7 Stocks Ready for the 'Green Revolution'

The recent passage of the Inflation Reduction Act of 2022, which includes significant funding for climate-related projects, along with new legislation from California in support of electric vehicles, has given new tailwinds to the clean energy space. Several contributors to MoneyShow.com offer a variety of recommendations involved in the green revolution. Roger Conrad, Conrad's Utility Investor California has gone all in on electric vehicles. The California Air Resources Board voted to ban sales of gasoline-powered vehicles by 2035. And the 17 states that have tied their emissions standards to the Golden State's will likely follow suit. The prize of winning a healthy chunk of the U.S. EV market is immense. But there are still many bridges to cross before the U.S. has real EV manufacturing capability. And in the meantime, supply-chain challenges along with commodity and wage inflation will continue to pressure companies' margins. As such, count me a skeptic on stocks such as Tesla that trade at more than 100 times trailing 12 months earnings. Fortunately, U.S. electric utilities offer a far lower risk alternative. California regulators have approved $1.4 billion of rate base spending on such facilities for its three largest utilities, including $800 million for Edison International . And that's in addition to other grid-related spending needed to support the state's projected demand for EVs. Edison shares recently traded at 15 times expected next 12 months earnings, a substantial discount to 21-plus for the S&P Utilities Index. That's largely because the utility is managing wildfire liability risk as it hardens infrastructure. But if California is to be successful taking EVs from 16 to 100 percent of its new car market in 13 years, this utility is going to have to pump tens of billions of dollars into rate base for needed infrastructure. This investment will flow directly to earnings growth. And the result is ultra-reliable yearly dividend increases in the mid-to-upper single digit percentage range, even if the U.S. economy hits a major speed bump. As a result, for investors looking at EVs, buy Edison, not Tesla. Mike Cintolo, Cabot Top Ten Trader Carbon capture utilization and storage (known as CCUS) has become a hot topic for energy companies in recent years, as oil and gas producers are under pressure to reduce carbon emissions. The costs involved in CCUS are huge and will require years before most energy firms can fully address it, but Denbury has a big head start on its competitors. What separates the company from other energy firms is its focus on carbon dioxide enhanced oil recovery (CO2-EOR), a technique that allows for (a) significantly higher oil extraction from a reservoir by utilizing CO2 in the extraction process, while (b) reducing the carbon footprint of the oil produced. Denbury's eye-opening Q2 report saw revenue of $482 million increase 60% from a year ago and per-share earnings of $2.83 that rallied 177%. Denbury's operating activities allowed it to generate $55 million in free cash flow in Q2 (up 244%) and $106 million year-to-date (up 27%). Analysts see the bottom line soaring 178% in 2022. New Fortress bills itself as being at the forefront of the clean energy trend, helping its customers lower costs and reduce emissions by replacing oil-based fuels with liquified natural gas (LNG), while aiming to be the world's largest provider of carbon-free power. The company helps businesses of all sizes convert existing power generation into clean-burning LNG facilities. While LNG operations remain the lion's share of its business, New Fortress is currently expanding into the green energy space via Zero Parks, which plans to provide carbon-free power by replacing fossil fuels with affordable zero-emission hydrogen. An even bigger tailwind for New Fortress comes from the war in Ukraine; customers are now contracting with New Fortress to build liquification terminals (typically produced in 18-to-20 months) to help alleviate the energy crisis in Europe. The company said it remains on track to achieve its goal of over $1 billion in adjusted EBITDA in 2022 and over $1.5 billion in 2023 before taking into account the expected contribution from the Fast LNG units. Analysts see high double-digit growth into 2024. It's an intriguing story. Brett Owens, Hidden Yields NextEra Energy is the largest developer of renewable energy in North America. It's one of those great dividend stocks that is rarely cheap because everyone knows it's awesome. Meanwhile, one of the few energy dividends growing faster than NEE's is NextEra Energy Partners which is the yieldco spun off from NEE back in 2014. The company buys and operates clean energy projects on long-term contracts with stable cash flows. Renewable energy is the angle. The yieldco buys the wind farms, for example, from the parent company and runs them. As the leader in renewables, the NEE-to-NEP connection was about