In this article, we look at the 10 Cheap Clean Energy Stocks To Buy According to Hedge Funds.
The Clean Energy Market is Booming
According to a report by the International Energy Agency (IEA), clean energy is expanding rapidly and the annual deployment of key technologies is accelerating, driven by policy support and cost reductions. Between 2019 and 2023, investment in clean energy surged by nearly 50%, reaching $1.8 trillion in 2023 and growing at an average annual rate of around 10% during this period. The clean energy sector has become a significant industrial player and a key contributor to the global economy. However, its benefits remain unevenly distributed, with the majority of clean energy deployment occurring in China and other advanced economies.
In 2023 the solar PV and wind capacity grew by 85% and 60% respectively, totaling nearly 540 GW. China led the market in both wind and solar capacity additions. China and advanced economies together made up 90% of wind and solar PV additions. Clean energy helped avoid annual fossil fuel energy demand of approximately 25 EJ, equivalent to 5% of global fossil fuel demand in 2023. This helped avoid around 580 million tonnes of coal demand, 180 billion cubic meters of natural gas, and almost 1 million barrels per day of oil demand. These avoided demands highlight the substantial impact of clean energy on reducing fossil fuel reliance globally.
Investing in a Greener Future
The clean energy market continues to attract significant interest from hedge funds and investment management companies. Norfund, a development finance institution owned by the Norwegian Ministry of Foreign Affairs is highly optimistic about the green energy sector. The organization has a goal to provide electricity to 6.5 million new households and finance 6.5 GW of new capacity by 2026 using a range of clean sources, including solar, wind, hydropower, biomass, and geothermal energy.
Norfund supports medium to large-scale grid-connected power plants, often through industrial partnerships. These projects typically operate under long-term contracts with utilities, benefiting from the significant cost decreases in solar and wind power. Norfund is also investing in enhancing grid capacity and reliability, which is crucial for integrating new renewable energy capacities.
In July, Norfund announced to invest $29.6 million in a rooftop solar project, a combined solar and battery storage project, and a hydropower project which is expected to reduce nearly half a million tons of CO2e annually. Additionally, Tinfos, a Norwegian hydropower company, is partnering with Norfund to develop small-scale hydropower projects in Indonesia, with a goal of 1 TWh of capacity by 2032. Norfund is also investing $25 million in Xurya, a company that provides rooftop solar rentals to businesses in Indonesia, which will help reduce high installation costs and facilitate the shift to renewable energy.
The rapid expansion of clean energy and accelerating deployment of technologies such as solar PV and wind play a pivotal role in shaping the future of global energy. As investment and innovation continue to drive the clean energy sector, a concerted effort to broaden its reach and impact will be essential for achieving a sustainable and resilient global energy future. With that in context, let’s take a look at the 10 cheap clean energy stocks to buy according to hedge funds.
Solar panel workers installing a new farm for clean energy generation.
Our Methodology
For this article, we used clean energy ETFs plus online rankings to compile an initial list of 35 clean energy stocks. From that list, we screened for companies that are trading at a forward P/E ratio of under 22.5, as of September 8. We then 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 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 Cheap Clean Energy Stocks To Buy According to Hedge Funds
10. Emeren (NYSE:SOL)
Number of Hedge Fund Investors: 6
Forward P/E Ratio as of September 8: 5.7
Emeren (NYSE:SOL) is a clean energy company with a primary focus on developing solar power and solar storage projects. The company operates as an Independent Power Producer (IPP) and has a diversified portfolio that includes 245MW of photovoltaic (PV) systems and 15MWh of storage systems.
Emeren (NYSE:SOL) has strategically shifted its focus to the European market, where competition is less intense compared to the United States, particularly in the construction of storage systems. The European market, particularly in countries like Italy, Poland, Spain, France, Germany, and the UK, offers significant opportunities for growth. The company’s has an extensive pipeline of solar and storage projects in Europe, which constitutes the majority of its order backlog
Emeren (NYSE:SOL) emphasis on Engineering, Procurement, and Construction (EPC) services now account for around 50% of the company’s revenues. The demand for EPC services in the photovoltaic sector has been growing, and the company continues to expand its EPC services, particularly in Europe.
Emeren (NYSE:SOL) has been facing challenges related to project delays. However, its strategic focus on the European market, enhances its growth prospects. The company’s earnings are expected to grow by 100% this year. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $23.59, which represents a 78.98% upside potential from its current level. Emeren’s (NYSE:SOL) stock is trading 5.70 times its earnings, which is an almost 69.64% discount compared to the sector median of 18.77. The stock is held by 6 hedge funds with stakes worth $28.67 million as of the second quarter. Shah Capital Management is the largest shareholder with stocks worth $27.94 million as of June 30.
