In this article, we present the list of 10 best climate change stocks to buy now, if you want to skip the discussion and see the top 5, head on straight to the 5 best climate change stocks to buy now.
NASA defines climate change as a broad range of global phenomena created predominantly by burning fossil fuels, which add heat-trapping gases to the Earth’s atmosphere.
Over time, global climate change has become evident with frequent dangerous weather events happening around the world. In the Global Climate Report for 2020; Global land and ocean surface temperature was 1.16°C above the 20th century average of 12.7°C and the second highest in the 141-year record.
Physical consequences of climate change can directly impact the stability of the financial markets. Utmost effects of climate change such as extreme weather changes (eg. drought, increase in sea level due to melting glaciers) can affect the operation and business processes of certain industries (could affect numbers of companies in terms of revenues which can affect stock values).
Climate change is reaching alarming levels and to help put an end to it, The Biden Administration is proposing to make US electricity production carbon-free by 2035 and achieve net zero-emission by the middle century. They plan to spend $2 trillion over four years to upgrade four million buildings making them more energy efficient. Some funds will also be allotted to public transportation, electric vehicle manufacturing, and financial incentives for consumers to trade up to cleaner cars. Andrew Light, the former senior climate official in the Obama administration, said that Mr. Biden is focused on lowering emissions and increasing jobs at the same time.
There will be a big push on electric vehicles, a big push on efficient buildings, both residential and offices, a big push on creating a new kind of civilian conservation corps and doing a lot of nature-based solutions on climate change.”
The International Energy Agency has found many benefits of electric cars where the carbon benefits of electric cars over petrol-fueled ones dropped from 50% to 30% in Europe when adding manufacturing emissions, even lower in the countries that get more electricity from fossil fuels, like the U.S.
In order to identify the 10 best climate change stocks to buy now, we started with the 38 holdings in the Global X CleanTech ETF (CTEC) as of December 18, 2020, and we were able to narrow down our list to the 10 best climate change stocks by using the hedge fund sentiment scores.
You will notice that Tesla (TSLA) is not part of our list of the best climate change stocks to buy because Global X's ETF classify it as a "climate change" stock. However, if Tesla was part of our list it would have ranked as the number one stock to buy now for many clear-cut reasons.
All Tesla vehicles produce significantly less CO2 than any gasoline-powered competitor and if an electric vehicle is powered by solar energy, essentially no CO2 is produced at all. Over 550,000 Tesla vehicles have been sold and driven 10B miles resulting in a combined saving of over 4M metric tons of CO2. You can check out this article that talks about the Top 11 Lithium and Battery Stocks to Buy Now, where Tesla was included in the rankings.
So why did we use the hedge fund sentiment scores as the main criterion to determine the best climate change stocks to buy now? Our in-house analysis shows that we can identify a select group of stocks that can outperform the S&P 500 index on average by double digits annually using the hedge fund sentiment results. For example, since March 2017 the portfolio of our monthly newsletter's stock picks has beaten the market by over 78 percentage points. We have also publicly shared some of the portfolio selections for our monthly newsletter. We posted this real estate stock idea in October and it's been up more than 50 percent since then.
Based on our hedge fund sentiment data, we present to you, the 10 Best Climate Change Stocks to Buy Now among the 800+ hedge funds tracked by Insider Monkey:
10. Fuelcell Energy Inc. (NASDAQ:FCEL)
No of HFs: 17
Total Value of HF Holdings: $35 Million
We start the list of best climate change stocks to buy now with Fuelcell Energy, Inc. The company is a fuel cell power company that designs, produces, and operates services Direct Fuel Cell power plants that run on natural gas and biogas. FCEL offers efficient and affordable fuel cell solutions configured for the supply, recovery, and storage of energy. During the third quarter of the year, FCEL posted revenue of $18.7 million.
The top hedge fund holder for this stock is Sander Gerber’s Hudson Bay Capital Management which had over $7 million invested in the stock at the end of September.
9. Bloom Energy Corporation (NYSE:BE)
No of HFs: 17
Total Value of HF Holdings: $176 Million
BE ranks 9th in our list of the best climate change stocks to buy now. Bloom Energy Corporation is headquartered in San Jose, California. The company manufactures and markets solid oxide fuel cells that produce electricity on-site. According to the New York Times, solid oxide fuel cells are considered to be the most efficient but most technologically challenging fuel-technology. During the third quarter of 2020, the company reported a revenue of $200.3 million, a gross margin of 28.0%, and a net loss of $12.0 million.
