Green Investing Favorites: 15 Wind, Solar, EVs and a Smart Grid Stock Plays

Alternative energy has been one of the most favored sectors among newsletter advisors for years, and support for renewable energy by the Biden administration has only increased the sector's popularity. From wind power and solar power to electric vehicles and the smart grid, several MoneyShow.com advisors review some favorite green ideas. Roger Conrad, Conrad's Utility Investor Renewable energy stocks were popular well before the recent U.S. elections. Since then, they've really blasted off. But one group of renewable energy stocks yet to feel the love is U.S. offshore wind developers. Globally, business is booming. Falling costs are a big reason for rapid adoption. By 2030, the global average levelized cost of energy (LCOE) for offshore wind farms is expected to drop by 41%. And in contrast to onshore wind and solar, facilities can be built on a very large scale to directly offset closures of major coal and nuclear plants. Some non-U.S. offshore wind stocks have already benefited greatly from the boom. Since the start of 2020, sector leader Denmark-based Orsted A/S (DNNGY) has returned around 96%. Northland Power , which operates a trio of North Sea offshore wind facilities, is up a bit less than 90%. And leading offshore wind turbine manufacturer Vestas Wind Systems has returned nearly 140%. U.S. offshore wind developers in contrast have badly lagged over the same time frame. Avangrid Inc , would-be developer of the Vineyard offshore wind facility, is underwater by nearly 5% including dividends. That's about seven points behind the Dow Jones Utility Average. Dominion Energy , which has the only operating U.S. offshore wind project at this time, is in the red by more than 7%. Public Service Enterprise Group with its big plans in New Jersey is up less than 2% including dividends. And EverSource Inc. , which has partnered with ORSTED in New England, is ahead by just 8% on that basis. We see two main reasons why these companies are getting such little respect. Both should largely disappear in the next couple years, with resulting big gains for these stocks. The first is investors want to see undeniable proof that offshore wind is economic as a source of electricity. The more developers in Europe and Asia demonstrate lower costs and reliable profits, the more investors will reward sector stocks. U.S. companies will have to prove they can manage construction costs and meet development deadlines as European firms have done. Fortunately, by not being first movers, they will be able to learn from others' trials and tribulations. Erratic and sometimes hostile regulation is the other major reason U.S. offshore wind industry development has lagged that of Europe and China so far. But the bet here is the days of federal regulation as a roadblock to offshore development are numbered. Mainly, pro-renewable energy Biden appointees look poised to slash through the red tape as they take control of the Interior Department and the Bureau of Ocean Energy Management (BOEM). That's apparently what U.S. offshore wind developers are banking on with the aggressive permits they've filed this past year. And companies are making huge new investments in equipment as well, such as the wind turbine installation vessel Dominion has commissioned for service in 2023. Even a return to supportive regulation won't make offshore wind a major supplier of U.S. electricity until mid-decade. But having a clear path to startup at last should do wonders long before that for the stocks of the lead developers. So far, these companies have been left out of the renewable energy boom. But their turn is coming. Jim Powell, Global Changes & Opportunities Report NextEra Energy is a successful electric utility that is focusing on renewable power. The company has a market value of over $150 billion -- which makes it one of the world's largest utilities. NextEra uses both wind and solar power to increase its profits. When necessary, the company also uses nuclear, coal, oil, and natural gas to generate electricity. The company uses whatever power source is the most suitable for each of the markets it serves. In an increasing number of cases, the best sources are proving to be renewable. Unlike most power companies that have some wind and solar installations -- often as show pieces -- no electric utility in the U.S. is using them as much as NextEra in its day to day operations. Moreover, as renewable energy costs decline, the company will replace its remaining reliance on fossil fuels. Within a few years, I think renewable energy installations will be NextEra's main source of power. NextEra Energy recently increased its growth outlook to 6% to 8% earnings per share through 2023. Dividends should increase proportionately. I think NEE has a bright future. Sunnova Energy International is a more speculative company that has a renewable energy business with considerable promise. Sunnova primarily serves residential and small business customers by installing and leasing solar systems that it then monitors, maintains, and upgrades as needed. Sunnova is popular with customers who want solar power but not the hassles that are common with the installations and their often troublesome electronic controls. So far, Sunnova has wisely plowed all its revenues into expanding its business. This year, Sunnova should post its first profits. Even more importantly, Sunnova also supplies reliable battery storage systems made by Tesla for many of its solar installations. The batteries make solar reliable for 24/7 power -- which is greatly increasing its appeal to customers who do not wish to go into hibernation on cloudy days and at night. Sunnova's battery systems can also pay for themselves by allowing users to make use of low cost, non-peak electric utility rates. Recharging electric cars, running washing machines, and so on can be done using the batteries during nighttime hours when power costs are at their lowest. Carl Delfeld, Cabot Global Stocks Explorer While Tesla has about an 80% market share of U.S. electric vehicles sales, competitors are coming alive, from giants like Ford to smaller, more niche players that are now being largely overlooked by the market. One such company is Fisker , a company headed up by luxury auto veteran Henrik Fisker and based in swanky Manhattan Beach, California. Fisker is merging into a SPAC (Special Purpose Acquisition Company) brought public by FS KKR Capital. Its first car is the Ocean, a mid-priced SUV with