Company / Analytics

Analytics, 27 August 2021

Top Renewable Energy Stocks for Your Portfolio

Renewable energy stocks are taking center in the energy sector and holds plenty of long-term growth potential.

Equity markets are full of up-and-coming renewable energy stocks. These are either pure-play clean energy companies that stand to benefit directly from the general adoption of solar energy across industrial markets or electric vehicle (EV) firms that will thrive as the transportation industry transitions to emission-free vehicles.

Many investors may be keen to invest in the green energy wave but might be wondering where to start. We share some top renewable energy stocks worth considering for your portfolio.

Top Renewable Energy Stocks

Renewable energy stocks are taking center in the energy sector, even as investors continue to wonder which stocks to buy.

For the most part, many would argue that this section of the stock market holds plenty of long-term growth potential. After all, with the ongoing climate crisis rearing its head even during the current pandemic, there is a need for action. Particularly, action towards lowering our carbon footprints across the globe to combat the effects of global warming. It is thus understandable if investors are bullish on renewable energy stocks now.

Equity markets are full of up-and-coming renewable energy stocks. There are either pure-play clean energy companies like Canadian Solar and Daqo New Energy. Arguably, these are the firms that stand to benefit directly from the general adoption of solar energy across industrial markets. Indeed, the shares of these companies have gained over 170% since their pandemic era lows.

Meanwhile, the electric vehicle (EV) industry seems to be getting a boost from consumers and federal governments alike. This is evident as consumer demand is rising while leaders across the world, most recently US President Joe Biden are planning to invest billions towards EV infrastructure. EV stocks have thus been gaining momentum in the stock market, and have seen EV companies such as Faraday Future, an emerging EV company list in the stock market in July.

Given recent trends, many investors may be keen to invest in the green energy wave but might be wondering where to start. We list some top renewable energy stocks worth considering for your portfolio.

1. Clean Energy Fuels Corporation

Clean Energy Fuels is one of the largest providers of clean fuel for the transportation market. The firm strives to decarbonize transportation through the development and delivery of renewable natural gas (RNG). Essentially, it allows thousands of vehicles to reduce their greenhouse gases. It operates a vast network of fueling stations across the U.S. and Canada. The stock is up by over 200% in the past year and was trading at $8.13 on Friday (August 27).

In May, the company announced new RNG contracts as fleets across North America increasingly continue to adopt the company’s clean, low-carbon fuel to power heavy and medium-duty trucks. “Fleets are learning that RNG, together with natural gas engine technology, is a proven solution that can significantly decrease the impact of harmful emissions and reduce greenhouse gas emissions,” said Chad Lindholm, vice president, Clean Energy Fuels. “Clean Energy’s corporate vision is directly tied to working with our customers to improve air quality and positively influence public health. We will continue to grow the role of RNG in our fuel offerings to provide a clean and cost-effective alternative to diesel fuel.”

2. General Motors Company

General Motors (GM) is a multinational company that designs and manufactures vehicles and vehicle parts. GM is focusing on advancing an all-electric future as it unveiled its latest growth strategy earlier this year. Notably, it plans to invest over $25 billion in EV and autonomous vehicles (AV) products through 2025. It also plans to launch 30 new EVs globally by the end of 2025. At the heart of its strategy is the Ultium battery platform, which will power everything from mass-market to high-performance vehicles. GM Stock currently trades at $55.64 a share as of the end of Thursday’s trading session.

On July 9, 2021, the company announced that it sustained strong momentum in China for the second quarter. GM and its joint ventures in China delivered more than 750,000 vehicles, an increase of 5.2% year-over-year. This growth was driven by luxury and premium vehicles and SUVs/MPVs that include the Cadillac CT5 and XT6, and Buick LaCrosse. Sales of its new energy vehicles across brands also posted a strong performance this quarter.

On July 2, 2021, GM also announced that it will source U.S.-based lithium for its next-generation EV batteries through a closed-loop process with low carbon emissions. Lithium is a metal crucial to GM’s plans to make more affordable and higher mileage EVs.

3. Enphase Energy Inc.

Enphase is a renewable energy company and the world’s leading supplier of micro inverter-based solar-plus-storage systems. Enphase also delivers smart, easy-to-use solutions that connect solar generation, storage, and energy management on one platform.

Furthermore, the company has shipped over 34 million microinverters and approximately 1.5 million Enphase-based systems to over 130 countries. ENPH stock currently trades at $178.94 as of Thursday’s closing bell.

Enphase Energy reported quarterly earnings in early August which showed business remained strong with margins near all-time highs. Enphase gave investors more confidence with its third-quarter outlook, which implied revenue would jump another 9% sequentially over the last quarter at the midpoint of guidance. That is also in line with what SolarEdge predicted for its upcoming quarter.

In late June, the company launched its Encharge battery storage system in Germany, the product’s first expansion into a market outside of the U.S. The battery storage system offers configurations ranging from 3.5 kWh to 42 kWh, along with the option to upgrade and expand through the lifetime of the system.

4. Xpeng Inc.

Another name to know in the renewable energy space now would be Xpeng Inc. In brief, the company primarily focuses on the development and manufacturing of EVs. This Guangzhou-based EV maker is among the major players in the massive Chinese EV market. According to Deutsche Bank analysts, EV sales in the country could likely double just this year.

Notably, Xpeng’s delivery numbers for the second quarter appear to line up with this monumental growth. Earlier this month, the company announced that it had delivered 17,398 vehicles, a 439% year-over-year increase. For one thing, Xpeng does not seem to be slowing down on the operational front right now.

Most renewable energy stocks remain richly priced. But investors see a long runway for the sector in general. Buying these stocks should be done with the knowledge that they are currently expensive, but the long-term outlook is still promising as solar capacity continues to grow.

Energy-focused ETFs

The energy industry is complex, making it difficult for many to decide where to nest their investments within the space. If you find assessing opportunities in energy difficult, or simply don’t have the time to adequately research opportunities in the sector, you may consider energy-focused exchange-traded funds (ETFs). ETFs, provide diversified exposure to the energy market.

There are a ton of ETFs on the market today, each with its own goals, strategy, and history. Many of these funds are focused solely on the provision of exposure to the energy sector. Some may invest in blue-chip energy stocks, others may invest in emerging market energy stocks or small-cap energy stocks, but they are all focused on energy investments.

The most popular ETFs are managed by some of the brightest minds on Wall Street. By investing in these funds, you’re investing in a diversified portfolio of energy assets while minimizing the research necessary to be effective in the space.

Nonetheless, less research isn’t synonymous with no research. Before investing in any ETF, it’s important to investigate its historic performance, expense ratio, and assets held to get an understanding of what you’re investing in.

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