Ten Clean Energy Stocks For 2015: Marching Ahead

My Ten Clean Energy Stocks for 2015 model portfolio added a second month to its winning streak, with a 6.1% gain for the month and a 5.7% gain for the year, despite a continued drag by the strong dollar.  If measured in terms of the companies' local currencies, the portfolio would have been up 7.5% for the month and 10.5% for the quarter or year to date.  For comparison, the broad universe of US small cap stocks rose 1.5%  for the month and 4.0% for quarter, as measured by IWM, the Russell 2000 index ETF.

The six income stocks continue to lead, with a gain of 5.9% for the month and 10.2% for the year.  This compares to a miserable performance by my income benchmark of global utility stocks (JXI), which was down 3.1% for the month and 5.5% for the year.  The fossil free Green Alpha Global Enhanced Equity Income Portfolio (GAGEEIP), which I co-manage, also outperformed the global utility trend and turned in a 0.6% gain for the month, and 5.3% gain for the year to date.

The four growth and value stocks gained 6.3% for the month, but remain down 1.0% for the year.  This compares to their clean energy ETF benchmark (PBW), which rose 1.6% for the month and is up 5.9% for the year.

The chart below (click for larger version) gives details of individual stock performance, followed by a discussion of March news for each stock.

10 for 15 February.png

The low and high targets given below are my estimates of the range within which I expected each stock to finish 2015 when I compiled the list at the end of 2014.

Income Stocks

1. Hannon Armstrong Sustainable Infrastructure (NYSE:HASI)
12/31/2014 Price: $14.23.  Annual Dividend: $1.04.  Beta: 0.81.  Low Target: $13.50.  High Target: $17.  
3/31/2015 Price: $18.28. YTD Dividend: $0.26  YTD Total Return: 30.3%.

The stock of sustainable infrastructure financier and Real Estate Investment Trust Hannon Armstrong continued its impressive advance.  

The market price is now above the $17 "High Target" I gave it at the start of the year. That means that it is higher than I expected it to go by the end of 2015, and while I revised my expectation upward when Hannon Armstrong increased their core earnings per share growth target from its previous 12% to 15% range to its current 14% to 16% range, I now feel the company is near its fair valuation.  While I am happy to hold the company for its dividend and dividend growth prospects, I have begun trimming my position for rebalancing.  It was already my largest holding at the end of 2013; it's time to bring the stock back in line with the rest of my positions.

Although I am trimming my holdings, I think HASI retains significant upside potential.  While I feel it is near its fair valuation now, there is no reason to believe it cannot become overvalued.  That has certainly happened with many of the conventional YieldCos: NRG Yield (NYSE:NYLD) and NextEra Enegy Partners (NYSE:NEP), for example.  These boast similar growth prospects to HASI, but much lower dividend yields. To bring HASI's yield down to 4%, which is in the middle of the range for YieldCos today, the stock would have to rise to $26.  While I believe many YieldCos are overvalued at current levels, I see no reason why Hannon Armstrong can't join them.

2. General Cable Corp. (NYSE:BGC)
12/31/2014 Price: $14.90.  Annual Dividend: $0.72.  Beta: 1.54.  Low Target: $10.  High Target: $30.  
3/31/2015 Price: $17.23. YTD Dividend: $0.  YTD Total Return: 15.6%.

International manufacturer of electrical and fiber optic cable, General Cable Corp.'s stock spiked on March 17th based on rumors that it might be bought by larger Italian rival Prysmian (OTC:PRYMF).  Prysmian later said in a statement that it had consulted with its advisors about the possibility of buying General Cable or France's Nexans, but had had no direct discussions with either company.  General Cable's stock held on to most of its gains as investors revalued the company as a possible acquisition target.

3. TransAlta Renewables Inc. (TSX:RNW, OTC:TRSWF)
12/31/2014 Price: C$11.48.  Annual Dividend: C$0.77.   Low Target: C$10.  High Target: C$15.  
3/31/2015 Price: C$12.55. YTD Dividend: C$0.19  YTD Total C$ Return: 11.0%. YTD Total US$ Return: 1.6%.

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Disclosure: Long HASI, CSE/MCQPF, ACCEL/ACGPF, NFI/NFYEF, AMRC, MIXT, PW, FF, BGC, RNW/TRSWF.  I am the co-manager of the GAGEEIP strategy.

Disclaimer: Past performance is not a guarantee ...

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