In this article, we discuss the 11 best alternative fuel stocks to buy right now. To skip the industry analysis and the recent market behavior around the stocks, go directly to the 5 Best Alternative Fuel Stocks To Buy Right Now.
The alternative fuel or renewable energy industry is one of the trending industries in the world at the moment. We previously reported that the renewable energy sector is expected to grow at 4% per annum and the annual supply and production investments will reach around $1.5 trillion to $1.6 trillion by 2035. Wind, solar, hydropower, and biofuel energy are all examples of alternative or renewable fuels.
Wind Energy Market
The wind energy market is the fastest-growing renewable energy industry with a forecasted CAGR of 9.4% between 2021 and 2030. The global wind energy market was valued at $77.77 billion which is expected to reach $174.75 billion by 2030. The International Energy Agency reported that wind generation increased by 17% in 2021 to 273 TerraWatt per hour (1 TerraWatt = 8,760 TerraWatt/hour), representing a 55% higher growth than the prior year.
In 2021, China accounted for 70% of the total wind energy growth, followed by the U.S. at a meager 14%. However, due to low wind conditions, the EU saw a decline of 3% in wind power generation in the year.
The U.S. installed 13.4 GigaWatts of wind capacity in 2021 and the industry serves around 40 million homes in the country and employs around 120,000 people.
Solar Power Market
The solar power market size was around $167.84 billion in 2021 and is expected to grow at a CAGR of 6.9% to $373.84 billion in 2029. Solar power is the second fastest-growing renewable energy source after wind and hit 1 Terrawatt of generation capacity in 2022. Between 2018 and 2021, the global solar capacity doubled and saw a huge surge in demand during the COVID-19 pandemic while representing a growth of 17% in 2020 from the previous year. According to a SolarPower Europe report, the global solar power capacity is expected to reach 2.3 TerraWatt in 2025.
According to the International Energy Agency, in 2021, the solar power generation capacity grew by 22% globally. China was responsible for the most significant growth as it accounted for 38% of the solar photovoltaic technology growth, followed by the U.S. at 17%, and the EU at 10%.
Hydro Electric Power Market
Hydropower is one of the oldest sources of renewable energy. In the United States, it accounted for 31.5% of renewable energy electricity generation. Globally, it accounted for 17% of the total electricity generation in 2020. The global hydropower market size was $236.4 billion in 2021 and is expected to grow at a CAGR of 5.16% to $371.8 billion by 2030. Hydropower is the largest renewable energy source in the world with 4,327 GigaWatts of generation capacity in 2021. However, in the same year, due to its high dependence on water, its generation capacity decreased by 0.4% globally. The droughts in countries such as Brazil, the United States, Turkey, China, India, and Canada were one of the main reasons for the decline in hydropower electricity generation capacity.
Renewable Energy Market
By 2027, the International Energy Agency predicts that the total renewable energy generation is expected to increase by 60%. One of the most significant factors of clean energy growth is its low cost. With uncertainties in the conventional energy market, as seen post-Russia-Ukraine war, new solar or wind power plants sometimes have a lower cost of electricity generation than the existing conventional energy generation facilities. Additionally, the tax incentives to renewable energy companies through the Inflation Reduction Act are another major growth driver for the clean energy industry.
Currently, coal is the largest source of electricity generation but the IEA expects that renewable energy electricity generation is expected to double in the next 5 years and will surpass coal.
Over the past few days, the renewable energy market, especially solar, was significantly hit by the Silicon Valley Bank crash. Recently, clean energy stocks like Sunnova Energy International Inc. (NYSE:NOVA) and Enphase Energy, Inc. (NASDAQ:ENPH) fell, while related ETFs like Invesco Solar ETF (TAN) and iShares Global Clean Energy ETF (ICLN) also took a hit.
The global clean energy market might have hit a snag due to the recent uncertainties in the equities market but it is bound to grow at a remarkable pace in the long term. Some of the biggest players in the clean energy market are Enphase Energy, Inc. (NASDAQ:ENPH), NextEra Energy, Inc. (NYSE:NEE), and General Electric Company (NYSE:GE).
Our Methodology
After analyzing the global clean energy market, we chose the most popular alternative fuel stocks from Insider Monkey’s database of 943 elite hedge funds.
Best Alternative Fuel Stocks To Buy Right Now
11. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Number of Hedge Fund Holders: 15
JinkoSolar Holding Co., Ltd. (NYSE:JKS) is China’s largest solar panel manufacturer. It is one of the best Chinese high-growth stocks. It was founded in 2006 as a wafer manufacturer and it serves commercial and residential customers across 160 countries. JinkoSolar Holding Co., Ltd. (NYSE:JKS) is headquartered in Shanghai, China.
