Best stock to invest in
Tom Konrad CFA
March and April were months of recovery for the broad market and for
clean energy income stocks, but most clean energy stocks failed to
participate in the rally. By design, my Ten
Clean Energy Stocks for 2016 model portfolio is heavily
weighted towards income, recovering 9% in March and 6% in April so
that it is now back in the black, up 0.8% year to date. This
puts it ahead of its benchmark, which is down 0.8% through the end
I want to thank Aurelien Windenberger for stepping in with an
interim update, now that I’ve switched to only writing these every
other month. While he does not follow all 10 stocks closely
himself, he does follow many of them, and his comments
on Terraform Global were particularly timely. I hope
they allowed some readers to scoop up shares of the stock I called
one of the most compelling speculations I’ve seen in a long time
when it was trading below $2.50.
I also hope readers paid
attention at the start of March when I took the risk of making
what may be the most bullish public call I’ve ever written:
In my decade and a half watching the stock markets, I
have only seen as many compelling buying opportunities as I see
today at the start of 2009. …
I’m excited about most of the stocks on this list at their current
prices, but Pattern (PEGI)
and MiX Telematics (MIXT)
all stand out as screaming bargains, while Terraform Global (GLBL)
is one of the most compelling speculations I’ve seen in a very
I can’t say this enough: If readers have any cash still on the
sidelines in this market, now is the time to buy. Buy and
keep reinvesting the extremely high dividends on offer until
I was cautious about when a rebound might happen, but said that the
high dividend yields available from most of these stocks would more
than compensate for the wait. As it was, there was no wait
(except for Terraform Global, where the wait was just a
month.) For the two months since the call, Pattern is up 26%,
and MiX is up 18%. The whole list, as well as the market in
general (with the exception of clean energy growth stocks) did well,
Clean energy growth stocks fared less well. My benchmark, the
Powershares Wilderhill Clean Energy ETF (NASD: PBW),
was up only 1.3% over the two months, and remains down 12.8% for the
year. My three growth picks did better, up 12.0% over two
months, but remain down 7.2% for the year through April as well.
Income stocks did better, with Global X YieldCo Index ETF (NASD:YLCO)
up 14.8% for two months, and 4.4% year to date. My seven
income picks recovered slightly more (16.5%) from a worse starting
point to end April up 4.3%. The Green Global Equity Income
Portfolio, which I manage, also rose substantially (13.3%) over two
months and is now up a solid 7.9% for the 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
4/29/16 Price: $21.00. YTD Dividend: $0.381.
Forward Annual Dividend:$1.524 (7.3%) YTD Total Return: 2.4%
Wind Yieldco Pattern Energy’s recent advance makes far more
sense to me than its decline at the start of the year. There
was not any significant news in April, but the stock continued the
advance it began in March.
Pattern will release first quarter results before the market opens
on May 9th.
Enviva Partners, LP
12/31/15 Price: $18.15. Dec 31st Forward Annual
Dividend: $1.76 (9.7%). Low Target: $13. High Target:
4/29/16 Price: $22.71. YTD Dividend:
$0.46 Forward Annual Dividend: $2.10 (9.2%) YTD Total
Wood pellet focused Master Limited Partnership (MLP) and Yieldco
Enviva Partners, unlike almost all the mainstream Yieldcos, is once
again trading above its $22 IPO price. This should allow new
secondary offerings of stock and enable additional drop-downs of new
wood pellet facilities from its private sponsor. Such drop
downs would likely allow Enviva to exceed its 2016
guidance for $271 to $2.87 of distributable cash flow and
$2.10 of distributions per unit.
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:
4/29/16 Price: $14.35. YTD Dividend:
$0.4025. Forward Annual Dividend: $1.62 (11.3%) YTD Total
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.
With the oil price starting to recover, GPP’s share price has begun
to recover as well.
