14 Best Clean Energy Stocks to Invest In

In this article, we shall discuss the 14 best clean energy stocks to invest in.

The economic activity during and after the pandemic triggered price spikes for multiple commodities. Russia’s invasion of Ukraine in February 2022 added to the inflation crisis, causing drastic increases in energy prices and massive supply-chain disruptions. However, according to the Global Energy Perspective 2022 by McKinsey, the transition to a lower-carbon energy system continues to gain pace, and the incoming years are projected to witness a rapidly changing clean energy landscape. Following the Inflation Reduction Act (IRA), a grand total of 64 countries have followed the U.S. and have legislated in an effort to accomplish decarbonization goals in the next couple of decades. The Inflation Reduction Act facilitates upcoming decarbonization technologies, including hydrogen and EVs. 

The Massachusetts Institute of Technology conducted an in-depth analysis into the future of the clean energy sector. It concluded that as the world combats the impending threat of climate change by facilitating the move towards a low-carbon future, companies which choose to compete within these transitional changes have the highest chances of profitability.

Hence, it is reasonable to expect clean energy to be the future of the utilities and power sectors. It is for this reason that hedge funds are investing heavily in clean energy stocks, some of the most prominent being NextEra Energy Inc. (NYSE:NEE), General Electric Co. (NYSE:GE), and Tesla Inc. (NASDAQ:TSLA). In this article, we shall look at 14 of the best clean energy stocks to invest in.

Our Methodology

We used Insider Monkey’s database of 895 hedge funds tracked as of the end of the second quarter and picked the top 14 clean energy stocks owned by these elite money managers.

Best Clean Energy Stocks To Invest In

14. Canadian Solar Inc. (NASDAQ:CSIQ)

Number of Hedge Fund Holdings: 13

Based in Ontario, Canadian Solar Inc. (NASDAQ:CSIQ) is a Canadian publicly traded company that specializes in the manufacture, production and sale of solar PV modules, and the operation of other large-scale projects. The company is a rapidly expanding solar energy powerhouse, which has over 75 GW of solar modules shipped per year. Furthermore, Canadian Solar Inc. production facilities manufacture ingots, solar cells, solar PV modules, solar power systems, and other solar products. Billionaire Ken Griffin is the largest shareholder in Canadian Solar Inc., having stakes worth $19.4 million as of the second quarter of 2022. In Q2 2022, the company beat estimates of $0.53 by $0.54, posting an EPS of $1.07.

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

Number of Hedge Fund Holdings: 19

Headquartered in Toronto, Ontario, Brookfield Renewable Partners (NYSE:BEP) is a publicly traded limited partnership that owns and operates one of the world’s largest pure-play renewable power assets. Additionally, the company currently owns more than 230 hydroelectric plants, 110 wind farms, over 550 solar facilities, and four storage facilities with over 17,000MWs of installed capacity. As of September 26, Brookfield Renewable Partners has a total market cap of $22.35 billion. In the second quarter of 2022, the company posted a total revenue of $1.27 billion.

On August 8, JPMorgan analyst Mark Strouse raised the price target on Brookfield Renewable Partners to $43 from $41, maintaining an Overweight rating on the shares. The analyst regarded the Inflation Reduction Act as the greatest policy change in U.S. history, further accelerating growth in an inevitable global transition from fossil fuels to clean energy.

Here is what ClearBridge Investments had to say about Brookfield Renewable Partners in their Q1 2022 investor letter:

“Brookfield Renewable (NYSE:BEP) is a pure-play renewables operator and developer headquartered in Canada, focused on international hydro, solar, wind and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable’s (NYSE:BEP) globally diversified, multi- technology renewables business makes it an attractive partner. Brookfield’s (NYSE:BEP) development pipeline stands at 18,000 MWs, providing confidence the company can meet its targeted double- digit cash flow growth through to 2025. The market narrative around the energy transition and energy security, along with increasing fossil fuels prices which have driven greater focus on switching to renewables, helped Brookfield (NYSE:BEP) shares in the quarter.”

12. Stem Inc. (NYSE:STEM)

Number of Hedge Fund Holdings: 19

Based in San Francisco, California, Stem Inc. (NYSE:STEM) provides clean energy solutions and services, designed to maximize the economic, environmental, and resiliency value of energy assets and portfolios. The company provides turnkey services for front-of-meter and behind-the-meter storage products for businesses, developers, and utilities. 

