12 Best Solar Energy and Battery Stocks To Buy Now

Published on July 25, 2023 at 7:31 am by Hamna Asim in Hedge Funds, News

In this article, we discuss 12 best solar and battery stocks to buy. If you want to skip our detailed discussion on the solar and battery industry, head directly to 5 Best Solar and Battery Stocks To Buy Now.

According to the International Energy Agency, solar energy is set to overtake coal in power capacity by 2027. The demand for solar installations in the US is set to triple by 2028 to 378 GW and the industry has experienced record success in 2023. The residential component for solar installations has increased by 30%, as compared to last year. Similarly, commercial growth for the year is expected to be around 12% in 2023. Although the industry has seen an increase in the cost of electricity due to supply chain issues and global inflation, solar energy still makes for a lower cost of power generation, as compared to fossil fuel. Over the last year, the industry has seen an unprecedented inclusion in policy making. The International Energy Agency has highlighted the importance of solar installations to counter Europe’s dependence on Russian gas. In line with this, around 26 countries have added at least 1 GW of solar energy installations over the past year. Experts have forecasted the cost to steadily decrease to pre-pandemic prices, with new advancement and installations that increase the photovoltaic capacities over time.

Similar to the solar industry, electric vehicles have seen their sales triple over the last two years. As of the first quarter of 2023, EV sales reached 2.3 million units. The International Energy Agency has forecasted a 35% year-over-year growth by the end of 2023. In China, the demand for electric vehicles has grown by 70% over the last year. In contrast, the US market has seen the demand increase by 80%. However, this increase in demand brings tough challenges. The biggest constraint for the industry is sourcing the crucial raw materials. Globally, the supply for lithium rose by 180% in 2022. Despite this significant increase, the industry experienced a shortage of lithium. To put this into perspective, about 60% of all the demand for lithium originates for EV applications. In addition to this, cobalt and nickel shortages continue as well. While mining efforts have increased globally, there is a strong need for more innovation in the industry. Companies have already focused on optimizing battery sizes that can result in a lower dependence on crucial materials.

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Companies are making big moves in the solar market. For example, Huawei Digital Power recently signed a memorandum of understanding with Elsewedy Electric T&D to explore sustainable energy and photovoltaic solutions for the Egyptian market. Joey Ding, the CEO of Digital Power Huawei Egypt said:

“Huawei strongly supports the Egyptian government’s efforts to expand reliance on green energy. It also supports the sustainable energy strategy for 2035. We are looking forward to working side by side with El Sewedy Electric T&D to cooperate in national projects in the fields of solar energy solutions, car charging and electric buses, in line with Egypt’s plans to transition toward clean energy, expanding the use of electric cars, and localizing the electric car industry in Egypt.”

To capitalize on the growth potential of this industry, some of the best solar and battery stocks to buy now include Tesla, Inc. (NASDAQ:TSLA), Enphase Energy, Inc. (NASDAQ:ENPH), and SolarEdge Technologies, Inc. (NASDAQ:SEDG).

Our Methodology

We selected the following solar and battery stocks based on the hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the first quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm.

Best Solar Energy and Battery Stocks To Buy Now

12. Solid Power, Inc. (NASDAQ:SLDP)

Number of Hedge Fund Holders: 14

Solid Power, Inc. (NASDAQ:SLDP) focuses on the manufacturing of batteries for electric vehicles. Over the years, the company has been a key player in the development of solid-state cells that replace the lithium ion batteries with a sulfide-based electrolyte. Earlier this year, Solid Power, Inc. (NASDAQ:SLDP) received over $5 million from the US Department of Energy aimed at aiding the development for the technology. In addition to this, Solid Power, Inc. (NASDAQ:SLDP) has strategic partnerships with giants such as Ford, BMW, and Hyundai.

As per Insider Monkey’s database for the first quarter of 2023, 14 hedge funds were bullish on Solid Power, Inc. (NASDAQ:SLDP), as opposed to 18 hedge funds in the previous quarter. Steve Pattyn’s Yaupon Capital continues to hold the largest position in the company, with 846,593 shares valued at around $2.548 million.

In addition to Tesla, Inc. (NASDAQ:TSLA), Enphase Energy, Inc. (NASDAQ:ENPH), and SolarEdge Technologies, Inc. (NASDAQ:SEDG), Solid Power, Inc. (NASDAQ:SLDP) is one of the best solar energy stocks to invest in.

