12 Best Climate Change Stocks To Buy According To Hedge Funds

In this article, we will be taking a look at the 12 best climate change stocks to buy according to hedge funds.

If there’s one global crisis everyone is likely to have heard of by now, it’s climate change. The problem posed by this phenomenon is extremely complex, and its resolution requires significant changes in the way we go about our daily lives. With rising emissions of greenhouse gases trapping heat in the atmosphere, global temperatures have been on the climb, contributing to a range of geological problems. As a result, many economic and market implications have also begun to be contemplated. According to a report published by the CFA Institute in 2020, economic losses caused by climate change could be between $4 trillion and $20 trillion.

As a result, climate change stocks, or stocks promoting the use of clean energy, have become the newest popular commodity on the market. Stocks like NextEra Energy, Inc. (NYSE:NEE), Tesla, Inc. (NASDAQ:TSLA), and Clearway Energy, Inc. (NYSE:CWEN) are a few of the more renowned names on this list of stocks. These are also the stocks set to benefit immensely from the recently passed Inflation Reduction Act which aims to combat the climate crisis. The Act laid down that it aimed to build 950 million solar panels, 120,000 wind turbines, and 2,300 grid-scale battery plants by 2030 to promote the use of clean energy. Embarking on such large-scale projects over the coming few years is expected to greatly increase the business and revenues of major clean energy companies on the rise.

Another report published by the International Energy Agency in March 2021 went over the total returns from global markets portfolios over the preceding 10 years and five years, showing a comparison between returns from portfolios containing fossil fuel companies and renewable power companies. The total return for the former over the past 10 years came in at 59%, while for the latter, it came in at 422.7%. Over the preceding five years, the returns came in at 59.3% and 186.6%, respectively. This shows the relative profitability of climate change stocks in comparison to traditional energy stocks, especially in light of growing concerns relating to the climate crisis.

Let’s now take a look at the 12 best climate change stocks to buy according to hedge funds.

Our Methodology

We scanned the database of 920 hedge fund holdings maintained by Insider Monkey and picked the top 12 stocks (in terms of hedge fund popularity) that are engaged in the clean energy sector in various forms. There are electric vehicle manufacturers, companies engaged in the solar photovoltaic industry, and ordinary clean energy-producing companies listed below. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.

Best Climate Change Stocks To Buy According To Hedge Funds

12. FuelCell Energy, Inc. (NASDAQ:FCEL)

Number of Hedge Fund Holders: 12

FuelCell Energy, Inc. (NASDAQ:FCEL) is an electrical components and equipment company that designs, manufactures, and sells stationary fuel cell power plants for distributed baseload power generation. The company is based in Danbury, Connecticut.

On October 21, Canaccord’s George Gianarikas assumed coverage of FuelCell Energy, Inc. with a Hold rating.

The recently passed Inflation Reduction Act is one that will significantly benefit FuelCell Energy, Inc.. Under this act, the US government is planning to allocate at least $370 billion over the next ten years to decarbonization initiatives. For FuelCell Energy, Inc., the act is expected to bring in 30% to 50% in increased investments. In the third quarter, the company’s revenue was $43.10 million, up 60.8% compared to the year-ago quarter.

D E Shaw was the largest stakeholder in FuelCell Energy, Inc. in the third quarter, holding 8.8 million shares worth $29.9 million. In total, 12 hedge funds were long the stock, with a total stake value of $57.1 million.

FuelCell Energy, Inc., like NextEra Energy, Inc., Tesla, Inc., and Clearway Energy, Inc., is among the top clean energy stocks investors can consider today if they are looking to invest in climate change stocks.

11. ChargePoint Holdings, Inc. (NYSE:CHPT)

Number of Hedge Fund Holders: 13

ChargePoint Holdings, Inc. (NYSE:CHPT) is another electrical components and equipment company on our list. It provides electric vehicle charging networks and solutions in the US and internationally.