9. JinkoSolar (NYSE:JKS)
Number of Hedge Fund Investors: 7
Forward P/E Ratio as of September 8: 7.69
JinkoSolar (NYSE:JKS) is one of the largest solar companies in the world by revenue. The company primarily develops and produces photovoltaic solar products. By the end of the second quarter, JinkoSolar (NYSE:JKS) product secured over 80% visibility of the 2024 order book and achieved new records in cell efficiency, with N-type TOPCon-based perovskite tandem solar cell reaching a lab efficiency of 33.24%, surpassing last year’s record of 32.33%. Management believes that the company’s TOPCon technology will offer the best economic performance at a lower cost.
JinkoSolar (NYSE:JKS) is expanding its global footprint and plans to set up a 10 GW solar cell and module factory in Saudi Arabia with PIF and Vision Industries with an investment of $1 billion. JinkoSolar (NYSE:JKS) is trading 7.69 times its earnings, which is a 66.49% discount compared to the sector median of 22.94.
As of the second quarter, the stock was held by 7 hedge funds at the end of the second quarter with stakes worth $15.40 million. As of June 30, Marshall Wace LLP is the largest shareholder in the company with a stake worth $9.27 million. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $23.59, which represents a 28.91% upside potential from its current level.
8. NextEra Energy Partners (NYSE:NEP)
Number of Hedge Fund Investors: 20
Forward P/E Ratio as of September 8: 10.06
NextEra Energy Partners (NYSE:NEP) is a renewable energy company and a publicly traded subsidiary of NextEra (NYSE:NEE). The company mainly focuses on the acquisition and management of contracted clean energy projects across North America and owns interests in a number of wind and solar projects.
On July 24, NextEra Energy Partners (NYSE:NEP) announced a 1.4% increase in its quarterly dividend, raising it to $0.905 per share. The company has been steadily increasing its dividends every quarter since 2015, making it a top dividend stock. This consistent growth is supported by strong cash generation. In the second quarter of 2024, the company’s cash available for distribution (CAFD) increased to $220 million, up from $200 million in the same quarter last year. Additionally, its operating cash flow for the first half of the year rose to $309 million, compared to $296 million in the same period last year.
NextEra Energy Partners (NYSE:NEP) stock is trading 10.06 times its earnings, which is a 41.41% discount compared to the sector median of 17.16. The company’s earnings are expected to grow by 2.26% this year. The stock was held by 20 hedge funds at the end of the second quarter with stakes worth $71.16 million. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $28.33, which represents a 15.7% upside potential from its current level.
7. Eversource (NYSE:ES)
Number of Hedge Fund Investors: 26
Forward P/E Ratio as of September 8: 14.78
Eversource (NYSE:ES) is a major energy provider in New England, operating through its subsidiaries, including Connecticut Light and Power (CL&P), NSTAR Electric, Public Service Company of New Hampshire (PSNH), and Aquarion Company. The company serves over 4 million customers with electric, gas, and water services. Eversource (NYSE:ES) is dedicated in advancing clean energy solutions and is investing heavily in offshore wind and geothermal projects to support its transition toward more sustainable energy sources.
Eversource (NYSE:ES) has established itself as a significant player in the clean energy sector through its investments in major offshore wind projects, including South Fork Wind, Revolution Wind, and Sunrise Wind. The Sunrise Wind project is anticipated to become the largest offshore wind initiative in the U.S. by 2026 and will generate 924 megawatts of power. Eversource (NYSE:ES) has sold a 50% stake in this project to Ørsted, a transaction projected to yield $1.5 billion by Q3 2024.
Eversource’s (NYSE:ES) stock is trading at a forward PE of 14.78, a 13.87% discount to its sector median of 17.16. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $72.82, which represents a 6.6% upside potential from its current levels. As of the second quarter, Eversource’s (NYSE:ES) stock is held by 26 hedge funds with a stake worth $622.20 million. Zimmer Partners is the largest shareholder in the company and owns stocks worth $303.36 million as of June 30.
6. Array Technologies (NASDAQ:ARRY)
Number of Hedge Fund Investors: 30
Forward P/E Ratio as of September 8: 9.63
Array Technologies (NASDAQ:ARRY) manufactures and sells single-axis trackers for solar panels, which include steel supports, electric motors, gearboxes, and electronic controllers. These systems, enable solar panels to follow the sun’s movement throughout the day.
In Q1, Array Technologies (NASDAQ:ARRY) introduced the Hail Alert Response system. This system uses weather prediction algorithms to autonomously stow solar trackers about 30 minutes before a predicted hail event. The system is compatible with Array’s existing products and requires a SmarTrack Controller for effective operation.
