Tom Konrad CFA
August Overview
I was traveling for much of the month of August, and so did not keep up with most of my stocks. But not much happened while I was gone, with the broad market and renewable energy stocks both producing small gains for the month of a little over three percent, as measured by my benchmarks, the Russell 2000 index (^RUT, 3.4%), and the most widely held clean energy ETF, the Powershares Wilderhill Clean Energy ETF (PBW, 3.2%).
My Clean Energy model portfolio also had a relatively uneventful month, producing a total return of 2-3%, only slightly below the general market (2.6% for the unhedged portfolio, 2.4% for the hedged portfolio.)
For the year, my clean energy model portfolio continues to greatly outperform its industry benchmark, but lag the total market. The unhedged portfolio is up 2.1% for the year, while the hedged portfolio is down 4.2%. Meanwhile, PBW is down 16% and the Russell 2000 is up 11%.
Stock Notes
Most of my clean energy stock picks also had uneventful Augusts, as shown by the small orange bars in the performance chart above. From left to right, the exceptions were:
- Alterra Power (TSX:AXY / OTC: MGMXF) gained 19% on a generally positive second quarter earnings announcement and an analyst upgrade.
- Western Wind Energy (TSX-V:WND / OTC: WNDEF) gained 17% when it emerged that Brookfield Renewable Energy Partners (TSX:BEP-UN/ OTC: BRPFF) acquired 10.7 million shares and 319 thousand warrants of the company for C$2.25 per share, and the right to acquire an additional 277 thousand shares on the same terms. The agreement requires that Brookfield compensate the seller if Western Wind is acquired by any party for more than C$2.25 any time in the next year. Since Western Wind is currently in a proxy battle between two parties, both of which have stated they intend to sell the company, such a sale is very likely, and Brookfield’s purchase only makes sense to me if Brookfield intends to bid at least C$2.25 per share for the whole company, and wants to influence the outcome of the shareholder vote in the proxy battle and/or the eventual sale ratification. Other investors seem to agree, and WND has been trading with a new floor price of C$2.25 since the announcement. It closed Friday at C$2.31.
- New Flyer Industries (NFI.TO / OTC:NFYEF) completed the redemption of its outstanding 14% subordinated notes. This wraps up the financial restructuring which began last year. New Flyer was up 4% (total return) for the month. As expected, the annual dividend rate was set at C$0.585; half the previous payout on the company’s old IDS securities, giving New Flyer a 7.6% yield at the current C$7.70 share price.
- Lime Energy (NASD:LIME) fell a further 7% after it received notice of potential delisting from NASDAQ because of its late 10Q filing, which is pending an internal investigation into the company’s revenue reporting. Lime has 60 days to submit a plan to regain compliance, upon receipt of which NASDAQ may grant a further extension of up to 180 days. As I discussed previously, I considered LIME so cheap at $0.90 that I could see little potential downside in the outcome of the internal investigation. While the company cannot currently give any timeline for the completion of the investigation, I consider the delisting notice a non-event, since Lime is already taking steps to restate its financial statements. Because of this, I decided to add to my position in LIME with a purchase at $0.70 on Thursday, and intend to purchase more if the stock falls further.
DISCLOSURE: Long WFIFF, LIME, RKWBF, WM, ACCEL, NFYEF, FNVRF, WNDEF, MGMXF, VE, BRPFF.
DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