On April 21st, Green Plains Partners again increased its quarterly
distribution slightly, to $0.405 per share, payable to unitholders
of record on May 6th.
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.
4/29/16 Price: $15.13. YTD Dividend: $0.225.
Forward Annual Dividend: $0.925 (6.1%) YTD Total Return: -9.4%
Yieldco NRG Yield (NYLD
has also been recovering nicely. I believe this is partly due
to the general recovery of the sector, and partly due to growing
confidence that the Yieldco still has the support of its sponsor,
The company will report its first quarter results on May 5th.
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.
4/29/16 Price: $2.91. YTD
Dividend: $0.275. Forward Annual Dividend: $1.10 (37.8%).
YTD Total Return: -41.9%
Yieldco Terraform Global’s sponsor, SunEdison (SUNE),
finally entered bankruptcy protection in June. Speculation abounds
as to if it and its sister Yieldco, Terraform Power (TERP),
might be drawn into a SunEdison bankruptcy, but I believe that the
debtor-in-posession nature of the bankruptcy makes the chances of
this already unlikely scenario even more remote.
On April 21th, both Terraforms named Peter Blackmore as interim CEO,
to replace the former CFO of SunEdison, who had been serving in that
role. Blackmore was previously head for the Yieldcos’
conflicts committees, and was previously unaffiliated with
SunEdison. Such steps to develop in-house management are part
of the Yieldcos’ moves to establish themselves as truly independent
companies. They also needs develop their own internal
accounting- the reliance on SunEdison means that neither has yet
filed its 2015 annual report, let alone their first quarter results.
of Terraform Global’s contracts allow for termination in a
SunEdison bankruptcy, and I believe that fear of such terminations
is keeping investors away from the stock. Even if such
contracts are terminated, the termination does not erase the value
of the power from its solar farms. Some power purchasers may
have the ability to renegotiate contracts with Terraform Global, but
the market seems to be treating the company as if those
renegotiations will lead to an end of payments. That will not
happen if the customers need the energy, which they do. All
these PPAs are recent, and were entered into by utilities that
wanted to purchase the power.
Terraform also has a dispute with SunEdison over the purchase of 425
MW of Indian solar farms which now may never be completed.
SunEdison’s bankruptcy throws into question
what sort of compensation the Yeildco will receive for its down
payments, but some such compensation is likely to be in order.
In summary, the situation at Terraform Global is mostly unknowns,
but the company is belatedly making the right moves to distance
itself from SunEdison. The question for investors is, how much
of the cash raised in the $15 per share IPO is owned by Terraform
Global, either as cash, or as operating projects with buyers for the
power. While this is likely less than the $7.40 book value per
share reported at the end of September, 2015, it’s also likely far
more than the current $2.91 share price. Abengoa (soon to be
Atlantica) Yield (ABY)
is much farther along the path towards distancing itself from its
(nearly) bankrupt sponsor, Abengoa. ABY trades at
approximately book value.
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.
4/29/16 Price: $19.40. YTD Dividend:
$0.30. Forward Annual Dividend: $1.24 (6.2%). YTD
Total Return: 4.1%
Clean energy financier and REIT Hannon Armstrong rang
the closing bell at the New York Stock Exchange to celebrate
Earth Day. The fact that I bother to mention this is
testament to the lack of any substantial news since the last
update. First quarter results will be announced on May 4th.
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.
4/29/16 Price: C$12.38. YTD Dividend:
C$0.293 Forward Annual Dividend: C$0.88 (7.1%) YTD Total
Return (US$): 35.3%
TransAlta Renewables continues to be one of the strongest
performers among Yieldcos, helped in part by the rising Canadian
dollar, and partly by its continuing ability to tap the capital
markets to fund further acquisitions. The company reported
its first quarter results on April 28th, with cash available for
distribution per share growing 32% to C$0.37 from C$0.28 a year
earlier, while dividends per share increased 16% to C$0.22.