“Bloom Energy and its hydrogen fuel cell peers performed very well early in 2020, as investors appeared to develop greater appreciation for the potential of fuel cell technology in an environment of falling natural gas prices. Bloom gave back all of this performance and more mid-quarter, however, as a financial restatement that delayed the release of their 2019 10K compounded the impact of the general coronavirus-related market selloff. A better-than-feared fourth quarter earnings report, which showed 50% growth in system acceptances, prompted a late-March rebound.”
8. Daqo New Energy Corporation (NYSE:DQ)
No of HFs: 18
Total Value of HF Holdings: $109 Million
DQ ranks 8th in our list of the best climate change stocks to buy now. Daqo New Energy Corporation is one of the leading manufacturers engaged in the production of monocrystalline silicon and polysilicon for use in solar photovoltaic systems. During the third quarter of 2020, the company reported a revenue of $125.5 million.
The top hedge fund holder for this stock is Jos Shaver’s Electron Capital Partners which had over $34 million invested in the stock at the end of September.
7. TPI Composites, Inc. (NASDAQ:TPIC)
No of HFs: 20
Total Value of HF Holdings: $103 Million
TPI Composites, Inc. designs and manufactures composite wind blades for the wind energy market worldwide. The company produces composite vehicle structures to solve the complex problem of reducing weight and cost in transportation applications. Since 2001, the company has manufactured 62,000 wind blades. During the third quarter of 2020, the company reported a net sales increase of 23.5%, net of $42.4 million, and adjusted EBITDA of $49.1 million.
6. Ballard Power Systems, Inc. (NASDAQ:BLDP)
No of HFs: 21
Total Value of HF Holdings: $122 Million
Ballard Power Systems, Inc. is one of the leading global providers of innovative clean energy fuel cell solutions. The company develops and produces proton exchange membrane (PEM) fuel cell products for markets such as heavy-duty motive. During the third quarter of 2020, BLDP reported revenue of $25.6 million and ending cash reserves of $361.7 million.
Ballard partner, Van Hool, a leading bus OEM recently made a purchase of 10 fuel cell modules to power Van Hool A330 buses that will be deployed in Emmen, the Netherlands. CEO of Van Hool said that Ballard products enable the commercialization of fuel cells in public transportation.
“We are keen to deploy more Fuel Cell Electric Buses, powered by Ballard, in European cities. The successful integration of Ballard products into our buses, including the A330, has enabled progress toward commercialization of fuel cells in public transportation. We expect continued market penetration and growth of zero-emission fuel cell buses throughout the EU."
“In recent months, fuel cell stocks have once again become one of the latest market crazes, with investors flocking to the sector despite the industry’s history of many disappointments, poor financial performance and undifferentiated technologies. The fund is short Ballard Power Systems, a consistently loss-making and cash-burning Canadian company that has recently seen its market capitalization swell to a remarkable $4.5 billion (up eight-fold from the end of 2018). We have tracked Ballard Power (and several other fuel cell stocks) for the past decade, and on five separate occasions, investors bid up the shares in a frenzy only to be left holding the bag months later when they came crashing down to earth.
Ballard Power, born in the height of the tech bubble twenty years ago, is a supplier of fuel cell “stacks,” which are layers of energy-producing units that are combined to generate power. The stacks are sold to original equipment manufacturers and systems integrators for applications such as transportation (bus, truck and rail) and material handling. A quick peek at Ballard’s financials reveals just how challenging selling fuel cell energy stacks to vehicle manufacturers can be. The company generates just over $100 million in annual revenues and has never earned more than $40 million in annual gross profit. 2019 revenues were actually 12% below what the company generated in 2017, and annual EBITDA losses and cash burn have averaged about $15 million and $25 million, respectively.
5. Plug Power, Inc. (NASDAQ:PLUG)
No of HFs: 21
Total Value of HF Holdings: $389 Million
Plug Power, Inc. is an American company that focuses on the development of hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity. During the third quarter of 2020, the company posted revenue of $106.99 million surpassing Zacks Consensus estimate by 1.99%. Plug Power, Inc. is a 2020 honoree of the Albany Business Review’s Best Places to Work.
