Ten Clean and Green Energy Stocks for 2011
This is my fourth annual list of renewable energy and energy efficiencystocks since I began the series in January 2008.
For myself, these lists serve as a record of my thinking on the marketwhich I can look back on and learn from over the following year.When I publish the list, I state my reasons for selecting each stock，and then track the portfolios performance over the following year inquarterly updates. This allows me to not only track how well theportfolio performed, but to check that performance against what Iexpected over the previous year.
For the reader, these annual lists are meant as a mini-portfolio ofindividual stocks that a small investor can buy to get exposure toclean energy without the historicalpoor performance of clean energy Exchange Traded Funds (ETFs).
Each year, I have measured my success at stock picking against twobenchmarks: a broad market index, and a clean energy index fund.My strategy has changed somewhat since the first list in 2008, as Ihave gained in my understanding of the sector (I have only beenfollowing clean energy closely since the end of 2005.)
The period over which I have been publishing these lists has been avery bad one for clean energy. All the public listin 2010 was up 3%, compared to the benchmark, which fell 7%.All told, if youd invested in the ETF benchmarks, you would still bedown 66%, while an investor in my ten picks would only be down 27% overthe same period.
As I told Stephen Lacey in a recent Renewable Energy World podcast, if the overall stock market does not collapse and drag clean energy with it, I believe that 2011has the potential to be an excellent year for clean energy stocks afterthese three years of heavy selling. Yet I continue to worry thata broad market decline would hold the sector down or drag it lower.
As long-time readers know, I vor the less exciting clean energysectors (and enabling technologies) that make few headlines but havehigher current profits. Chief among these are energy efficiencyand conservation (where the greatest short-term potential for reducingthe reliance on fossil fuels lies), the electric grid (an enabler forvariable renewable resources such as wind and solar), and alternativetransportation technologies that can reduce the use of the electriccar.
I prefer the mostcost effective renewable energy technologies, which are biomass, wind, and geothermal. Wind and Geothermal power are particularlyinteresting this year, because the sectors have red particularlybadly in recent years. Im putting more emphasis on renewableenergy sectors (as opposed to efficiency and the electric grid) in 2011than I have in the past because Im more bullish about clean energy ingeneral. While not as volatile as renewable energys poster boy, solar power, Wind and Geothermal tend to be more volatile than therelatively defensive efficiency and supporting technology sectors.
When picking individual stocks, I gravitate towards value stocks withlow Price/Earnings and decent dividends, where available. Sincefinancing is still hard to get in the current climate, I also likecompanies that can fund their operations and investment plans frominternal resources if they are not currently profitable. Finally, I tend to gravitate towards companies with charts that look like theyare bottoming.
Without further ado, here are my picks, with prices as of the 2010close (December 30.)
WaterfuranceRenewable Energy (WFI.TO, WFIFF.PK US$24.77) is a long timevorite because its the only pure-play geothermal heat pump stock Iknow. David Gold made the case for geothermal heat pumps as an investment in October, sofollow the link if youd like the details. This is the third yearrunning that Waterfurnace has been in my list, and while it has notappreciated much in that time, it has consistently paid a dividend over3% (C$0.22 per quarter, or 3.6% annually) while the business hascontinued to grow.
Comverge(COMV $6.92) is a leader in providing Demand Side Managementsolutions to electric utilities, both in the form of DemandResponse(DR), and energy efficiency. Demand Response allowsutilities to maintain less peak capacity while still maintaining astable grid (see Drawingthe Right Lessons from the Texas Wind Emergency) while Comvergesenergy efficiency solutions allow utilities to build less base loadcapacity. Both DR and Efficiency can be delivered at much lowercost than new baseload or peaking plants, and have the added advantageof no carbon emissions.
The stock has been badly beaten up since its 썗 IPO and can now bebought for one third of the IPO price, and less than one fifth thesmart-grid euphoria induced 2007 peak. While Comverge is stillnot profitable， they have enough cash on hand to fund the current levelof operations for three years, giving them time to raise future fundswhile negotiating from a position of strength.
EnerNOC(ENOC $23.91) also provides Demand Response to electric utilities, but unlike Comverge, they are currently (if marginally)profitable. With no net debt and plenty of cash in the bank, EnerNOC has not been beat up quite as badly as Comverge since they bothIPOd in 2007, so this is a safer pick than Comverge with somewhat lessupside potential.
CVTechGroup (CVT.TO, CVTPF.PK $1.30) provides electricity systemconstruction and maintenance to electric utilities, as well asefficient continuously variable vehicle transmission systems for smallvehicles such as the Tata Nano. The company is profitable andpays a CŨ.02 annual dividend, for a yield of 1.5%.
TelventGit S.A. (TLVT, $26.42) provides management solutions toinfrastructure markets including electric utilities, pipelineoperators, and transportation authorities. Better management inthese sectors has great potential to lead to large cost and energysavings.
I covered both of these stocks in considerable detail in my listof four top peak oil stocks but are included here is that most ofthose four have since risen considerably, and I also wanted to limitthis list to stocks that are easily purchased by a North Americaninvestor.
PotlatchCorp (PCH, $32.55) is a US Timber REIT which is a leader in seekingstringent FSC sustainability certification for its timberland. Iwrote about Potlatch in late 2009 in an article highlighting the role of forestry in a clean energy portfolio.Potlatch has a 6.3% forward annual dividend yilearn stock marketeld.
Geothermal exploration and production stocks seem to have bottomed inthe ll of 2010, but they have not yet really taken off. I thinkthat could easily happen in 2011, so I include two of my voriteshere:
AmericanSuperconductor Corporation (AMSC, $28.59), despite its name, islargely a wind component supplier to Chinese wind manucturers.Yet it also has an intriguing electricity transmission business based on its eponymoussuperconducting cables. The company is profitable, althoughit trades at a irly hefty multiple of 45x trailing earnings based onwidespread expectations of continued high growth.
VeoliaEnvironnement SA (VE, $29.36) is a global conglomerate providingwater, waste water, energy systems (including renewable energy), andtransportation system management. As such Veolia providesservices in a wide variety of clean energy sectors, and is a goodbalance to the usual volatility of a clean energy portfolio with itsrelatively stable earnings and high 4.1% dividend yield.
As usual, Ill provide quarterly updates on this list throughout 2011.
DISCLAIMER: The information andtrades provided here are for informational purposes only and are not asolicitation to buy or sell any of these securities. Investing involvessubstantial risk and you should evaluate your own risk levels beforeyou make any investment. Past results are not an indication of futureperformance. Please take the time to read the full disclaimer
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January 8th, 2011 at 7:32 am
Way to focus and straight to your point, i love it. Keep up the work people. Dont let anyone stop us bloggers.