This leaves plenty of room for the Yieldco to invest in new
projects or raise the already generous dividend further.
Renewable Energy Group
12/31/15 Price: $9.29. Annual Dividend: $0.
Beta: 1.01. Low Target: $7. High Target: $25.
4/29/16 Price: $9.72. YTD Total
Advanced biofuel producer Renewable Energy Group (REG) benefits
from both national and regional incentives which already give
robust support to the biodiesel market and are likely to lead to a
biodiesel boom in 2016 and beyond. REG is poised to be one
of the primary beneficiaries of this boom.
Iowa’s House and Senate agreed to expand
and extend state incentives in April, which will only add
fuel to the fire when they are signed into law.
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.
4/29/16 Price: $4.08 / R2.30. YTD Dividend:
R0.02/$0.12 Forward Annual Dividend: R0.08 (3.6%)
YTD Total Return: -2.5%
Software as a service fleet management provider MiX Telematics
continued to recover from its lows along with the oil price.
Fuel savings make MiX’s solutions quickly pay for themselves, but
in the current low fuel price environment, MiX is working to
emphasize another substantial advantage of its services. The
company just launched an extended
Hours of Service solution to help fleet managers improve
safety by managing driving hours.
The company will announce its full year results for the twelve
months ending March 31st before the market opens on May 26th.
Ameresco, Inc. (NASD:AMRC).
Current Price: $6.25. Annual Dividend:
$0. Beta: 1.1. Low Target: $5.
High Target: $15.
4/29/16 Price: $4.47. YTD Total Return: -23.7%
Energy service contractor Ameresco has been a consistent
under-performer in this list. This has mostly been the
result of management under performance which the company is paying
for in terms of poor results: A large Canadian contract outside
their core business which they bid too aggressively for, and the
acquisition of a energy monitoring software business which did not
produced the results that they had hoped for.
Low energy prices have also payed their part, something to be
expected in a business that helps customers cut their energy
bills, but I am beginning to wonder if this company’s long term
under performance has more to do with weak management than a
cyclical downturn, as I previously believed.
The company will also announce first quarter results on May
5th. If a positive surprise sends the stock up
significantly, I may take the opportunity to exit. I love
the company’s core business of saving customers money through
energy efficiency, but the company has failed for years to make
that business as profitable as I hoped it would be.
Two months ago, I used this space to urge readers to buy, both
because the market seemed generally undervalued, and also because of
specific stocks which seemed (and proved to be) incredible
bargains. After gains for roughly 15%, I still think many of
these stock are cheap, but I am slightly more cautious. My
favorite picks are currently Terraform Global and Green Plains
Partners, which might be good places to redeploy cash when
rebalancing other winners.
Long-term followers of this list are likely to have significant cash
to deploy in the near future, since the buyout of Capstone
OTC:MCQPF) closed on Friday. I recommended Capstone in 2014 at
C$3.55 and again in 2015 at C$3.20. The buyout by iCON
Infrastructure Partners was for C$4.90, plus C$0.67 in dividends for
2014 buyers (a total 57% gain), and C$0.37 for buyers in 2015 (a 65%
total gain). These gains are somewhat offset by the 15%
decline in the Canadian dollar since the start of 2014, and its 3%
decline since the start of 2015.
Long term pick New Flyer (TSX:NFI, OTC:NFYEF)
has also reached levels that have had me sell a significant portion
of my stake both for rebalancing and because the high price has
reduced its dividend yield below 2%. When I confidently
wrote that the shares were “worth at least C$12.26″ in 2011
(they were trading for C$7.66) I never imagined I’d be selling for
C$37 five years later. I just like undervalued green companies
with 8% dividend yields. Who doesn’t?
Disclosure: Long HASI, AMRC, MIXT,, RNW/TRSWF, PEGI, EVA,
GPP, NYLD/A, REGI, GLBL, CSE/MCQPF, NFI/NFYEF
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