Best stock to invest in
Tom Konrad, Ph.D., CFA
This October saw falling leaves and falling stocks. Then came the
first week of November with its election jitters and stripped the
trees of the rest of their leaves like a fifty mile an hour wind
sending stocks flying as well.
While Donald Trump’s unpredictable performance has the whole stock
market rattled (at least when it looks like he might win), his
anti-environment and pro fossil fuel rhetoric have had stocks in the
sector quaking like the leaves on an aspen.
Although all its benchmarks were decidedly in the red for October
and the first week of November, my Ten
Clean Energy Stocks for 2016 fared relatively well.
Although the portfolio, its growth and income subportfolios, and my
privately managed Green Global Equity Income Portfolio all fell,
their declines were smaller than their benchmarks. For the
year to date, their out-performance ranged from 11% to 31% over
Detailed performance for the growth and income subportfolios, my
Green Global Income Portfolio, and their various subportfolios can
be found in the chart below.
See the original
for a description of the benchmarks.
The chart below and the following discussion gives detailed
performance and discussion for the individual stocks. Click
for a larger version.
Pattern Energy Group
12/31/15 Price: $20.91. Dec 31st Annual Dividend: $1.488
(7.1%). Beta: 1.22. Low Target: $18. High
10/31/16 Price: $22.35. YTD Dividend: $1.171. Expected
2016 Dividend:$1.58 (7.1%) YTD Total Return: 12.9%
11/4/16 Price: 21.62 . YTD Total Return: 9.3%
Wind Yieldco Pattern Energy will release its third quarter earnings
on November 7th. Wind speeds were a little disappointing in
the first half of the year because of El Nino. Investors will
be watching for higher revenues from wind generation now that El
Nino is no longer affecting wind patterns. This seems likely,
considering that other companies (see NRG Yield and TransAlta
Renewables, below) have been reporting strong wind production for
Enviva Partners, LP
12/31/15 Price: $18.15. Dec 31st Annual Dividend:
$1.76 (9.7%). Low Target: $13. High Target: $26.
10/31/16 Price: $27.25. YTD Dividend:
$1.495 Expected 2016 Dividend: $2.10 (7.7%)
YTD Total Return: 49.9%
11/4/16 Price: 27.00 . YTD Total Return: 58.9%
Wood pellet focused Master Limited Partnership (MLP) and
Yieldco Enviva Partners announced its earnings on Thursday, November
4th. The company agreed to terms with its sponsor for its
second drop-down acquisition which should allow the cash flow and
dividend per share growth to continue in 2017. This particular
drop-down also has the effect of increasing Enviva’s number of
customers, helping to diversify the partnership’s future revenue
Enviva forecasts a per share distribution in 2017 of $2.35 per a
share, which would amount to an increase of approximately 12% over
Plains Partners, LP (NYSE:GPP)
12/31/15 Price: $16.25. Dec 31st Annual
Dividend: $1.60 (9.8%). Low Target: $12. High
10/31/16 Price: $21.25. YTD Dividend:
$1.218. Expected 2016 Dividend: $1.64 (7.7%) YTD Total
11/4/16 Price: 18.60. YTD Total
Ethanol production Yieldco Green Plains Partners also announced
3rd quarter results. The partnership increased its
quarterly distribution to $0.42 per unit, and reported
$0.43 in per unit income for the quarter. It’s parent
company, Green Plains (GPRE)
produced a record volume of ethanol in the second quarter.
Revenues increased due to a reviving ethanol market and new ethanol
storage acquired out of the Abengoa (ABGB)
However, the stock’s strong performance so far this year led
analysts at Stifel
Nicolaus to downgrade the stock from “Buy” to Hold. That and
the general election jitters caused the partnership’s units for fall
more than 10% in the first week of November, although it still shows
significant gains for the year to date.
Yield, A shares (NYSE:NYLD/A)
12/31/15 Price: $13.91. Dec 31st Annual Dividend:
$0.86 (6.2%). Beta: 1.02. Low Target: $11. High
10/31/16 Price: $14.73. YTD Dividend:
$0.695. Expected 2016 Dividend: $0.96 (6.5%) YTD Total
11/4/16 Price: $14.75. YTD Total Return:
Yieldco NRG Yield (NYLD
3rd quarter results on November 4th. Revenues were strong,
in large part due to good production from the company’s wind
farms. It increased its quarterly dividend to $0.25 (16% year
over year growth.) The strong quarter is doubtless why the
stock made a slight gain in the first week of November despite the
The company released guidance for 2017, and re-affirmed its targeted
15% annual dividend per share growth of 15% through 2018.
Terraform Global (NASD: GLBL)
12/31/15 Price: $5.59. Dec 31st Annual Dividend:
$1.10 (19.7%). Beta: 1.22. Low Target: $4. High
10/31/16 Price: $3.75. YTD
Dividend: $0.275. Expected 2016 Dividend: $0.60 (16.0%).
YTD Total Return: -25.2%
11/4/16 Price: 3.75. YTD Total Return: -25.2%
Yieldco Terraform Global has still not released its much delayed
financial statements (although some preliminary
information was released in July.) The stock’s decline
in October has been mostly driven by rumors about the possible sale
or non-sale of its much larger sister Yieldco, Terraform Power (TERP.)
These included rumors
that SunEdison intended to keep its stake in Terraform Power
and restructure the company around that holding, as well as
Brookfield ruling itself out as a buyer for Terraform Power.
Sustainable Infrastructure (NYSE:HASI).
12/31/15 Price: $18.92. Dec 31st Annual
Dividend: $1.20 (6.3%). Beta: 1.22. Low
Target: $17. High Target: $27.