In February, Array Technologies (NASDAQ:ARRY) confirmed a partnership with Alpuco in Saudi Arabia to supply locally sourced materials. This partnership benefits from domestic incentives and strengthens the company’s position in the Middle Eastern market. The region is expected to add nearly 70 GW of photovoltaic capacity by 2030, with Saudi Arabia alone aiming for 130 GW of renewable energy by 2030. This partnership has the potential to significantly boost Array Technologies’ (NASDAQ:ARRY) market expansion goals and grow its order book.
Array Technologies (NASDAQ:ARRY) is trading 9.63 times its earnings, which is a 48.70% discount compared to the sector median of 18.77. The stock was held by 30 hedge funds at the end of the first quarter with stakes worth $396.77 million. As of June 30, Hill City Capital is the largest shareholder in the company with a stake worth $136.61 million. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $13.73, which represents a 73.09% upside potential from its current level.
5. Shoals Technologies (NASDAQ:SHLS)
Number of Hedge Fund Investors: 33
Forward P/E Ratio as of September 8: 15.66
Shoals Technologies (NASDAQ:SHLS) is a leader in the alternative fuels sector, specializing in both solar energy and electric vehicles. Shoals Technologies (NASDAQ:SHLS) has over 66 patents and its products are installed in more than 62 GW of solar systems globally. The company is known for its innovations in electrical balance of systems (EBOS) solutions.
The company’s Big Lead Assembly (BLA) System consolidates multiple components into a single unit and streamlines the solar installation process by reducing the need for combiner boxes and wiring. The BLA System has demonstrated about 43% reduction in installation costs and roughly 20% in material costs which enhances both efficiency and safety compared to traditional EBOS systems.
Shoals Technologies (NASDAQ:SHLS) Interconnect System is engineered to simplify the connection of solar panels to the grid, reducing reliance on specialized labor and improving overall efficiency and reliability. The company also provides patented connectors and wire harnesses with in-line fuses that are more cost-effective to produce and transport to simplify solar installations. In the electric vehicle (EV) sector, Shoals Technologies (NASDAQ:SHLS) has developed the EV-BLA system, a cable bus solution that connects multiple EV chargers to a single power center, which reduces installation and material costs in the EV charging infrastructure.
Shoals Technologies (NASDAQ:SHLS) is trading 15.66 times its earnings, which is a 21% discount compared to the sector median of 18.77. As of the second quarter, the stock is held by 33 hedge funds with stakes worth $208.17 million. Joho Capital is the largest shareholder in the company and has stocks worth $60.16 million as of June 30. Analysts hold a consensus Buy rating on the stock and the average price target of $9.28 implies an upside of 55% from its current levels.
4. Nextracker (NASDAQ:NXT)
Number of Hedge Fund Investors: 39
Forward P/E Ratio as of September 8: 11.23
Nextracker (NASDAQ:NXT) offers solar tracking solutions for both utility-scale and distributed generation projects. Since its initial public offering in 2023, the company has achieved notable double-digit returns, benefiting from its strong market position and the overall expansion of the solar energy sector.
According to Precedence Research, the global solar power market, valued at $269.07 billion in 2024, is expected to grow to approximately $495.12 billion by 2034, with a compound annual growth rate (CAGR) of 6% over this period. As of June, Nextracker (NASDAQ:NXT) demonstrated strong financial health, holding $472 million in cash and short-term investments, and reducing its debt-to-capital ratio from 24% in 2023 to 11% in 2024. Given the anticipated growth in the solar sector, Nextracker is well-positioned to maintain its robust performance, offering promising prospects for continued revenue growth and profitability in the years ahead.
Nextracker (NASDAQ:NXT) stock is trading at a forward PE of 11.23, a 40% discount to its sector median of 18.77. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $59.93, which represents a 46.14% upside potential from its current level. As of the second quarter, the stock is held by 39 hedge funds and the stakes amount to $672.68 million.
3. Pacific Gas & Electric (NYSE:PCG)
Number of Hedge Fund Investors: 46
Forward P/E Ratio as of September 8: 14.79
Pacific Gas & Electric (NYSE:PCG) is a major energy provider serving Northern and Central California, reaching over 16 million people through its subsidiary, Pacific Gas & Electric Company. In 2023, the company achieved 100% clean electricity, derived from a diverse mix of sources: 53% from nuclear power, 34% from renewable resources such as solar and wind, and 13% from large hydroelectric power. Additionally, Pacific Gas & Electric has made substantial investments in battery storage systems, adding more than 2,100 megawatts to its storage capacity.
