Best stock to invest in
by Aurelien Windenberger
I’ve been a fan of Tom Konrad’s annual renewable model portfolio for
years, so I’m happy to be able to assist Tom with some of his
chilly months to start off 2016, the outlook turned
considerably warmer in March, both for the market and for clean
energy stocks. The Russell 2000 (IWM) jumped 8% for the month, as
market participants took to the “risk-on trade” following Fed
Chairwoman Yellin’s dovish commentary. Clean energy stocks did even
better, buoyed by a reversal in the broader energy sector.
Clean Energy Stocks for 2016 model portfolio pared its losses
from Jan/Feb, and is now down only 3.9% for the year, almost exactly
the same as its benchmark (see below), which is down 3.8%. The seven
income stocks were down 2.3% on average, slightly below the income
benchmark, the Global X YieldCo ETF (NASDAQ:YLCO.)
The three growth stocks are now down 7.6%, and performed
substantially better than their benchmark, the
Powershares/WilderHill Clean Energy ETF (NYSEARCA:PBW),
in March. The overall benchmark mentioned above is a 70/30 blend of
the income and growth benchmarks.
The Green Global Equity Income Portfolio, a seed account investing
in green income stocks which is managed by Tom, was only up 6.7%
during March. However, it has still outperformed all of the other
model portfolios, climbing a total of 1.7% year to date.
The chart above gives detailed performance for the individual
stocks. Significant news driving individual stocks is
Pattern Energy Group
12/31/15 Price: $20.91. Dec 31st Forward Annual Dividend:
$1.488 (7.1%). Beta: 1.22. Low Target: $18. High
3/31/16 Price: $19.07. YTD Dividend: $0.381 Forward Annual
Dividend:$1.524 (8.0%) YTD Total Return: -7.0%
After two surprisingly poor months to start 2016, Pattern Energy’s
was up 15% in March. The company’s strong fourth quarter results and
dividend ex-date in late March were certainly catalysts for the
ascent. As mentioned by Tom last month, Pattern Energy’s CAFD (Cash
Available for Distribution) is expected to increase to about
$2.06/share over the next couple years.
Assuming a 7% yield puts the price up near $30, which might be a
conservative target once MLP (Master Limited Partnership) investors
learn about Pattern’s MLP-like yields and better risk profile.
Anyone interested in learning more about Pattern Energy should read
Neumaier’s recent articles on the company and dig into Tom’s
Enviva Partners, LP
12/31/15 Price: $18.15. Dec 31st Forward Annual
Dividend: $1.76 (9.7%). Low Target: $13. High Target:
3/31/16 Price: $21.72. YTD Dividend: $0.46
Forward Annual Dividend: $1.84 (8.5%) YTD Total Return: 22.5%
Wood pellet focused MLP and Yieldco Enviva Partners continued
its excellent performance in 2016, jumping another 12% during March.
Enviva is in an enviable position at the moment, given that it is
producing a fuel source that hasn’t been as effected by the general
decline in energy prices. As noted last month, the company provided
new guidance for total distributions in 2016 of at least $2.10, 19%
over its annual distribution rate at the end of 2015.
However, there are some concerns that the EU could take a less
positive stance towards wood pellets in the future. For more
information, I suggest readers review the comments on this
Plains Partners, LP (NYSE:GPP)
12/31/15 Price: $16.25. Dec 31st Forward Annual
Dividend: $1.60 (9.8%). Low Target: $12. High Target:
3/31/16 Price: $13.45. YTD Dividend: $0.4025.
Forward Annual Dividend: $1.61 (12.0%) YTD Total Return: -14.6%
Like Enviva, Green Plains is a new MLP and
Yieldco. The company’s contracts with its parent, Green Plains
also insulate it from the general level of economic activity and
commodity markets. However, this insulation is only as good as
its parent’s solvency. While GPRE has a strong balance sheet,
its ethanol operations are exposed to commodity markets, especially
the oil price.
As expected, GPP recovered along with the broader energy sector
during March, although the move up was weak given the lack of any
positive company specific news.
Yield, A shares (NYSE:NYLD/A)
12/31/15 Price: $13.91. Dec 31st Forward Annual
Dividend: $0.86 (6.2%). Beta: 1.02. Low Target: $11.
High Target: $25.
3/31/16 Price: $13.57. YTD Dividend: $0.225.
Forward Annual Dividend: $0.90 (6.6%) YTD Total Return: -0.7%
There was no significant news at Yieldco NRG
during March, although the company did announce that their new
20MW solar power facility was completed in Southern
California. The stock was up a solid 9% for the month and expects to
increase their annual dividend to $1.00 per share by the end of
Terraform Global (NASD: GLBL)
12/31/15 Price: $5.59. Dec 31st Forward Annual
Dividend: $1.10 (19.7%). Beta: 1.22. Low Target: $4.
High Target: $15.
3/31/16 Price: $2.38. YTD Dividend: $.275.
Forward Annual Dividend: $1.10 (46.2%). YTD Total Return: -52.5%
Terraform Global’s stock had an extremely volatile month
due to bankruptcy concerns at its sponsor and controlling
shareholder, SunEdison (NYSE:SUNE).