11. QuantumScape Corporation (NASDAQ:QS)

Number of Hedge Fund Holders: 15

QuantumScape Corporation (NASDAQ:QS) aims to develop lithium-metal batteries for electric vehicles to maximize utility. With its patented technology, the company seeks to improve the EV ecosystem with safe, long-lasting batteries. QuantumScape Corporation (NASDAQ:QS) incurred $28 million in capital expenditures and $110 million in GAAP operating expenses during the first quarter of 2023. Cash operating expenses amounted to $63 million. By the end of the quarter, QuantumScape Corporation (NASDAQ:QS) had a liquidity of slightly above $1 billion. For the full year 2023, the company anticipates capital expenditures ranging from $100 million to $150 million and cash operating expenses ranging from $225 million to $275 million. It is one of the best solar energy stocks to buy.

As per Insider Monkey’s database for the first quarter of 2023, 15 hedge funds were bullish on QuantumScape Corporation (NASDAQ:QS), compared to 21 funds in the previous quarter. Philippe Laffont’s Coatue Management has the largest position in the company, with 1.4 million shares valued at over $11.5 million.

Here is what Baron Opportunity Fund said about QuantumScape Corporation in their Q1 2021 investor letter:

“QuantumScape Corporation is an early-stage developer of solid-state battery technology for electric vehicles aimed at improving key aspects of batteries, including safety, charging times, energy density, and cost. The company went public via a SPAC in November. After rapid appreciation, the stock came under pressure when the company raised additional capital to help accelerate its commercialization process. We exited our small position, as described below.

We sold QuantumScape Corporation, an early-stage solid-state electric vehicle battery innovator, because it was an undersized position with an ambitious valuation. We will continue to monitor QuantumScape’s developments and may revisit the company as an investment at a future point in time.”

10. FREYR Battery (NYSE:FREY)

Number of Hedge Fund Holders: 20

FREYR Battery (NYSE:FREY) is involved in the production and commercialisation of battery cells across various industries. These include applications in aviation, marine, and other electric mobility sectors. On July 14, FREYR Battery (NYSE:FREY) announced that it has received a grant of around €100 million from the EU Innovation Fund, aimed to aid the development of its Giga Arctic Project, which is expected to mitigate 80 million tonnes of carbon dioxide emissions. The company aims to install more projects in the United States after this. It is one of the best solar energy stocks to invest in.

According to Insider Monkey’s first quarter database, 20 hedge funds remain bullish on FREYR Battery (NYSE:FREY), as opposed to 27 in the prior quarter. Todd J. Kantor’s Encompass Capital Advisors held the largest position in the company, with 6.6 million shares valued at $58.7 million.

9. Enovix Corporation (NASDAQ:ENVX)

Number of Hedge Fund Holders: 24

Enovix Corporation (NASDAQ:ENVX) is involved in the development of batteries across various sectors. The company has broadly focused on electric vehicles, aiming to develop safe batteries with a high-energy density. Enovix is one of the best solar energy stocks to monitor. On June 27, Enovix Corporation (NASDAQ:ENVX) received a purchase order from the U.S. Army to manufacture battery cells for the Conformal Wearable Battery (CWB), a central power source for soldiers. Enovix’s cell has the potential to significantly increase the energy density, leading to advantages such as longer-lasting and lighter battery packs. This agreement marks a significant step forward in Enovix Corporation (NASDAQ:ENVX)’s collaboration with the U.S. Army, bringing them closer to full volume production.

According to Insider Monkey’s database for the first quarter of 2023, 24 hedge funds were bullish on Enovix Corporation (NASDAQ:ENVX), compared to 28 hedge funds in the last quarter. Peter S. Park’s Park West Asset Management is the biggest stakeholder of the company, with 5.4 million shares worth $80.7 million.

Here is what Long Cast Advisers said about Enovix Corporation (NASDAQ:ENVX) in its Q4 2022 investor letter:

“Enovix Corporation (NASDAQ:ENVX) is what I’ll endearingly call a “shitco” meaning it’s pre-revenue / pre-profit but with a massive addressable market, so if it succeeds, the potential reward offsets the risks. I think there’s room in the portfolio for a few smaller investments like this, but if I am consistently wrong over time, I’ll change course (SNES and SANW also fall into this category, and so far I’ve been wrong about those, but like ENVX, they are small positions with long time horizons).