A Buy rating was reiterated on ChargePoint Holdings, Inc. on November 7 by B. Riley’s Christopher Souther. The analyst also placed an $18 price target on the stock.

Investors and analysts remain optimistic about ChargePoint Holdings, Inc. since sales for new vehicles have stayed robust in 2022. Reports from October show elevated demand for the company’s products at 0.5% sequentially and 8.4% year-over-year. ChargePoint Holdings, Inc. also increased its charging point capacity by this October, when it was operating over 200,000 such ports in North America and 16 European Union countries. This was a 69.49% year-over-year increase in the company’s installed base of network ports.

There were 13 hedge funds long ChargePoint Holdings, Inc. in the third quarter, and 17 hedge funds long the stock in the previous quarter. Their total stake values were $71.7 million and $22.8 million, respectively.

10. Brookfield Renewable Partners L.P. (NYSE:BEP)

Number of Hedge Fund Holders: 19

Brookfield Renewable Partners L.P. (NYSE:BEP) is a renewable electricity company owning a portfolio of renewable power generating facilities. The company operates primarily in North America, Colombia, Brazil, Europe, India, and China.

Sean Steuart, an analyst at TD Securities, resumed coverage of Brookfield Renewable Partners L.P. on October 18 with a Buy rating and a $41 price target.

Brookfield Renewable Partners L.P. is considered to be one of the most attractive investment options in the clean energy sector. The company delivered significantly positive results in the third quarter. Its funds from operations were $243 million of $0.38 per unit, representing a 15% increase from the year-ago quarter. Brookfield Renewable Partners L.P. also has a strong balance sheet showing 90% of its borrowings being project level non-recourse debt, with an average remaining term of 12 years.

Select Equity Group was the largest stakeholder in Brookfield Renewable Partners L.P. in the third quarter, holding 1.9 million shares worth $61.2 million. There were 19 hedge funds long the stock in total, with a total stake value of $161 million.

9. Canadian Solar Inc. (NASDAQ:CSIQ)

Number of Hedge Fund Holders: 22

Canadian Solar Inc. (NASDAQ:CSIQ) is an information technology company that designs, develops, and sells solar ingots, wafers, cells, modules, and other solar power and battery storage products. The company operates through its Canadian Solar Inc. (CSI) and Solar and Global Energy segments.

JPMorgan’s Mark Strouse holds a Neutral rating on Canadian Solar Inc. as of October 20. The analyst also placed a $42 price target on the stock.

Canadian Solar Inc. has a history of profitability and is currently trading under $40, making its valuation highly attractive for a renowned stock. As of this October, the company’s net income trailing three months stood at $144.88 million over the past five years. In the second quarter, Canadian Solar Inc.’s (NASDAQ:CSIQ) revenue from its CSI segment grew by 74% and gross profit grew by 161% year-over-year. The growth in its second segment stood at 97% year-over-year and 496% quarter-over-quarter.

Our hedge fund data shows 22 funds long Canadian Solar Inc. in the third quarter, and 13 hedge funds long the stock in the previous quarter. Their total stake values were $123.7 million and $54.2 million, respectively.

8. Clearway Energy, Inc. (NYSE:CWEN)

Number of Hedge Fund Holders: 25

Clearway Energy, Inc. is a renewable electricity company operating in the US. It has about 5,000 net megawatts of installed wind and solar generation projects.

Julien Dumoulin-Smith at Bank of America holds a Neutral rating on Clearway Energy, Inc. shares as of September 19, alongside a price target of $40.

The passing of the Inflation Reduction Act will benefit Clearway Energy, Inc. in the near future as well. The IRA is expected to spur 40% more solar panel installations over the next ten years, meaning the number of projects for Clearway Energy, Inc. to take will significantly increase. The company has also mentioned that it intends to raise its dividend at the upper end of its target of 5-8% per year through 2026.

Out of 920 hedge funds tracked in the third quarter, 25 hedge funds were long Clearway Energy, Inc., with a total stake value of $159.6 million. Renaissance Technologies was the largest stakeholder in the company, holding 1.1 million shares worth $30.6 million.