According to the Insider Monkey database, 15 hedge funds held a position in JinkoSolar Holding Co., Ltd. (NYSE:JKS) in Q4 2022. Hillhouse Capital Management was the most prominent stakeholder of the company in the quarter with 654,049 shares worth $26.737 million.
JinkoSolar Holding Co., Ltd. (NYSE:JKS) has been covered by three analysts in the last three months with two Buy and one Sell ratings. Their average price target stands at $62.67 which is 46.56% higher than the current stock price of $42.76 at the time of writing.
Enphase Energy, Inc. (NASDAQ:ENPH), NextEra Energy, Inc. (NYSE:NEE), and General Electric Company (NYSE:GE) are some of the noteworthy clean energy stocks along with JinkoSolar Holding Co., Ltd. (NYSE:JKS)
10. Brookfield Renewable Partners L.P. (NYSE:BEP)
Number of Hedge Fund Holders: 19
Brookfield Renewable Partners L.P. (NYSE:BEP) is a renewable energy company owned by Brookfield Asset Management Inc. It is one of the most sustainable companies in the world as it has strong financial backing from a huge asset management company.
According to its 2022 annual report, Brookfield Renewable Partners L.P. (NYSE:BEP) plans to invest $12 billion over the next five years toward renewable energy growth. The company also mentioned that its global renewable power development pipeline includes 110 gigawatts of electricity.
Brookfield Renewable Partners L.P. (NYSE:BEP) is quite undervalued compared to its peers as its price-to-sales ratio currently stands at 2.9x at the time of writing, compared to its peer average of 4.2x.
ClearBridge Investments made the following comment about Brookfield Renewable Partners L.P. (NYSE:BEP) in its Q4 2022 investor letter:
“Rising interest rates remain the key risk to renewables utility Brookfield Renewable Partners L.P. (NYSE:BEP), an underperformer in the fourth quarter, though we view Brookfield’s stable fundamentals (with >90% of contracted cash flows having an average term of 14 years), inflation protection (~70% of power purchase agreements are indexed to inflation) and long-term growth opportunities as attractive in the current environment. Brookfield’s balance sheet is also relatively well-protected against rising rates given it has 97% fixed-rate debt with an average term to maturity of 12 years.”
9. Ormat Technologies, Inc. (NYSE:ORA)
Number of Hedge Fund Holders: 21
Ormat Technologies, Inc. (NYSE:ORA) is one of the largest geothermal companies in the world. The company owns geothermal and energy recovery power plants and provides turbines, generators, and heat exchangers. It is headquartered in Nevada, USA, and operates globally.
In the fourth quarter of 2022, 21 hedge funds had a stake worth $188.97 million in Ormat Technologies, Inc. (NYSE:ORA). In the previous quarter, the number of hedge funds holding the company shares was 16 with a combined value of a little over $195 million.
According to Ormat Technologies, Inc. (NYSE:ORA)’s Q4 2022 earnings report, the company had a non-GAAP EPS of $0.73, outperforming the estimates by 25 cents. Moreover, the company’s revenues increased 7.6% YoY to $205.48 million, beating the forecasts by $6.15 million. For 2023, the company guided its revenue estimates to the range of $823 million and $858 million, compared to the $865.68 million consensus.
Massif Capital made the following comment about Ormat Technologies, Inc. (NYSE:ORA) in its Q4 2022 investor letter:
“We shorted Ormat Technologies, Inc. (NYSE:ORA) last year as the firm appeared to be an unprofitable geothermal-focused independent energy producer borrowing money to grow an even less-profitable U.S. renewables energy business. Along with eroding the company’s margins, we expected numerous executional challenges in the build-out of Ormat’s new U.S. renewable business. We got impatient as it increased from our short price of roughly $75 to $100, and we closed out the position. At the time, we noted the following:
“Reviewed earnings [3rd Qtr 2022] and found that although execution had struggled, the impact was minimal, the future impact of the IRA [Inflation Reduction Act] on the firm’s independent power production is uncertain (although almost assuredly positive), as such the business appears likely to maintain, at least for some period, its high earnings margins relative to independent power producing peers. We cannot find a reason to question the high margins’ near-term sustainability, but long-term sustainability should be in question. Nevertheless, we do not see a catalyst in the future to prompt a repricing or reevaluation of the multiple being placed on unsus[1]tainably high earnings or a catalyst that will send the high margins lower in short order, despite the fact the stock is clearly overvalued on fundamental earnings and cash flow basis. Absent a catalyst, it seemed prudent to exit the position.”…” (Click here to read the full text)
8. Clearway Energy, Inc. (NYSE:CWEN)
Number of Hedge Fund Holders: 27
Clearway Energy, Inc. (NYSE:CWEN) is a New Jersey-based utility company that generates most of its power from renewable resources. The company is owned by the privately held Clearway Energy Group.