ENVX makes lithium batteries using silicon instead of graphene as the anode. Silicon as an anode offers many benefits – faster charging, longer charge periods and longer battery life – but it has a major drawback in that it swells when it charges, and this causes battery degradation and mechanical failure…” (Click here to read the full text)

8. Sunrun Inc. (NASDAQ:RUN)

Number of Hedge Fund Holders: 27

Next on our list of the best solar energy stocks is Sunrun Inc. (NASDAQ:RUN), which specializes in the development, installation, and maintenance of photovoltaic systems and battery solutions. Although the company primarily focuses on the residential market, it provides additional services for its commercial clients as well. On July 18, Sunrun Inc. (NASDAQ:RUN) stock soared around 8% following its inclusion in Morgan Stanley’s portfolio for solar energy stocks. Morgan Stanley analyst Andrew Percoco has forecasted that the company will achieve half of its target for installations within the second quarter of 2023, in addition to a positive demand forecast in California.

According to Insider Monkey’s first quarter database, 27 hedge funds were bullish on Sunrun Inc. (NASDAQ:RUN), in contrast to 39 hedge funds in the prior quarter. William B. Gray’s Orbis Investment Management holds the largest position in the company, with 13 million shares worth a little over $265 million.

Here is what Horizon Kinetics has to say about Sunrun Inc. (NASDAQ:RUN) in its Q2 2021 investor letter:

“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business on the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.

To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.

Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.

If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).

Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).

Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%. (Click here to read full text)

7. Nextracker Inc. (NASDAQ:NXT)

Number of Hedge Fund Holders: 29

Nextracker Inc. (NASDAQ:NXT) provides solar energy solutions, primarily focusing on tracking and software services. On May 9, while Nextracker Inc. (NASDAQ:NXT) reported a Q4 EPS lower than the expected figure by 23 cents, the company’s revenue of $518.4 million exceeded Wall Street estimates by $18.4 million. It is one of the best solar energy stocks to invest in. On June 29, 2023, the company offered 14.21 million shares, at an offer price of $36.50 per share.

As per Insider Monkey’s database for the first quarter of 2023, 29 hedge funds were bullish on Nextracker Inc. (NASDAQ:NXT), with combined stakes worth $304.5 million.

6. Shoals Technologies Group, Inc. (NASDAQ:SHLS)

Number of Hedge Fund Holders: 34

Shoals Technologies Group, Inc. (NASDAQ:SHLS) provides all components for solar, battery energy, and electric vehicles. Be it assembly lines, wireless monitoring systems, or energy management solutions, the company has a strong presence in the B2B marketplace. On June 12, the share price appreciated by around 9%, following Shoals Technologies Group, Inc. (NASDAQ:SHLS)’s contract to supply 10 GW of its wire assembly systems with Blattner Company over the next two years. The company has commenced project deliveries and anticipates completing them by the second quarter of 2025.

As per Insider Monkey’s database for the first quarter of 2023, 34 hedge funds were bullish on Shoals Technologies Group, Inc. (NASDAQ:SHLS). Todd J. Kantor’s Encompass Capital Advisors held the largest position in the company, with 4.3 million shares worth approximately $100 million.

Like Tesla, Inc. (NASDAQ:TSLA), Enphase Energy, Inc. (NASDAQ:ENPH) and SolarEdge Technologies, Inc. (NASDAQ:SEDG), Shoals Technologies Group, Inc. (NASDAQ:SHLS) is one of the top solar energy stocks to watch.

ClearBridge Investments had this to say about Shoals Technologies Group, Inc. (NASDAQ:SHLS) in its investor letter from the third quarter of 2022:

“Shoals Technologies Group, Inc. (NASDAQ:SHLS) manufactures electrical balance of systems (EBOS) components for ground-mounted solar projects and has been gaining market share for quality of service and price. Shoals is also starting to develop an EV charging infrastructure business. We previously owned Shoals and sold our position earlier this year as supply chain issues were negatively affecting margins. Improving supply chain dynamics should support the stock, and tax credits for clean energy production and investment in the IRA should further act as a tailwind for Shoals.”

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