“We also closed our short position in Plug Power this quarter as the market was subsumed with enthusiasm over their recent acquisitions, resulting in an almost 80% rally in the stock over ten trading days. Our decision to exit was painful at the time as we were forced to reconcile with a collective exuberance that was (and is, in our opinion) not grounded reality. In hindsight, it was the correct decision as we avoided most of its recent vertical trajectory.”
4. Canadian Solar, Inc. (NASDAQ:CSIQ)
No of HFs: 25
Total Value of HF Holdings: $245 Million
Canadian Solar, Inc. is a solar power company that focuses on the designing, manufacturing, and marketing of solar module products that convert sunlight into electricity for a variety of uses. During the third quarter of 2020, the company reported net revenue of $913 million.
Canadian Solar, Inc. recently announced that they have completed the sale of Gunma Aramaki, a 19 MWp operational solar power plant in the Yamaguchi Prefecture in Japan to Tokyo Electic Power Company for approximately $64 million. Chairman and CEO of Canadian Solar, Dr. Shawn Qu mentioned,
“We have significantly enhanced the value of the Gunma Aramaki power plant over the past two years by acquiring the land for this project, and have meanwhile benefitted from the asset’s strong cash generation, Gunma Aramaki’s new owners have invested in our previous projects, and we are pleased to continue working with them. As we remain the asset manager and O&M service provider for this project, we will continue to capture a share of the project’s value creation through stable and long-term revenue streams, in addition to the profits from the sale.”
3. Solaredge Technologies (NASDAQ:SEDG)
No of HFs: 31
Total Value of HF Holdings: $553 Million
Solaredge Technologies is headquartered in Israel. The company provides a power optimizer, solar inverter, and monitoring systems for photovoltaic arrays which aims to increase energy output through module-level Maximum Power Point Tracking. During the third quarter of 2020, SEDG earned a $338.1 million revenue, a marginal increase of 2% from the prior quarter.
The top hedge fund holder for this stock is Ian Simm’s Impax Asset Management which had over $114 million invested in the stock at the end of September.
2. First Solar, Inc. (NASDAQ:FSLR)
No of HFs: 40
Total Value of HF Holdings: $283 Million
First Solar, Inc. is one of the leading providers of comprehensive PV solar solutions that use its advanced module and system technology. PV Solar Solutions provide an economically attractive alternative to fossil-fuel electricity generation today. During the third quarter of 2020, the company reported net sales of $928 million, an increase of $285 million compared to the prior quarter.
First Solar’s Photovoltaic Technology became the longest-running research project at the Outdoor Test Facility where the product was continuously monitored for 25 years. Nick Strevel, the company’s vice president for product management mentioned that they are more confident now of their product,
“Our product encapsulation technology and materials today are far superior, this helps us understand a legacy performance baseline and provides further confidence in the superior long-term durability and long-term degradation performance of today’s product.”
First Solar has risen 10% in the last one year, underperforms the market. In an article, we mentioned what White Brook Capital’s had to say about it,
“First Solar is a provider of solar modules to the industrial and commercial segment. Despite lackluster earnings reported during the second quarter, the stock appreciated due to the growth in the backlog as their offering continues to be attractive to industrial customers globally.
Solar is having its second moment, and I believe that First Solar is the best positioned to take advantage. First Solar is an industrial and commercial solar module producer. While often thought of as a homogenous solution, solar generation assets should be considered on a spectrum with retail and industrial applications on opposite ends.
1. Enphase Energy, Inc. (NASDAQ:ENPH)
No of HFs: 42
Total Value of HF Holdings: $1.04 Billion
The top climate change stock to buy now is Enphase Energy, Inc. They are a technology company that designs and produces software-driven energy solutions that span solar generation, home energy storage, and web-based monitoring and control. The company’s first product was the M175, it was designed to output 175 Watts of AC power which was later on replaced by the M190 that offers a higher power rating of 190 Watts. During the third quarter of 2020, the company reported a revenue of $178.5 million, along with a record 41.0% for non-GAAP gross margin.
Enphase Energy, Inc recently launched its Enphase Installer Network in Australia. The product is designed to help Enphase installers grow their business with a range of innovative digital tools and exclusive benefits. These include allowing access to sales leads and metrics and analytics that can be leveraged to improve business efficiency and profits.
The top hedge fund holder for this stock is Daniel Patrick Gibson’s Sylebra Capital Management which had over $345 million invested in the stock at the end of September.
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