In this article, we will take a look at the 10 most undervalued solar stocks to buy according to hedge funds. To see more such companies, go directly to 5 Most Undervalued Solar Stocks to Buy According to Hedge Funds.
The solar energy market is set to make new growth records in 2023 and beyond as the world scrambles to find alternative energy sources to cut its reliance on conventional energy amid rising costs and climate worries. According to a BloombergNEF piece, global solar deployment in 2023 will reach about 316 gigawatts, up from about 268GW in 2022.
The report said that the growth in the space outperformed expectations as BNEF was expecting solar deployments for 2022 to come in at 228GW. The report said that rising demand in Chinese solar markets was one of the reasons for this solid growth. Another reason was rising solar deployment in Europe amid rising electricity prices.
Another report published by Bloomberg in January highlighted that the production of solar panels is set to soar in 2023 as manufacturers seem to have solved one of the key problems that was keeping a lid on production. The problem was the high cost of polysilicon — a key material for most panels. The Bloomberg report said that with several new manufacturing facilities coming online in China, the cost of the material has dropped by more than a third since mid-November.
The energy sector has always been rewarding for investors, especially during difficult economic times. In 2022, energy stocks provided a refuge to investors amid the broader market turmoil. Solar stocks present an attractive opportunity since they are operating in an industry that has long-term growth prospects. Many of the stocks in the industry also pay dividends and are diversified enough across the renewable energy spectrum to offset any losses or uncertainty for a specific business area.
Copyright: lassedesignen / 123RF Stock Photo
Our Methodology
For this article we scanned the iShares Global Clean Energy ETF holdings and listed the top solar stocks owned by the ETF. We then narrowed down to the stocks that have attractive PE ratios when compared to the green and renewable industry average PE of 83, which was calculated by NYU Stern. After applying these checks, we got a long list of solar stocks. We then picked 10 stocks from this list which had the most number of hedge fund shareholders. For that metric we used Insider Monkey’s database of 920 hedge fund holdings.
Most of the stocks mentioned in this article have PE ratios less than the average solar industry PE ratios. However, you will come across some companies that have relatively high PE ratios. Those stocks, however, have lost significant value of the past few months and have long-term growth catalysts and strong hedge fund sentiment. These factors make them undervalued as they have long-term growth upside.
Most Undervalued Solar Stocks to Buy According to Hedge Funds
10. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Number of Hedge Fund Holders: 15
JinkoSolar Holding Co., Ltd. (NYSE:JKS) has a forward PE ratio of 8.83 as of January 27, according to Yahoo Finance. This Chinese solar stock rallied earlier in January after Roth Capital upgraded the stock to Buy from Neutral. JinkoSolar Holding Co., Ltd. (NYSE:JKS) also increased its price target on the stock to $70 from $50. Roth Capital cited the improving US policy situation and the potential for margin expansion on poly price declines for the upgrade.
As of the end of the third quarter, 15 hedge funds tracked by Insider Monkey reported having stakes in JinkoSolar Holding Co., Ltd. (NYSE:JKS). The total value of these stakes was about $183 million.
9. Avangrid, Inc. (NYSE:AGR)
Number of Hedge Fund Holders: 16
With a PE ratio of under 20, Avangrid, Inc. (NYSE:AGR) is one of the most undervalued solar stocks to buy according to hedge funds. In October, Avangrid, Inc. (NYSE:AGR) stock price target was raised by investment firm Mizuho analyst Paul Fremont to $41 from $39. The analyst kept a Neutral rating on the shares. The analyst said there was a “high probability” that Avangrid, Inc. (NYSE:AGR) will succeed in its negotiations with Connecticut and Massachusetts for higher prices for its Commonwealth and Park City offshore wind projects.
A total of 16 hedge funds out of the 920 funds tracked by Insider Monkey reported having stakes in Avangrid, Inc. (NYSE:AGR) at the end of the third quarter, compared to 17 funds in the previous quarter. The total worth of these stakes was about $96 million. The biggest stakeholder of Avangrid, Inc. (NYSE:AGR) was Paul Marshall and Ian Wace’s Marshall Wace LLP, which has a $22 million stake in Avangrid, Inc. (NYSE:AGR). The second biggest stakeholder in Avangrid, Inc. (NYSE:AGR) was Cliff Asness’ AQR Capital Management with a $20 million stake.
