Ten Clean Energy Stocks For 2017: Summer Harvest

Colossal Fossil Failure 

With a president actively hostile towards renewable energy and focused on promoting fossil fuels, it would be easy to think that clean energy stocks would underperform their fossil cousins. The exact opposite has been true. Despite the administrations' efforts and tweets bragging about new highs for the Dow, energy funds are down over 10% for the year. For example, the Energy Select Sector SPDR (XLE), largely composed of oil and gas companies, is down 13% for the year. The tiny coal sector did better, with the VanEck Vectors Coal ETF up 18%.

Even so, Trump's favorite industry was behind the one he seems to hate the most, clean energy.  The broadly held Clean Energy ETF (PBW) which I use as a benchmark for my growth stock picks is up 24% year to date, which my clean energy income stock benchmark (the Yieldco ETF YLCO) is up 20%.  

Perhaps this administrations' ineffectiveness is simply the result of the chaos resulting from the many investigations into the possible corrupt practices that may have helped bring this administration into power. Or perhaps the media spotlight has helped the solar and wind industries bring the message to a broad audience that solar, wind and energy efficiency are the most cost effective energy resources. The President can remove environmental regulations and allow coal companies to increase their profits from existing plants and the expense of citizens' health, but he can't make new coal plants more economic than solar and wind, no matter how many regulations he removes. Wind and solar have simply come too far for a mature technology like coal to catch up.  

In short, the President may brag about the stock market, be his efforts have little to do with its actual performance.

While clean energy has been doing well, and my Ten Clean Energy Stocks model portfolio has been doing better. For the year to July 31st, the portfolio is up 24.7% compared to 20.8% for its benchmark. The success has been driven by the core eight income stocks (up 24.8% vs 19.6% for YLCO.) My real managed Green Global Equity Income Portfolio (GGEIP) is up 19.9%, slightly ahead of the same benchmark. My two growth picks are up 22.2%, closing in on their benchmark PBW at 23.8%.

See the chart below for detailed performance over the two months since the May 31st update.


Stock discussion

Income Stocks

Pattern Energy Group (NASD:PEGI)

12/31/16 Price: $18.99.  Annual Dividend: $1.63 (8.6%). Expected 2017 dividend: $1.64 to $1.67.  Low Target: $18.  High Target: $30.  
7/31/17 Price: $25.10.  YTD Dividend: $0.832 (4.4%).  Annualized Dividend: $1.655.  YTD Total Return: 37.3%

Wind-focused Yieldco Pattern Energy Group made a strong 13% gain in June and July without any significant news.  

This move is mostly in line with other Yieldcos, most of which made gains for the two months. The Yieldco ETF (YLCO) was up 7%. I believe this trend is mostly due to the market realizing that the Trump administration can do little to undermine Yieldco profitability, combined with a return to more normal valuations in the wake of the 2015 Yieldco bust. Pattern's somewhat stronger move compared to other Yieldcos is most likely a function of better valuation.

8point3 Energy Partners (NASD:CAFD)
12/31/16 Price: $12.98.  Annual Dividend: $1.00 (7.7%). Expected 2017 dividend: $1.00 to $1.05. Low Target: $10.  High Target: $20. 
7/31/17 Price: $14.75.  YTD Dividend: $0.521 (4.0%)  Annualized Dividend: $1.04. YTD Total Return: 17.9%

8point3 Energy Partners gained 10% for the two months, also ahead of the average Yieldco. This is most likely due to its relatively high dividend yield. 

I believe that 8point3 is somewhat overvalued at the current price. Both its parent companies, First Solar (FSLR) and SunPower (SPWR) have said that they want to sell their stakes, and an examination of the Yieldco's financials leads me to believe that they are unlikely to find a buyer for more than $13 a share. If they can't find a buyer, I believe that 8point3 will be forced to drastically cut its dividend in the next one to three years, a move which will almost certainly send the share price tumbling.

I have sold my position in CAFD and sold short calls on the stock.

Hannon Armstrong Sustainable Infrastructure (NYSE:HASI)

1 2 3 4
View single page >> |

Disclosure: Long HASI, MIXT, PEGI, NYLD/A, CVA, ABY, NEP, SSW-PRG, ASPN, GLBL, TERP.  Long puts on SSW (an effective short position held as a hedge on SSW-PRG.  Short calls on ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.
Tom Konrad 4 years ago Author's comment

Just published a new article, here: www.altenergystocks.com/.../brookfields-yieldco-buying-spree/ since you ask.

Danielle Rogers 4 years ago Member's comment

Thanks Tom!

Danielle Rogers 4 years ago Member's comment

Now that the summer is over, do you have any new suggestions for us @[Tom Konrad](user:5273)?

Al Speisman 4 years ago Contributor's comment


Congratulations on your Clean Energy Stock picks. Impressive.