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Clean Power Paradigm Portfolio Gains

Published on November 2nd, 2013 | by Guest Contributor

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Renewable Energy Portfolio Outpaces Market

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November 2nd, 2013 by
 

Originally published on Roen Financial Report.
By Harris Roen.

The Paradigm Portfolio is a select list of green investments that are considered best positioned to benefit from the energy paradigm shift away from foreign oil and polluting coal and toward cleaner power alternatives. These leadership companies are culled from a list of nearly 250 alternative energy stocks that play an important role in redefining our energy future.

Accounting for additions and removals from the Paradigm Portfolio since inception in January 2013, returns* have profited 35%. This greatly outpaces returns of the overall market – the S&P 500 was up 24% and the tech-heavy NASDAQ gained 27% over the same time period.

 

gains_20131030

*Hypothetical gain from portfolio recommendations. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on this list.

Portfolio Returns

It is no coincidence that the two biggest gainers in the portfolio to date are both solar installers. This is one of the hottest investment themes of the year, as dropping panel prices, assorted government incentives and a plethora of financing options has dramatically increased the number of solar installs.

SolarCity Corp. (SCTY) is the best performer by far, having gained 335% in price since entering the portfolio in January 2013. The stock has surpassed its peaks back in May on the announcement of underwriting of new shares. In addition, SolarCity reported solid third-quarter numbers and even better guidance.

SunPower Corp (SPWR), the second largest gainer, is a more integrated solar company that both manufactures and installs photovoltaic panels. SunPower has gained 120%.

Seven companies out of the 36 in the Paradigm Portfolio have shown a loss since entering the portfolio. The average loss of these stocks, however, is very small, around 4%.

 

myrg

Paradigm Portfolio Update

One company is being added to the Paradigm Portfolio, and one is being removed.

COMPANY ADDED: The smart grid company MYR Group, Inc. (MYRG) provides a range of services to the electrical infrastructure market, including design, engineering, procurement, construction, upgrade, maintenance and repair. This relatively small Midwestern company has 3,300 employees and operates throughout the continental U.S. MYR is involved in several renewable energy projects, including transmission lines for large-scale wind farms and solar arrays.

The financials of MYRG look very good. It rates well in earnings per share growth, sales growth, return on capital and cash flow. In addition, MYRG has very low debt. We measure MYRG to be trading at fair value at current prices, so this is a good time to add it to the Paradigm Portfolio.

COMPANY REMOVEDRenewable Energy Group Inc. (REGI) is an Iowa-based biodiesel business with over 220 million gallons of production capacity. REGI is a profitable company with excellent sales growth, and has performed very well in the portfolio, gaining 86% since January 2013. There are several other companies in the Paradigm Portfolio involved in renewable fuels, including The Andersons, Inc. (ANDE) and Darling International (DAR).

REGI and other biofuel companies have benefited greatly from the Renewable Fuel Standards (RFS) put in place by the EPA. These standards mandate that specific volumes of renewable fuel be sold, and those percentages are set to increase before the end of the year. A lawsuit recently filed by the influential American Petroleum Institute against the EPA poses a serious challenge to the 2013 RFS. There may be some fallout for biodiesel companies if the lawsuit is successful and biofuel companies loose the incentive to continue to scale up. Although we believe in the future of renewable fuels as part of the clean energy mix, it makes sense not to overweight the portfolio in this area. Since we see REGI as overvalued at current stock prices, it is prudent to remove it from the portfolio at this time.

*Hypothetical gain from portfolio recommendations. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on this list.

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  • SirSparks

    I am interested in investing in this portfolio as a collection of funds. How would that happen?

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