10/31/16 Price: $23.86. YTD Dividend:
$0.90. Expected 2016 Dividend: $1.25 (5.5%). YTD
Total Return: 26.0%
11/4/16 Price: $19.96 . YTD Total Return:
After clean energy financier and REIT Hannon Armstrong reported
second quarter core earnings in August, I wrote:
Hannon Armstrong has a target of paying out 100% of core
earnings in dividends and a policy of increasing the dividend
once per year in the fourth quarter. Since Core Earnings
have historically always increased or held constant from
quarter to quarter, they typically lag the dividend in the
first two quarters, but exceed them in the second half of the
I expect this year to be different. Results in the
first half of the year were boosted by a larger
securitizations (selling assets to third parties rather than
keeping them on the books.) While producing strong
earnings in the quarter when they happen, securitizations
produce no ongoing income. After raising $91 million in
equity in June, the company will again return to placing more
transactions on the balance sheet, a change which I expect to
reduce core earnings in the third quarter before returning to
growth in the fourth quarter.
I expect my anticipated decline in third quarter earnings in
early November to catch some investors by surprise.
Investors looking to buy the stock should wait until
then. Investors considering taking some gains may want
to sell before the November announcement.
My prediction was on the mark. Core earnings fell from $0.32
per share in the second quarter, to $0.29 this quarter. The
stock decline was compounded by the company issuing an additional
3.5 million shares in a secondary offering priced
at $20. I remain confident that earnings growth will
resume in the fourth quarter and that the company will again raise
its quarterly dividend in December to at least $0.34.
The current price of $19.96 seems an excellent and likely
fleeting buying opportunity.
Renewables Inc. (TSX:RNW,
12/31/15 Price: C$10.37. Dec 31st
Annual Dividend: C$0.84 (8.1%). Low Target:
C$10. High Target: C$15.
10/31/16 Price: C$14.81. YTD Dividend:
C$0.733 Expected 2016 Dividend:
C$0.88 (5.9%) YTD Total Return (US$): 56.2%
11/4/16 Price: C$14.26 . YTD Total
Canadian listed Yieldco TransAlta Renewables’ third quarter
results showed expected growth due to previous acquisitions, and
the construction of the company’s Australian South Hedland
facility continues as planned. Like NRG Yield, the company
had a strong quarter of production at its Canadian Wind farms.
Renewable Energy Group
12/31/15 Price: $9.29. Annual Dividend: $0.
Beta: 1.01. Low Target: $7. High Target: $25.
10/31/16 Price: $8.75. YTD Total
11/4/16 Price: 8.40. YTD Total Return: -9.6%
Advanced biofuel producer Renewable Energy Group reported
strong earnings growth in the third quarter, but
not as strong as many analysts had been expecting.
This combined with the inclusion of REGI
in The Street’s “Clinton
Portfolio” sent the shares tumbling in the first week of
November. I personally think that the “Clinton
Portfolio” was very badly designed, and would have weighted such a
portfolio much more heavily towards solar installers and
manufacturers, rather than biodiesel which has much stronger
bipartisan support than solar.
I continue to think REGI is an excellent buy at the current price
of $8.40, even if Trump wins the election.
MiX Telematics Limited
12/31/15 Price: $4.22 / R2.80. Dec
31st Annual Dividend: R0.08 (2.9%). Beta:
-0.13. Low Target: $4. High Target: $15.
10/31/16 Price: $6.29 / R3.35. YTD Dividend:
R0.06/$0.101 Expected 2016 Dividend:
R0.08 (2.1%) YTD Total Return: 52.6%
11/4/16 Price: $6.05 / R3.23. YTD Total Return:
Software as a service fleet management provider MiX Telematics announced
the results for the second quarter of its 2017 fiscal year,
which starts in April. Subscriber growth remained weak (8%
year over year) due to the depressed energy sector, but showed
signs of acceleration late in the quarter. The company is
continuing to make progress in its long term strategy of steering
customers towards its bundled offerings, which improve margins in
the long term at the cost of greater up-front investments.
Ameresco, Inc. (NASD:AMRC).
Current Price: $6.25. Annual Dividend:
$0. Beta: 1.1. Low Target: $5.
High Target: $15.
10/31/16 Price: $4.80. YTD Total Return: -8.7%
11/4/16 Price: 4.95 . YTD Total Return: -18.0%
Energy service contractor Ameresco’s third
quarter results continued recover. The company is also
increasing its project backlog and investments in owned renewable
energy facilities (mostly landfill gas), both of which increase
the level and predictability of its future earnings. Giving
the company’s improving results and prospects, Ameresco would be a
highlight of my own “Clinton Portfolio” if I were to construct one
(see comments on Renewable Energy Group, above.) Because
Ameresco does much of its business with the federal government,
the stock would likely suffer under a Trump administration.
The possibility of a Trump victory on Tuesday has many clean energy
investors running for the hills. This creates buying
opportunities among stocks that are relatively immune to decisions
in the White House, such as Pattern and Hannon Armstrong, both of
which should advance no matter who is in the White House.
Ameresco is my top pick to benefit from a Clinton victory.
Disclosure: Long HASI, AMRC, MIXT,, RNW/TRSWF, PEGI, EVA,
GPP, NYLD/A, REGI, GLBL, TERP, GPRE
DISCLAIMER: Past performance is
not a guarantee or a reliable indicator of future results.
This article contains the current opinions of the author and
such opinions are subject to change without notice. This
article has been distributed for informational purposes only.
Forecasts, estimates, and certain information contained herein
should not be considered as investment advice or a
recommendation of any particular security, strategy or
investment product. Information contained herein has been
obtained from sources believed to be reliable, but not
– Best stock to invest in