Tyler Rosenlicht, Head of Natural Resource Equities at Cohen & Steers, in an interview with Bloomberg on July 31, shared his insights on the global energy landscape, emphasizing that the conversation around energy has shifted beyond just oil. While oil remains a significant driver of production and energy supply, natural gas, nuclear, and alternative energy sources are growing rapidly.
Rosenlicht noted that the growing demand for energy from data centers requires significant amounts of power to operate, however, energy consumption is also surging to satisfy the needs of technological advances, a rising middle class globally, urbanization, and traveling. Rosenlicht believes that the demand for energy will continue to grow, driven by population growth, economic expansion, and the increasing energy intensity of the global economy. He noted that his firm Cohen & Steers forecasts energy demand in 2040, taking into account factors such as population growth, economic growth, and energy intensity.
Rosenlicht expressed concerns that the assumption of increasing energy efficiency may be overstated, as new technologies may lead to higher energy usage. He emphasized that the world is in an “energy addition” phase, where new supply is needed to meet growing demand.
In terms of investment opportunities, Rosenlicht favors the U.S. natural gas sector, particularly liquefied natural gas (LNG) exports. He also favors energy companies that are pursuing emissions reductions using their existing infrastructure. On the alternative side, Rosenlicht’s company is bullish on companies building electrification assets and infrastructure, such as transmission wires and lines. Rosenlicht is also bullish on nuclear energy, which he believes will play a crucial role in meeting the demand for low-carbon energy.
Read Also: 10 Worst-Performing Industries in 2024 and 10 Most Promising Growth Stocks According to Hedge Funds.
Clean energy ETFs have also been a popular investment choice, especially between 2020 and 2022, when the industry experienced rapid growth. One major driver was the declining costs of solar and wind energy, which became increasingly competitive with fossil fuels. The Clean Energy ETFs also benefited from broader techno-optimism between 2020 and 2022. However, the interest rate hikes beginning in mid-2022 have significantly impacted the sector. For example, the iShares Global Clean Energy ETF (NASDAQ:ICLN) has declined by 20% year to date, as of November 11. The SPDR Kensho Clean Power ETF (NYSEARCA:CNRG), which invests in companies innovating and manufacturing renewable energy technology rather than generating power directly is down 13.3% year to date, as of November 11. The clean energy sector is expected to regain momentum driven by decreasing costs, technological advancements, and global carbon reduction targets, the industry has a solid long-term outlook. According to Straits Research, the clean energy market is expected to grow at a 9.47% annual growth rate from 2024 to 2032.
The alternative energy sector is set for significant growth, fueled by rising environmental awareness, favorable regulations, and advancements in technologies such as wind, solar, and hydropower. While the industry encounters challenges, including high upfront costs and technological barriers, the overall outlook remains positive. With that in context, let’s take a look at the 10 best alternative energy stocks to buy according to hedge funds.
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Our Methodology
For this article, we scanned alternative energy ETFs plus online rankings to compile an initial list of 30 alternative energy stocks. From that list, we narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Alternative Energy Stocks To Buy According to Hedge Funds
10. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 29
Bloom Energy Corporation (NYSE:BE) is a leader in solid oxide fuel cell (SOFC) technology, a method that produces electricity through a chemical reaction without burning fuel. Their fuel cells can run on different energy sources such as natural gas and hydrogen and help to reduce carbon emissions while providing reliable and secure energy. Bloom Energy Corporation’s (NYSE:BE) technology is reliable and plays a vital role in the global shift towards alternative energy.
On November 7, Bloom Energy Corporation (NYSE:BE) announced that it would deliver fuel cells to the largest single site in history. An 80 MW project, developed in partnership with SK Eternix will power two eco parks in North Chungcheong Province, South Korea. The project is expected to begin commercial operations in 2025 and marks a significant milestone for the company. Bloom Energy Corporation (NYSE:BE) also announced an agreement with FPM Development to deploy 20 megawatts (MW) of SOFCs across two strategic locations in Los Angeles. The partnership aims to rapidly add affordable and resilient generation capacity to support the local electric utility, mitigate power shortages, and provide clean energy to vulnerable communities across Southern California. The agreement calls for the installation of Bloom Energy Corporation’s (NYSE:BE) fuel cell-based Energy Server at repurposed commercial sites, strategically selected for their location on the grid to support growing electrical demand.
Bloom Energy Corporation’s (NYSE:BE) technology generates electricity with no combustion and negligible criteria pollutant emissions, and it operates on multiple fuels, including natural gas, biogas, and hydrogen, providing a lower carbon footprint compared to the electric grid while maintaining grid stability. This technology allows the company to accomplish its goals of providing clean power solutions faster than the alternatives. While hydrogen is currently more expensive than traditional fuels, Bloom Energy Corporation’s (NYSE:BE) breakthrough in achieving 60% electrical efficiency could make hydrogen economically viable as a fuel source. This makes Bloom Energy Corporation’s (NYSE:BE) fuel cells a cleaner alternative for electricity production.
9. Edison International (NYSE:EIX)
Number of Hedge Fund Holders: 32
Edison International (NYSE:EIX) is a leading energy company that has served California for over a century through its main subsidiary, Southern California Edison (SCE). Edison International (NYSE:EIX) provides electricity to around 15 million people across Southern, Central, and Coastal California. The company is actively involved in California’s transition toward alternative energy, aligning with the state’s goal of achieving carbon-free power by 2045.
In 2023, Southern California Edison (SCE), Edison International’s (NYSE:EIX) principal subsidiary, delivered 52% carbon-free power to its customers. The company has made significant investments in energy storage, contracting approximately 2,200 megawatts in 2023 alone, which increased its total energy storage capacity to about 8,100 megawatts, one of the largest portfolios in the U.S.
SCE is also heavily engaged in grid modernization efforts, completing 84% of its planned grid hardening in high fire-risk areas. These initiatives not only enhance grid reliability but also facilitate the integration of alternative energy sources, ensuring the grid is resilient and ready for the increasing demand for alternative energy.
On October 29, for the three months ended on September 30, Edison International (NYSE:EIX) reported impressive financial results, showcasing the company’s strong performance and solidifying its position as a leader in the utility sector. The company’s third-quarter net income came in at $516 million, or $1.33 per share compared to a net income of $155 million, or $0.40 per share in the previous year. The company’s core earnings were $582 million compared to $531 million in the previous year. The surge was primarily due to higher revenue authorized in Track 4 of SCE’s 2021 General Rate Case and an increase in the rate of return resulting from the cost of capital adjustment mechanism.
Edison International (NYSE:EIX) is also well-positioned to benefit from the expansion of data centers, with California leading the U.S. in data center capacity. The company’s focus on integrating advanced technologies like artificial intelligence (AI) to enhance grid reliability and predict power loads gives it a competitive edge in driving future growth.