as blue blood as it gets, and provides us with plenty dividend safety and payout upside. The recent climate bill could be a net positive for NEP, too. Buy NextEra Energy Partners up to $95.00. Note that NEP does not send out a K-1. The firm is listed as a partnership under state law, but files its taxes as a corporation. This is perfectly legal to do. So NEP investors receive a Form 1099-DIV instead of a K-1. Jon Markman, Strategic Advantage The global energy complex is in a state of flux, made worse by the war in Ukraine, overzealous European lawmakers and unpredictable oil exporters. Investors should consider buying Equinor ASA , a Norwegian energy producer that was created in 2007 by the merger of Statoil and the oil and gas operations of Norsk Hydro. The business is 67% owned by the government of Norway through its ministry of petroleum and energy. However, Norway is now an extremely green country. Legislators there are pushing executives at Equinor to move quickly from its primary business of oil and gas development to green energy such as offshore wind farms. Equinor is in the right place at the right time. For the past five years executives have been dramatically reducing the footprint of the traditional fossil fuel business. The trend to green energy is one of the biggest current investment themes. Institutional investors are clamoring for companies that meet strict Environmental, Social and Governance criteria. The company claims that by 2030, 50% of revenues will come from low carbon sources. Equinor recently traded at only 7.6x forward earnings and 1x sales. The dividend yield is over 3%. Longer-term investors should consider buying shares on any pullback to the $36 level. Jim Woods, Bullseye Stock Trader Shoals Technologies Group is a provider of electrical balance of system (or EBOS solutions) for solar energy projects, primarily in the United States. EBOS encompasses components that are necessary to carry electric current produced by solar panels to an inverter. The products are sold principally to engineering, procurement and construction firms that build solar energy projects. In 2022, the company entered the electric vehicle charging market. A full $300 billion of the Inflation Reduction Act of 2022 has been allocated to environmental and climate reform as the United States seeks to reshape its global carbon footprint over the next eight years. Much of those dollars are going to solar projects of the sort that SHLS is an integral supplier to, and this is precisely the kind of bullish news we like to identify. Over the past three months, SHLS has spiked some 60%, a statistic that demonstrates the smart money is pushing this relative strength stalwart higher. And on that relative strength metric, the stock is in the top 3% of all companies. Equity investors can buy Shoals Technologies with a protective stop set at $22. Carl Delfeld, Cabot Explorer It is hard to imagine a clean energy future without a lot of copper. For example, the average electric vehicle (EV) uses about 4X as much copper as the average gas-powered car. Given that the U.S., Europe, and other parts of the world are transitioning to green energies, demand for copper should expand. Copper is a key material used in electric vehicles, solar panels, and other green energy products because its conductivity is second only to silver. However, even though copper prices plunged in July, S&P Global reported that copper demand was skyrocketing while demand couldn't keep up. Goldman Sachs expects demand for the metal to double by 2035. Phoenix-based Freeport-McMoRan operates seven open-pit copper mines in North America. It also owns two copper mines in South America and one of the world's largest copper and gold mines in Indonesia (Grasberg). Every 10 cents of price movement in copper has a sizable impact on the firm's revenue and profitability. For example, management believes the company currently has earnings before interest, taxation, depreciation, and amortization (EBITDA) sensitivity of $430 million for every $0.10 per pound move in the price of copper. For reference, Freeport's EBITDA was around $10 billion in 2021, when prices were mostly well above $4 a pound. Freeport's current share price presents an opportunity because the stock has pulled back a bit with the price of copper and concern about global growth. Freeport is a well-run company with a return on equity of 27%, return on assets of 12%, and has an ample cash reserve of $9.5 billion. The stock is trading right at around 30 per share, down from March 2022 high of $52 with a valuation of just under 10X earnings. I think we have more upside potential than downside risk and recommend beginning to build a position in the stock.

7 Stocks Ready for the 'Green Revolution'

These names primed for renewable gains include those that should benefit from carbon capture, California EV legislation, copper demand and more.

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