Clearway Energy, Inc. (NYSE:CWEN) reported its annual earnings on February 23, reporting a significant gain in its net income compared to the previous year despite a weaker wind segment performance in the fourth quarter of the year. At the end of the year, the company reported a net income of $1.06 billion compared to a net loss of $75 million in the previous year. In addition, Clearway Energy, Inc. (NYSE:CWEN) has a strong balance sheet and exited the year with $1.366 billion of liquidity including its $370 million revolving credit facility. On top of that, almost all of the company’s consolidated debt is at a fixed rate which keeps it safe from the rising interest rates by the Federal Reserve.
Clearway Energy, Inc. (NYSE:CWEN) has been covered by 4 Wall Street analysts in the last 3 months, and two of them maintain a Positive rating on the company stock. Despite the other two analysts keeping a Hold rating, the lowest price range forecast is at $34 which provides an upside to the company’s current stock price of just over $30 at the time of writing.
7. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 39
Sunrun Inc. (NASDAQ:RUN) is a San Francisco-based renewable energy company providing solar power systems and battery energy storage systems to residents of the United States.
Sunrun Inc. (NASDAQ:RUN) posted its fourth quarter 2022 earnings on February 22. The company recorded a GAAP EPS of $0.29, outperforming the analyst estimates by $0.56. Moreover, the company generated a revenue of $609.52 million, up 40% YoY, and exceeded the analyst estimates of $588.9 million.
Sunrun Inc. (NASDAQ:RUN) is one of the most promising growth stocks according to analysts. Out of 11 analysts that have covered the stock in the last three months, 9 have given a Positive rating to the company stock. The average analyst price target for Sunrun Inc. (NASDAQ:RUN) is $40.50. In addition, the lowest price target of $31 still shows a 78.98% upside compared to the stock price of $17.32 at the time of the market close on March 17.
6. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 41
Vistra Corp. (NYSE:VST) is a Texan energy utility company with a well-diversified portfolio. The company provides electricity through solar, wind, natural gas, and nuclear power. Moreover, the company also owns the Moss Landing Power Plant project which holds the world’s largest battery energy storage system.
Vistra Corp. (NYSE:VST) is a dividend stock and the company is quite active when it comes to shareholder returns. In its Q4 earnings conference call, management revealed that it expects to pay over $300 million in dividends in 2023. Furthermore, the management revealed that they want the share repurchases to be at least $1 billion per year from 2023 through 2026. On February 23, Vistra Corp. (NYSE:VST) declared a quarterly dividend of $0.1975 per share, representing a 2.3% increase from its previous dividend. It will be payable by March 31 to the shareholders of record on March 21.
Out of 41 hedge funds that had a stake in Vistra Corp. (NYSE:VST) in Q4 2022, Laurion Capital Management held the largest stake with over 10.275 million shares worth $238.384 million.
Vistra Corp. (NYSE:VST) is one of the best clean energy stocks along with Enphase Energy, Inc. (NASDAQ:ENPH), NextEra Energy, Inc. (NYSE:NEE), and General Electric Company (NYSE:GE).
Legacy Ridge Capital made the following comment about Vistra Corp. (NYSE:VST) in its Q4 2022 investor letter:
“I sent the 2019 letter on February 10, 2020. Vistra Corp. (NYSE:VST) closed that day at $22.27. As I write in early January the price is $22.30. Now I did say “We would actually prefer it if both (VST & NRG) securities went nowhere for as long possible”—assuming repurchased shares at depressed valuations was our best-case scenario. But A) I didn’t think I’d be that right with respect to “nowhere”, and B) I certainly didn’t think I’d be right 3-years on. Here we are though, with the stock literally going nowhere for the last 3-years. Just like we drew it up!
“Management has indeed repurchased 20.3% of the shares outstanding since year-end 2019 and will probably repurchase another 12-15% of the outstanding shares in 2023. My initial assumption was that management could plausibly repurchase 60% of their shares by 2030, leaving them with 200mn outstanding (that assumed shares were appreciating and they had to pay more as the years went on, not what’s transpired so far), but at the current pace of about 50mn shares repurchased per year, they’ll hit that mark by the end of 2026, which would imply free cash flow of $10 pershare if the underlying business continues to perform as it currently is. That’s a 45% FCF yield on today’s price. Meanwhile, dividends per share have grown 54% since 2019 and the stock now yields 3.5%, growing about 15% a year.
Being paid to wait makes waiting much easier. We had sold VST shares in mid-2020, replacing some of the position with call options, to free up capital for other opportunities that became available. But when winter storm Uri hit Texas in February 2021 and VST shares went down 20%+, below $17 a share, we rebuilt our common equity position. Today VST oscillates between the biggest and second biggest position in the fund, depending on weekly performance.”
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Disclosure: None. 11 Best Alternative Fuel Stocks To Buy Right Now is originally published on Insider Monkey.