modern, upscale styling and flair, and full of recycled materials and the latest gadgets. The Ocean offers 2WD and 4WD option, a 250- to 350-plus-mile range, and recycled material interior. The SUV is also decked out with a large, curved screen and unique California Mode that opens nine glass panels with one touch, and a PV solar roof to enhance efficiency. A production-intent prototype is slated for a summer 2021 unveiling. I like this company and the stock for five reasons: First is the vehicle's price point, starting at $37,500, which seems to me to be a sweet spot for a midsized five-person EV SUV. Second, Fisker has logged over 10,550 reservations for the Ocean and has $1 billion in the bank to fund its launch in the second half of 2022 with an estimated volume in 2025 of 250,000 units. Third, I like its Apple-like model of outsourcing the production of the EV to Magna much like Apple lets Foxconn assemble the iPhone while keeping 38% profit margins. Fourth, the company is going completely digital from sales to servicing, which will translate into lower costs. Finally, unlike many other EV-related SPACs, FSR shares have not yet moved significantly beyond the SPAC IPO price. Frank Curzio, Curzio Venture Opportunity Electrovaya is an under-the-radar battery maker based in Canada that fits into the green energy theme. It's a tiny company that nearly tripled its sales over the past year. Back in 2015-2016, the company was focused on the electric vehicle (EV) market. When demand for electric vehicles didn't ramp as expected, Electrovaya shifted its focus to electric forklifts, which it turned out to be a hugely successful pivot. Electrovaya got its foot in the door by selling its batteries to companies that operate huge warehouses, like Mondelez and Walmart . In 2019, the company expanded by teaming up with Raymond Corp., a subsidiary of Toyota and the biggest forklift manufacturer in North America. In short, Electrovaya found its niche. Last year, sales nearly tripled, growing from $4.9 million to $14.5 million. The vast majority (over 80%) of Electrovaya's sales came during the second half of 2020. That means the company's sales boom is likely still in the early stages. Longer-term, Electrovaya is already exploring potential opportunities in three other markets: electronic buses, electronic delivery trucks, and robotics. The shares trade on the Toronto stock exchange, but we're recommending its OTC (over-the-counter) shares to make sure everyone can invest in this fast-growing company. Electrovaya has skyrocketed over the past year. So be patient and wait for the stock to come back down. Sean Brodrick, Wealth Wave I've been banging the drum about EVs for a few years now -- and 2020 saw them shift into higher gear. Sales of electric cars topped 3.24 million in 2020, up from 2.26 million in 2019. Sure, this is starting from a small base. Even with record sales, electric cars accounted for about 3% of global vehicle sales in 2020, according to Bernstein Research. But for investors, this is great news. This bull market is still a baby. It has a long way to go. So, what ride should we choose for that journey? In the U.S., the first stock that comes to mind is Tesla, Inc. . After all, it's cutting edge, right? Well, I'm going to tell you about two U.S. automakers that are putting the pedal to the medal to gain market share in EVs. And they're much better values than Tesla. The smart money is probably onto this. Because the two stocks I'm talking about are Ford Motor Company and General Motors Co. . But these old guard car manufacturers missed the bus on EVs, didn't they? Nope. They're playing catch-up, sure. But they're shifting into higher gear. GM and Ford are all cheaper on price-to-earnings, price-to-sales and price-to-book. And when it comes to earnings, GM is projected to earn more than Tesla in 2021, too. I can see the real bargain in this comparison ... and it isn't Tesla. If you want to ride along with the EV trend, and you prefer not to have single-stock risk, you can buy the Global X Autonomous & Electric Vehicles ETF . Whether you buy a single stock or an ETF, don't miss out on this opportunity. EVs are a megatrend that will shape the 21st Century. And you should be on that road to riches. Jim Woods, The Deep Woods While carbon-based fuel sources, such as oil and coal, have been used since the Industrial Revolution, they have increasingly fallen out of favor due to their impact on the environment. Instead, we are seeing a rise in interest in renewable energy sources, such as solar and wind power, as they have fewer of the negative drawbacks of coal and oil. At the same time, we also are seeing a movement toward more efficient ways to store energy and use smart grids. These are electrical grids that contain many energy-saving and energy-efficient measures, including smart meters and smart appliances. The election of Joe Biden, who has publicly expressed his support for green energy, might impel investors to turn toward such stocks. So, it is time to turn our attention to the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund . GRID tracks a market-cap weighted index of global equities that are in the smart grid and electrical energy sector. These are divided into pure play (where more than 50% of the company's revenue comes from these two sectors) or diversified (where these sector represent less than 50% of the company's revenue.) After being screened for minimum liquidity and market capitalization, the stocks are then given a collective weight of 80% for pure play stocks and 20% for diversified stocks. Some of this fund's top holdings include Aptiv PLC , ABB Ltd. , Johnson Controls , Schneider Electric SE (SBGSY), Eaton Corp. , Enphase Energy , SolarEdge Technologies and Prysmian S.p.A. (PRYMY). This fund's performance has been strong, even when including the damage done by the COVID-19 pandemic. The fund has amassed $156.56 million in assets under management and has an expense ratio of 0.70%. While GRID does provide an investor with a chance to tap into the world of electrical grids, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

Green Investing Favorites: 15 Wind, Solar, EVs and a Smart Grid Stock Plays

Experts pick their favorites in alternative energy from wind power to solar power to electric vehicles and the smart grid.

Columnist Conversation

4 Biotech Stocks That Could Be Takeover Targets

The ARKK Will Not Sink as Our LT Bounce Zone Is...

For the First Time in Months...

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.