Tom Konrad CFA
Experimenting with more frequent updates
In the past, I genrally only wrote about my annual list of ten clean energy stocks on a quarterly basis, but when I wrote last month to apolgize for inadvertently slipping in an extra stock, and in the process wrote a few notes on a couple of the stocks with news, a couple readers wrote to say they liked the more frequent updates. So let it be written, so let it be done.
Leave a comment if you think it’s something I should continue doing, or if you think my limited writing time is more valuably spent talking about stocks you have not already heard about.
Portfolio performance
February was kind to my stock picks, which had a total return since the start of the year of 19.5%, up from 15.1% at the start of February. The hedged portfolio showed a gain of 16.1%, up from 12%. Meanwhile my benchmarks both lost ground, the Clean Energy ETF PBW falling back to 10.9% from 20.8% at the start of February, and the Russell 2000 ETF IWM falling from a gain of 12.3% to a gain of only 8.8% for the year.
For details on the composition of the portfolio and hedged portfolio, see the original article: 10 [sic] Clean Energy Stocks for 2012. Stock-by-stock performance and dividends are shown in the chart below. Note that the performance of foreign-traded stocks mrked with * is calculated based on the prices in their home markets converted to dollars at the prevailing rate at the time.
Stock Notes
Euro Stocks Rebound as Crisis Fades
The three European stocks (Rockwool [ROCK-B.CO] up 28%, Veolia [VE] up 31%, and Accell [ACCEL.AS] up 22%) have done well this year, as investors worst fears of the outcome from the Greek debt crisis begin to fade. Veolia climbed 15% over the last two days based on its announcement that the company is in talks to sell its mass transit unit.
Alterra Rises on HS Orka
The top performer has been Alterra Power [MGMXF.PK/AXY.TO.] I think the 57% gain so far this year is partly based on the fact that the company had been so beaten down last year, and the announcement that the group of Icelandic pension funds that owned 25% of its HS Orka geothermal plant had increased their stake to 33.4%. This is good for Alterra in two ways: the cash can be used for investments in other renewable energy projects, and the greater local ownership of the Icelandic power plant helps to blunt the criticisms of Icelandic nationalists who who have been highly critical of foreign ownership of this power plant, which meets 9% of Iceland’s electricity needs and 10% of its heating needs.
Depressed Stocks Cheer Up
The other star performer has been transit bus manufacturer New Flyer (NFYEF.PK/NFI.TO). I believe the stock’s rise has been mostly a rebound from excessively depressed levels at the start of the year. Even at the current $7.89 a share, I think this high-yielding stock remains an excellent value. The story at Waterfurnace (WFIFF.PK/WFI.TO) is similar, with the stock rebounding from severely undervalued levels at the start of the year on little news of note.
Drifting in the Western Wind
The worst performer has been Western Wind Energy (WNDEF.PK/WND.V.) This stock has been drifting slowly downward on a lack of news after rejecting potential buyout at the end of last year. Since the company has completed its Windstar and Kingman wind farms, the value of the company has risen appreciably since I wrote about it in late 2011, so the price decline represents an opportunity to pick up a deeply undervalued renewable energy power producer. I have a limit order in to buy a little more at slightly below the current price, despite my fairly large existing position in the stock.
Conclusion
It’s been a good year so far for my picks, much like the start of my last banner year, 2009. As I wrote when I introduced this list,
I’m optimistic about 2012. Unless we see a total economic meltdown…, I expect strong appreciation of this portfolio of undervalued clean energy stocks in 2012.
DISCLOSURE: Long WFIFF, LIME, AMRC, RKWBF, WM, VE, ACCEL, NFYEF, FNVRF, WNDEF, MGMXF, and puts on IWM and SPY.
DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.
I appreciate the update and vote for regular updates.
Unfortunately, I had trouble buying Accell and Rockwool through my broker. There would be extra fees, if I could buy them at all.
I’ve totally missed out on Alterra’s gains but perhaps it will come back down.
Do you still like VE, given the news on mass transit and the recent gains?
VE is a poorly managed company that’s really a turn-around play. While it is poorly manged, it’s priced like a disaster. One thing I liked about them was their mass transit division, but rationalizing operations may mean shedding some divisions I like. I probably would not by VE now that it’s over $14, but it was a steal under $10.
Yes, the costs of buying Accell and Rockwool are fairly high… at least with my broker, buying these stocks only really makes sense for purchases over $10,000+. I only buy them in the larger accounts I manage. But I thought they were well priced this year, so I thought they should be in the ist.
Curious where your limit order is for Western Wind? Probably it was filled today.
I paid 1.86 for my WNDEF shares.
If I’d wanted to disclose my limit price, I would have.
Most of my WNDEF was acquired below $1.50, but that was bought before Algonquin’s failed takeover offer, and before the successful completion of Kingman & Windstar I… I’m willing to pay more today than I was 6 months ago.
Thanks, Tom. I’ve put in an order to buy more WNDEF.
On another note, I am very pleased with the recent Obama-Clinton public/private 4 Billion initiative regarding energy retrofits of buildings. Have seen very little on it in the media but its clearly a very economically sound plan–and I expect it will benefit LIME, WFIFF and HON.
Would appreciate others feedback regarding quarterly results as they come in. WFI is doing the same business as last year but the price is 25% lower than it was then, plus there has been a dividend increase.
Part of LIME’s business is down and so is the stock price. Wonder if it means time to think about buying more?
The part of the business that’s down is the volatile C&I segment, so no biggie.
As for the price decline in WFI, I think it’s just because the sector is down…
Sorry I can’t do the play-by-play on earnings… I have a day job.
OK and your comment on LIME is helpful. I’ll look for price stabilization perhaps before buying more.
Just did the math and realized that even with the dividend cut coming by August 2012, NFYEF will still be paying 5% when the price hits $11.60! (They’ve estimated the new dividend will be approximately 58 cents)
Have you had a chance to look at New Flyer’s free cash flow? I’m curious if there is any chance they would be forced to cut the dividend in the short-term beyond whats already been signaled. (58 cents)
In the long run, I definitely like the business.
I did not see anything in NFI’s earnings statement that would make me sell at the current price. Short term, competitive pressures look bad, not so bad that I’d trade in and out.