ClearBridge Investments, an investment management firm, mentioned Clearway Energy, Inc. in its fourth-quarter 2021 investor letter. Here’s what the firm said:

“Clearway Energy primarily owns and operates contracted renewable generation assets. It also owns and operates conventional generation and thermal infrastructure assets. Clearway Energy’s share price continued to benefit from the completed sale of its thermal assets, which was above expectations, generating USD$1.3 billion in incremental proceeds. Additionally, there was optimism surrounding a stimulus bill passthrough which contains renewables subsidies.”

7. Plug Power, Inc. (NASDAQ:PLUG)

Number of Hedge Fund Holders: 32

Plug Power, Inc. (NASDAQ:PLUG) is an electrical components and equipment company delivering end-to-end clean hydrogen and zero-emissions fuel cell solutions. The company is based in Latham, New York.

A Buy rating was reiterated on Plug Power, Inc. on November 10 by analyst P.J. Juvekar at Citigroup. The analyst also placed a $20 price target on the stock.

At its Plug Power Symposium this year, Plug Power, Inc. management expressed their confidence in achieving their growth targets of $5 billion in 2026 and $20 billion in 2030. The company expects a continued growth rate of 50% annually, yielding growth of over 5x from today. Management also raised their growth guidance for 2025 from $3 billion by 10%, bringing them up to 15%.

In total, 32 hedge funds were long Plug Power, Inc. in the third quarter, with a total stake value of $373.5 million. In comparison, 26 hedge funds were long the stock in the previous quarter, with a total stake value of $258.9 million.

6. SolarEdge Technologies, Inc. (NASDAQ:SEDG)

Number of Hedge Fund Holders: 44

SolarEdge Technologies, Inc. (NASDAQ:SEDG) is an information technology company that develops direct current optimized inverter systems for solar photovoltaic installations. The company is based in Herzliya, Israel.

Ameet Thakkar at BMO Capital raised the price target on SolarEdge Technologies, Inc. from $316 to $355 on November 18. The analyst also reiterated an Outperform rating on the stock.

SolarEdge Technologies, Inc. is seen benefitting from strong momentum in Europe, according to its third-quarter results. The company’s $836.6 million revenue in the quarter was up by 59% from the same period last year. It shipped about 265,000 inverters, also showcasing an increase in shipments from the 228,400 figure reported in the second quarter.

SolarEdge Technologies, Inc. was found among the 13F holdings of 44 hedge funds in the third quarter, with a total stake value of $673.7 million. Impax Asset Management was the largest stakeholder in the company, holding 547,646 shares worth $126.2 million.

SolarEdge Technologies, Inc., like NextEra Energy, Inc., Tesla, Inc., and Clearway Energy, Inc., is a climate change stock many elite hedge funds are piling into today.

5. First Solar, Inc. (NASDAQ:FSLR)

Number of Hedge Fund Holders: 45

First Solar, Inc. (NASDAQ:FSLR) is an information technology company providing photovoltaic solar energy solutions. It is based in Tempe, Arizona.

Corinne Blanchard, an analyst at Deutsche Bank, initiated coverage of First Solar, Inc. shares on November 14 with a Buy rating and a $180 price target.

First Solar, Inc. is a leading company in the energy sector because of its exceptional solar modules. In the second quarter, the company’s net sales stood at $621 million, demonstrating a significant increase from the $254 million figure reported in the previous quarter.

There were 45 hedge funds long First Solar, Inc. in the third quarter, with a total stake value of $703.7 million.

4. Sunrun Inc. (NASDAQ:RUN)

Number of Hedge Fund Holders: 47

Sunrun Inc. (NASDAQ:RUN) is an electrical components and equipment company. It develops and installs residential solar energy systems in the US.

Deutsche Bank’s Corinne Blanchard also initiated coverage of Sunrun Inc. on November 14 with a Buy rating and a $36 price target.