8. NextEra Energy Partners, LP (NYSE:NEP)
Number of Hedge Fund Holders: 21
With an attractive PE ratio of 12.97 and long-term growth catalysts, NextEra Energy Partners, LP (NYSE:NEP) is one of the most undervalued solar stocks to buy according to hedge funds. Of the total hedge funds in Insider Monkey’s database, 21 hedge funds had stakes in NextEra Energy Partners, LP (NYSE:NEP) as of the end of the September quarter of 2022.
Recently, NextEra Energy Partners, LP (NYSE:NEP) stock price target was increased by investment firm Oppenheimer’s analyst Colin Rusch. The analyst raised NextEra Energy Partners, LP (NYSE:NEP)’s price target to $94 from $88 and kept an Outperform rating on the shares. While the analyst noted that NextEra Energy Partners, LP (NYSE:NEP)’s Q4 results were weak, he believes NextEra Energy Partners, LP (NYSE:NEP) is well-positioned for the future.
7. Canadian Solar Inc. (NASDAQ:CSIQ)
Number of Hedge Fund Holders: 22
With a PE ratio under 15 and a strong hedge fund sentiment, Canadian Solar Inc. (NASDAQ:CSIQ) is one of the best undervalued solar stocks to buy now according to hedge funds. Of the 920 hedge funds tracked by Insider Monkey, 22 hedge funds had stakes in Canadian Solar Inc. (NASDAQ:CSIQ). This number shot up significantly when compared to the previous quarter when just 13 funds had stakes in Canadian Solar Inc. (NASDAQ:CSIQ). The biggest stakeholder in Canadian Solar Inc. (NASDAQ:CSIQ) at the end of September was Israel Englander’s Millennium Management with a $31 million stake. The second biggest stakeholder in Canadian Solar Inc. (NASDAQ:CSIQ) was Ken Griffin’s Citadel Investment Group, with a $28 million stake.
Canadian Solar Inc. (NASDAQ:CSIQ) makes solar panels, modules, and solar power systems for residential, commercial, and utility-scale power generation. Canadian Solar Inc. (NASDAQ:CSIQ) is growing rapidly and has diversified its operations to offset uncertainty. One of the biggest advantages Canadian Solar Inc. (NASDAQ:CSIQ) has over its peers is the company’s presence in the entire value chain of the solar industry.
Analysts believe Canadian Solar Inc. (NASDAQ:CSIQ) is undervalued. As of January 24, Canadian Solar Inc. (NASDAQ:CSIQ) had a Price to Earnings ratio of 16.7x, price to sales ratio of 0.4x revenue, and EV to sales ratio of ~0.64x sales.
In November, Canadian Solar Inc. (NASDAQ:CSIQ) posted its third-quarter results. Canadian Solar Inc. (NASDAQ:CSIQ)’s revenue in the quarter jumped 57 % YoY. Canadian Solar Inc. (NASDAQ:CSIQ)’s net income jumped a whopping 123% on a YoY basis.
6. Clearway Energy, Inc. (NYSE:CWEN)
Number of Hedge Fund Holders: 25
With a PE ratio of just 6.6 as of market close of January 27, Clearway Energy, Inc. (NYSE:CWEN) is one of the most undervalued solar stocks to buy according to hedge funds. Insider Monkey’s database shows that 25 hedge funds had stakes in Clearway Energy, Inc. (NYSE:CWEN) at the end of the third quarter of 2022, compared to 21 funds in the previous quarter. This shows that the overall hedge fund sentiment for Clearway Energy, Inc. (NYSE:CWEN) is positive.
Clearway Energy, Inc. (NYSE:CWEN) is also a dividend-paying stock. Clearway Energy, Inc. (NYSE:CWEN) has a dividend yield of over 4%. In November, Clearway Energy, Inc. (NYSE:CWEN) declared a $0.25 per share special dividend. Another important thing to note here is that Clearway Energy, Inc. (NYSE:CWEN) is targeting annual dividend growth in the range of about 5% to 8% through 2026.
Clearway Energy, Inc. (NYSE:CWEN)’s balance sheet is also strong. Most of Clearway Energy, Inc. (NYSE:CWEN)’s debt is project-attached debt. It has no corporate maturities until 2028, and 99% of its consolidated debt is fixed rate.
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Disclosure: None. 10 Most Undervalued Solar Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.
