Investing in these environmentally conscious stocks could put green in your wallet, too.
Rising political and social acceptance of environmentalism is bullish for green companies over the longer term. In the shorter term, some have come under pressure amid a broader shift from growth stocks to value stocks, the potential for interest rates to keep rising, an uncertain outcome for the White House’s climate legislation and cost inflation for developers. That can make for good bargain hunting, experts say. “There are a lot of companies to choose from, as the truly sustainable investing arena has really taken it on the chin the past few months after a stellar 2020 and a so-so 2021,” says Peter Krull, CEO at Earth Equity Advisors in Asheville, North Carolina. Most of these top green stocks are down sharply from where they were a year ago, and all are down so far this year through Tuesday’s close through Jan. 25.
Beyond Meat Inc. (ticker: BYND)
Eating plants instead of animals saves land and water and reduces greenhouse gas emissions. Beyond Meat is making it easier for more people to reduce the amount of meat in their diets. But the company also faces increasing competition from Impossible Foods and others like Tyson Foods Inc. (TSN), Kellogg Co. (K) and Conagra Brands Inc. (CAG). “The stock has not performed well of late and we think there is an opportunity here with a market leader in a growing space,” Krull says. “The risks, obviously, are that they are a small company in a rapidly growing space with increased competition.” Beyond Meat’s stock is down more than 60% over the past year.
Hannon Armstrong Sustainable Infrastructure Capital (HASI)
This company claims to be the first public U.S. company dedicated only to investing in climate solutions. The firm finances companies involved in energy efficiency, renewable energy and other sustainable infrastructure markets. “They are the definition of a sustainable company,” Krull says. He also points to the company’s “good financials,” dividend yield above 3% and long-term track record of “great” returns. “Risks are increased interest rates, but we believe in the importance of their service in helping to finance a more sustainable economy,” Krull says. The stock is down about 40% over the past 52 weeks.
Sunrun Inc. (RUN)
California has been debating a controversial plan to change the way rooftop solar users are compensated when they provide extra power to the grid in what is known as net metering. This stock “has been hammered over the past few months because of fears surrounding new net metering rules,” Krull says. “We feel these risks are overblown and would be active buyers of the solar stock.” The company provides solar panels and batteries for purchase or lease. “We believe that the pullback is an opportunity to buy the stock at a bargain price,” Krull says. The stock is down about 67% over the past year.
UGE International Ltd. (UGEIF)
In November, T-Mobile US Inc. (TMUS) picked this solar company to help source clean energy from projects in New York City with a contract that will reduce the wireless provider’s carbon dioxide use by 2,600 tons a year. The partnership “highlights the strong demand from top-tier corporate off-takers to participate in community solar, further de-risking the operating model,” says Nicholas Boychuk, analyst with Cormark Securities. UGE’s model of developing, building, owning and operating commercial and community solar projects creates a diversified recurring revenue base, he says. He expects its business model — which allows property owners to monetize unused space and consumers to get access to clean, local, renewable power at or below grid rates — will help UGE as more areas adopt renewable energy. UGE shares have dropped about 50% in the past year.
Tesla Inc. (TSLA)
As the leading electric vehicle maker globally, Tesla‘s products mean less emissions from the auto sector. Even when factoring in the pollution caused by generating the electricity to charge their batteries, Tesla Model S and X vehicles have kept at least 340 million pounds of greenhouse gases out of the atmosphere since the Model S started shipping in 2012, according to numbers crunched by Plugless Power. The electric vehicle maker “is arguably the most popular clean energy company globally,” says Kunal Sawhney, CEO of Kalkine Group. Tesla is a strong bet because it has room for growth in untapped markets around the world, and its Cybertruck could “be the trigger for the next sustained rally in Tesla stock,” Sawhney says. While Tesla’s shares have risen more than 7% over the past year, they have lost more than 20% year to date.
TE Connectivity Ltd. (TEL)
With electric vehicle sales hitting new highs and demand outstripping production, companies that provide equipment to electric vehicle manufacturers have been benefiting. “Companies addressing the automotive supply chain with positive product mix on EVs have seen outperformance over the past several years, and we believe that can continue,” says Matt Breidert, senior portfolio manager with Ecofin. TE Connectivity, which produces connectors and sensors, is one of his favorites. While many of the company’s customers are not directly involved with clean tech, its products can be found in hybrid and electric vehicles as well as wind and solar farms. The stock is up more than 16% over the past year, but it has come down more than 10% in 2022.
Infineon Technologies (IFNNY)
This company is another that Breidert likes because of its involvement with electric vehicles, especially as rising gasoline prices make such transportation more attractive. In addition to its products being found in electric vehicles, Infineon’s semiconductors help solar and wind farms generate electricity. “Our technologies help make cars, trains, industrial plants, data centers, consumer electronics and household appliances as energy-efficient as possible,” says the company, which is aiming to become carbon-neutral by 2030. Infineon’s stock is roughly unchanged over the past year, but it has come off more than 11% so far this year.
First Solar Inc. (FSLR)
This solar power plant developer has longer-term opportunities to expand manufacturing in multiple international regions, with the localized production allowing it to compete with more dominant Chinese producers, Breidert says. First Solar is the 10th-largest holding in the iShares Global Clean Energy ETF (ICLN), which is down more than 40% over the past year given headwinds facing the clean tech industry. “Sentiment is quite washed out, and in the past almost 10 years of our experience investing in this space, those are generally better entry points given the volatility in the sector,” Breidert says. First Solar shares are off more than 25% over the past year.
Vestas Wind Systems (VWDRY)
The U.S. has very little in the way of offshore wind energy production, but the Biden administration aims to change that. The White House has set a goal for the nation to have 30 gigawatts installed by 2030. That expansion is a boon for international offshore wind turbine developers such as Vestas, which is also a leading onshore wind turbine manufacturer. In its 2022 list, media and research company Corporate Knights ranked Vestas the most sustainable corporation in the world. “Vestas has successfully helped our partners avoid more than 1.7 billion (metric tons of) carbon emissions over the past four decades,” CEO Henrik Andersen said in a press release. “As the energy transition accelerates, Vestas is dedicated to making sure this transformation unfolds sustainably, in close collaboration with our partners.” The stock is down more than 40% over the past year.
9 of the best green stocks to buy:
— Beyond Meat Inc. (ticker: BYND)
— Hannon Armstrong Sustainable Infrastructure Capital (HASI)
— Sunrun Inc. (RUN)
— UGE International Ltd. (UGEIF)
— Tesla Inc. (TSLA)
— TE Connectivity Ltd. (TEL)
— Infineon Technologies (IFNNY)
— First Solar Inc. (FSLR)
— Vestas Wind Systems (VWDRY)
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