In the third quarter, Sunrun Inc. saw revenue growth of 44% year-over-year and its customers reached a record-high of 760,000. Its revenue stood at $631.9 million, beating estimates by $63.28 million. For the full year of 2022, the company’s solar energy capacity installed is set to rise by at least 25%.

Our hedge fund data shows 47 funds long Sunrun Inc. in the third quarter. Their total stake value was $785.6 million.

3. Enphase Energy, Inc. (NASDAQ:ENPH)

Number of Hedge Fund Holders: 59

Enphase Energy, Inc. (NASDAQ:ENPH) is an information technology company. It designs and manufactures home energy solutions for the solar photovoltaic industry in the US and internationally.

Corinne Blanchard at Deutsche Bank also initiated coverage of Enphase Energy, Inc. shares on November 14, with a Buy rating and a $330 price target.

Enphase Energy, Inc. reported impressive third-quarter results showcasing 80% year-over-year revenue growth, with revenue from Europe alone growing by 70%. The company’s revenue came in at $634.7 million. The company also increased its margins to 42.9% despite rampant inflation.

In total, 59 hedge funds were long Enphase Energy, Inc. in the third quarter, with a total stake value of $2.2 billion.

ClearBridge Investments, an investment management company, mentioned Enphase Energy, Inc. in its third-quarter 2022 investor letter. Here’s what the firm said:

“In IT, Enphase Energy, Inc. (NASDAQ:ENPH) delivered a strong quarter driven by secular growth in global rooftop solar, increased penetration into Europe, where demand accelerated, and a continued ramp up in battery storage sales. Also with a strong presence in the U.S., Enphase Energy designs and manufactures microinverters for residential and small commercial solar PV systems and has made strides in evolving from a solar inverter maker into a “home energy management” company that can act as the brains for the home’s energy system, including microinverters for solar, as well as storage and energy management software.”

2. NextEra Energy, Inc. (NYSE:NEE)

Number of Hedge Fund Holders: 73

NextEra Energy, Inc. is an electric utility company. It generates and distributes electric power to retail and wholesale customers in North America. Its energy is generated through wind and solar facilities, alongside nuclear, coal, and natural gas facilities.

A Buy rating was reiterated on NextEra Energy, Inc. on October 24 by analyst Shahriar Pourreza, who also placed a $99 price target on the stock.

NextEra Energy, Inc. is the perfect pick for dividend growth investors looking to delve into the clean energy sector. The company has been growing its dividend for over 27 years, and its five-year dividend growth rate is 11.6%. The company’s PE ratio has remained at around 40 since 2019.

Out of 920 hedge funds tracked in the third quarter, 73 hedge funds were long NextEra Energy, Inc., with a total stake value of $2.1 billion.

ClearBridge Investments, an investment management company, mentioned NextEra Energy, Inc. in its third-quarter 2022 investor letter. Here’s what the firm said:

“NextEra Energy, Inc. (NYSE:NEE) is an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. NextEra’s regulated business includes Florida Power & Light, which serves nine million people in Florida. NextEra’s share price rose along with the passage of the U.S. Inflation Reduction Act, which considerably expands support for renewable energy.”

1. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 88

Tesla, Inc. is an automobile manufacturer. It sells electric vehicles and energy generation and storage systems.

On November 23, Itay Michaeli at Citigroup upgraded Tesla, Inc. from Sell to Neutral, with a $176 price target.

Tesla, Inc. has a significant market capitalization and a positive EBIT margin of 16.66%. The company also shows significantly high revenue and EBIT growth rates. Its revenue growth rate over the last five years CAGR is 47.41%.

Tesla, Inc. was found among the 13F holdings of 88 hedge funds in the third quarter, with a total stake value of $7.4 billion.

See also 12 Best AI Stocks To Buy Now and 15 Biggest Exploration and Production Companies in the World.

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This article is originally published at Insider Monkey.