California is at the forefront of data center capacity in the U.S. and leads in electric vehicle (EV) ownership, boasting over 1.1 million EVs and more than 15,000 charging stations. Pacific Gas & Electric (NYSE:PCG) holds a strong position in California, particularly in Silicon Valley, which benefits from an advanced fiber network and a largely renewable-powered grid. This makes Pacific Gas & Electric a key player for data centers in the region. According to CEO Patti Pope in a Bloomberg interview, the company’s grid is currently operating at only 45% of its capacity. However, with the growth of modern computing, grid utilization is projected to rise to 80% by 2040, potentially doubling power demand during this period.
Pacific Gas & Electric (NYSE:PCG) is strategically positioned to benefit from the rising demand for energy, especially driven by the electric vehicle (EV) and artificial intelligence (AI) sectors. The company’s stock is trading at a forward PE of 14.79, a 15% discount to its sector, and analysts expect the company’s earnings to grow by almost 10% this year. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $21.75, which represents an 8.6% upside potential from its current level. As of the second quarter, the stock is held by 46 hedge funds with stakes worth $2.00 billion. Third Point is the largest shareholder in the company with stocks worth $938.47 million as of June 30.
2. First Solar (NASDAQ:FSLR)
Number of Hedge Fund Investors: 66
Forward P/E Ratio as of September 8: 15.91
First Solar (NASDAQ:FSLR) is a leading solar energy company in the United States, specializing in the production of thin-film photovoltaic (PV) solar panels for large-scale solar power installations. The company also operates facilities in Vietnam and Malaysia.
In Q2, First Solar (NASDAQ:FSLR) reported a 24.7% increase in revenue, reaching $1.01 billion, while EBITDA surged 95% year-over-year to $470 million, driven by higher selling prices and improved gross margins. The company achieved a robust gross margin of 49.4%. With strong demand for its products and an order backlog extending to 2030, First Solar is expanding its production capabilities. It has recently completed an expansion at its Ohio plant and is constructing new facilities in Louisiana and Alabama. These expansions are expected to nearly double its U.S. production capacity and better position the company to meet the growing demand for solar energy.
First Solar (NASDAQ:FSLR) is in the process of patenting its new TOPCon technology, which is expected to enhance the efficiency of its solar panels. The potential royalties from this patent could provide an additional revenue stream and bolster the company’s financial position.
First Solar (NASDAQ:FSLR) is trading 15.91 times its earnings, which is a 32.62% discount compared to the sector median of 22.94. The company’s earnings are expected to grow by 54.78% this year. The stock was held by 66 hedge funds at the end of the second quarter with stakes worth $1.68 billion. As of June 30, Citadel Investment Group is the largest shareholder in the company with a stake worth $766.56 million. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $292.69, which represents a 33.52% upside potential from its current level.
1. Vistra (NYSE:VST)
Number of Hedge Fund Investors: 92
Forward P/E Ratio as of September 8: 15.08
Vistra (NYSE:VST) is a Texas-based energy company with a vertically integrated business model. It operates across various segments of the energy sector, including electricity generation, wholesale energy sales, fuel production, and logistics. The company provides electricity and natural gas to residential, commercial, and industrial clients. Additionally, Vistra manages battery energy storage facilities and its nuclear assets are crucial for powering artificial intelligence (AI) applications.
In March 2024, Vistra (NYSE:VST) completed its acquisition of Energy Harbor and significantly boosted its nuclear capacity by 4,000 megawatts while adding around 1 million retail customers to its portfolio. The company has also integrated AI technologies into its operations to improve power plant efficiency, enhance thermal performance, and cut carbon emissions. Notably, the implementation of the Heat Rate Optimizer (HRO) across nearly 67 power-generation units in 26 plants led to an average efficiency improvement of 1%, saving the company millions in operational costs. As demand for renewable energy grows, especially driven by AI and data centers, Vistra (NYSE:VST) is strategically well-positioned to benefit from this trend.
For the quarter ending June 30, Vistra’s (NYSE:VST) operational net income rose to $492 million, up from $409 million the previous year. The company’s Adjusted EBITDA also saw a significant increase of 40%, reaching $1.41 billion compared to the same quarter in the previous year.
Vistra’s (NYSE:VST) stock is trading 15.08 times its earnings, which is an almost 13% discount compared to the sector median of 17.16. The company’s earnings are expected to grow by 40.17% this year. As of the second quarter, 93 hedge funds hold stakes in Vistra’s (NYSE:VST) stock with stakes worth $4.03 billion as of the second quarter. Lone Pine Capital is the largest shareholder with stocks worth $587.93 million as of June 30.
While we acknowledge the potential of Vistra (NYSE:VST) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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