As traditional energy stocks continue to flounder, renewable energy stocks have picked up the slack. And these five look exceptional.
April 2019 was the first month that renewable energy sources provided more power to U.S. customers than coal (despite government support for that dirty old industry), and coal’s share of the energy market has continued to slip, while renewable energy’s share grows, thanks to increasingly compelling economics. Bottom line: Coal is on the way out, all over the globe, and eventually other fossil fuels will follow it, displaced by ecologically cleaner renewable energy systems like solar power, wind power and fuel cells that typically use hydrogen and oxygen to create electricity. So if you’re looking to make big profits in the energy sector (because as the world grows, people continue to demand more power), renewable energy stocks are the best choice.
Following are five of the best stocks in the renewable energy sector today, with the most conservative first and the most aggressive last.
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5 Renewable Energy Stocks to Buy
Renewable Energy Stock #1: NextEra Energy (NEE)
NextEra is huge, with $19 billion in revenues. Its Florida Power & Light division serves more than 5 million customers while its Gulf Power division serves roughly half a million. But what’s more important for my thesis is its NextEra Energy division, which is the world’s largest generator of renewable energy from wind and sun as well as a world leader in battery storage—and which serves customers in New Hampshire, Iowa and Wisconsin as well as Florida. Analysts are looking for EPS to grow 9% this year to $9.15 per share and 9% again next year to $9.94 per share. As for the stock, it looks great, trending steadily higher year after year. Most recently it built a base centered on 280 through August and September but the first week of October saw the start of a renewed advance! Last but not least, the stock pays a fat 1.9% dividend. Risk-averse investors seeking income can buy here.
Renewable Energy Stock #2: SolarEdge Technologies (SEDG)
Based in Israel, SolarEdge makes and sells solar inverters and power optimizers that are extremely efficient at converting DC electricity produced by solar panels into AC electricity that can power homes and business; these components are so superior to all other solutions that they’ve been installed in solar systems in 133 countries! 2019 saw revenues of $1.43 billion, up 52% from the year before, and 2020 is expected to yield $1.57 billion, up 10%—so growth patterns are not smooth here. But the future is bright, as solar power becomes increasingly affordable all over the globe. As for the stock, it’s red-hot, up almost every day over the past two weeks. Aggressive investors could buy here, while more prudent investors should wait for a lower-risk entry point.
Renewable Energy Stock #3: Enphase Energy (ENPH)
California-based Enphase is also in the solar inverter business, and while Enphase is roughly only half the size of SolarEdge, it’s growing faster; 2019 revenues were $620 million, up 94% from the year before, while 2020 should see $900 million, up 45%. Enphase has more than 300 patents, has shipped more than 28 million inverters, and has operations in 20 countries. As for the stock, it’s also strong like SEDG, with the same big surge over the past two weeks, so my advice on buying is the same.
Renewable Energy Stock #4: Plug Power (PLUG)
PLUG is a stock I’ve known since 2000, when it was one of the tech stocks that flew to giddy heights in the final phase of the dot-com bubble—and then crash-landed. Basically, it was ahead of its time. The stock had another strong run in 2013—but that too was followed by years of retrenching, and now here we are again, with PLUG strong technically and, hopefully, strong financially as well. To be clear, Plug Power is not a dot-com stock; its technology is based on fuel cells, which use hydrogen today to generate electricity in the harshest off-grid environments, which power electric industrial vehicles like forklifts, and which will soon be powering on-road vehicles as well—as the hydrogen market develops. By the end of 2020, the firm expects to have shipped 40,000 fuel cells, to have more than 100 fueling stations, and to be through-putting more than 40 tons of hydrogen per day. Financially, the company has not yet turned profitable, and there are no profits visible in the year ahead, but 2019 saw revenues of $230 million, up 28% from the year before and 2020 should see revenues of $335 million, up 46% from last year. As for the stock, it’s hot, hitting new highs—though not quite as hot as the two solar inverter stocks. Given its history, there’s reason to be leery of PLUG, but I wouldn’t argue with the stock today.
Renewable Energy Stock #5: Bloom Energy (BE)
Last but not least is another fuel cell stock. Bloom Energy’s fuel cells generate electricity from natural gas, biogas or hydrogen to provide highly reliable on-site power to liberate businesses (like Walmart, Ikea, Oracle and eBay) from unreliable electric grids. Bloom’s solid oxide fuel cells are designed as server modules, which are linked together to create a power system that’s as large or small as the customer desires. At present electricity from such a system is still more expensive than grid power; reliability and low emissions are the attractions. But within the next decade, management expects price parity. And before then, the marine market may take off. In late June, management disclosed a partnership with Samsung Heavy Industries, which is the world’s third-biggest shipbuilder, to provide power plants for ships (which would help comply with the International Maritime Organization’s mandate to meet emissions reduction targets by 2050). Revenues in 2019 were $930 million, up 26% from the year before, and are expected to grow to $943 million this year. Earnings are not in sight yet, but the stock has been gaining strength and just broke out to a new high this week so it can be bought here, too.
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More