While the company did pay their 4th quarter dividend as expected in
mid-March, they were not able to release their financials due to
accounting issues at SunEdison.
Global also released an 8-K on March 29th confirming that SunEdison
is likely to file for bankruptcy protection, a move which would have
material negative impacts on Global. SunEdison currently owes Global
about 90MW of power plants from their formation agreements, as well
as 425MW of Indian solar aseets for which Global pre-paid $231mil in
December 2015. The delivery of some or even all of these assets is
Global also has change of control covenants in certain of
their bonds and project level debt which could force the company to
pre-pay the debts. On the plus side, the company still has an
estimated $750mil in unrestricted cash, along with 814MW of
Both Tom and I believe that the company is largely undervalued
at current prices. Tom notes that, “even the current bag of
assets should produce the cash flow to support a $0.40 dividend, way
more than is needed to justify a $2.50 stock price.” It was also
good to see that former CEO Brian Wuebbels resigned
this week, and that the board of the directors expressly noted
that they take their fiduciary responsibilities to shareholders very
seriously and remain committed to acting in their best interests.
Sustainable Infrastructure (NYSE:HASI).
12/31/15 Price: $18.92. Dec 31st Forward Annual
Dividend: $1.20 (6.3%). Beta: 1.22. Low Target:
$17. High Target: $27.
3/31/16 Price: $19.22. YTD Dividend: $.30. Forward
Annual Dividend: $1.24 (6.3%). YTD Total Return: 3.2%
Clean energy financier and REIT Hannon Armstrong
delivered a solid month, performing in-line with the benchmark for
the month. As highlighted by Tom many times over the past couple
years, the company has an excellent business model that focuses on
consistent growth with less risk than most of the Yieldco’s in the
HASI generally raises its dividend in the fourth quarter. The
above guidance implies that the 4th quarter dividend will be
between $0.34 and $0.36, and the dividend will be raised another 4
to 7 cents in 2017.
Renewables Inc. (TSX:RNW,
12/31/15 Price: C$10.37. Dec 31st
Forward Annual Dividend: C$0.84 (8.1%). Low
Target: C$10. High Target: C$15.
3/31/16 Price: C$12.65. YTD Dividend: C$0.22 Forward Annual
Dividend: C$0.88 (7.0%) YTD Total Return (US$): 32.7%
TransAlta Renewables continued its excellent performance in 2016,
climbing another 18% in March. The stock was boosted in part by
continued gains in the Canadian dollar, which was up 4.2% in March.
As noted last month, the company recently completed a drop-down of a
cogeneration plant, a wind farm, and a hydro facility in Canada from
its parent, TransAlta Corp. (NYSE:TAC).
Renewable Energy Group
12/31/15 Price: $9.29. Annual Dividend: $0.
Beta: 1.01. Low Target: $7. High Target: $25.
3/31/16 Price: $9.44. YTD Total Return: 1.6%
Advanced biofuel producer Renewable Energy Group
saw its stock soar 29% during March, as the company reported
better than expected annual results on March 8th. Thanks to the
retroactive reinstatement of the bio-diesel tax credit for 2015,
the company reported revenues and earnings which were
substantially higher than expected by the market. REGI also
announced a stock and/or convertible bond repurchase program of up
to $50mil, which has likely provided additional support for the
MiX Telematics Limited
12/31/15 Price: $4.22 / R2.80. Dec
31st Forward Annual Dividend: R0.08
(2.9%). Beta: -0.13. Low
Target: $4. High Target: $15.
3/31/16 Price: $3.94/R2.36. YTD Dividend: R0.02/$0.12
Forward Annual Dividend: R0.08 (3.2%) YTD Total Return: -5.8%
Software as a service fleet management provider MiX Telematics
finally saw its stock climb again in March, as it was up 13.5%.
The stock was also helped by a 7.5% improvement in the South
African Rand. The company also announced two
offerings in North America targeting the oil & gas
industry. The 2nd in particular highlighted the expected monthly
savings to companies using MiX’s fleet solutions, a key
consideration given the cost cutting required in the industry
today. In addition, MiX has $1.85 worth of cash per share, and a
P/E ratio of just over 8.
Ameresco, Inc. (NASD:AMRC).
Current Price: $6.25. Annual Dividend:
$0. Beta: 1.1. Low Target: $5.
High Target: $15.
3/31/16 Price: $4.77. YTD Total Return: -18.6%
Energy service contractor Ameresco was the only pick aside from
Terraform Global to trade down during March. The company reported
so-so results in early March, with no news since, so the stock
hasn’t seen any interest. On the plus side, insiders continued to
purchase more company stock.
Last month, Tom highlighted the fact that he was seeing great values
across the renewable energy space, and urged investors with cash to
buy. So far, it appears that the call was well timed. Even so, most
of the stocks remain strong values, particularly the dividend
payers. Given their relatively depressed share prices and
projections for increasing dividends, total returns of 20-30%
annually over the next couple years are not out of the question.
- Aurelien: Long: HASI, MIXT, GLBL.
- Tom: Long HASI, AMRC, MIXT,, RNW/TRSWF, PEGI, EVA,
GPP, NYLD/A, REGI, GLBL.
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