On August 18, Morgan Stanley analyst Stephen Byrd raised the price target on Stem to $20 from $13, keeping an Equal Weight rating on the shares. The analyst boosted growth predictions for solar, wind, energy storage, and clean hydrogen. Furthermore, he also raised price targets on many clean tech stocks, due to the incentives provided by the IRA legislation. The bill is expected to accelerate the decarbonization of the U.S. economy, lead to increased localized manufacturing, and provide necessary support to catalyze decarbonization technologies that are expected to be commercially viable.

11. Clearway Energy Inc. (NYSE:CWEN)

Number of Hedge Fund Holdings: 21

Based in San Francisco, California, Clearway Energy (NYSE:CWEN) specializes in the development and operation of clean energy in the United States, with over 5GWs of wind, solar, and energy storage in operation. According to the company’s official website, Clearway Energy operates and provides asset management services for more than 4.1GW of operating assets, and owns an extensive pipeline of renewable energy projects in development and construction.

Clearway Energy recorded a remarkable performance on a variety of different financial metrics in Q2 2022. The company has garnered substantial capital to expand and add to its asset base, a move which will be bolstered by the recent sale of the company’s thermal business.

Here is what ClearBridge Investments had to say about Clearway Energy in their Q4 2021 investor letter:

“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.”

10. SunPower Corporation (NASDAQ:SPWR)

Number of Hedge Fund Holdings: 21

Based in San Jose, California, SunPower Corp. (NASDAQ:SPWR) is an American company which specializes in the production and development of photovoltaic solar energy generation systems and battery energy storage products. Hedge fund sentiment around the stock has remained consistent in Q1 and Q2 of 2022, with 21 hedge funds long SunPower Corp. in both quarters. SunPower reported impressive adjusted earnings of $1.07 per share in Q2 2022, completely in line with expectations.

On August 18, Morgan Stanley analyst Stephen Byrd raised the price target on SunPower Corp. to $31 from $22, keeping an Equal Weight rating on the shares.

9. First Solar Inc. (NASDAQ:FSLR)

Number of Hedge Fund Holdings: 26

Based in Tempe, Arizona, First Solar Inc. (NASDAQ:FSLR) is an American company which specializes in the manufacture and production of solar panels, utility-scale PV power plants, and other services, like construction, maintenance, and end-of-life panel recycling.

On September 7, Goldman Sachs analyst Brian Lee upgraded the rating on First Solar Inc. shares to Buy from Sell, conferring a price target of $172 on the shares. The analyst states that the company is best-positioned to capitalize on the tailwinds of the Inflation Reduction Act, as it is expected to be one of the most significant beneficiaries of manufacturing credits. The company is also perfectly leveraged to take advantage of demand tailwinds originating from macroeconomic transitions to clean energy. Lee also contends that he has a more positive outlook on First Solar’s (NASDAQ:FSLR) module gross margin recovery.

8. Plug Power Inc. (NASDAQ:PLUG)

Number of Hedge Fund Holdings: 26

Based in Latham, New York, Plug Power Inc. (NASDAQ:PLUG) is an American producer of hydrogen fuel cell systems. On August 25, Truist analyst Bronson Fleig reported that Plug Power announced a commercial agreement with Amazon (NASDAQ:AMZN), under which the e-commerce mammoth and Plug Power have agreed to the sale of liquid green hydrogen in 2025. According to the analyst, this announcement is a major breakthrough in supporting Plug Power’s (NASDAQ:PLUG) green H2 ecosystem strategy through further backstopping of substantial internal green H2 production. Fleig points out that the transaction will aid the company accomplish its $3 billion revenue target for 2025. He expressed positive share support near-term on the notion of industry acceptance of green H2, keeping a Buy rating and $32 price target on Plug Power shares.

Global supply of lithium is rapidly running short and since HFC vehicles have similar range when compared to petrol-powered vehicles and are able to refuel just as quickly, the latter will eventually fizzle out. Plug Power and other HFC manufacturers are set to benefit immensely from the subsidies offered by the Inflation Reduction Act and the Hydrogen for Trucks Act.

7. The Southern Company (NYSE:SO)

Number of Hedge Fund Holdings: 29

Based in Atlanta, Georgia, Southern Company (NYSE:SO) is an American gas and electric utility holding company which operates in southern regions of the United States. The company’s subsidiaries operate hydroelectric, gas, coal, and nuclear generation sources which generate approximately 200 TWh of electricity. Renewable hydroelectric power represents 6% of Southern Company’s (NYSE:SO) generation, with coal-based generation dropping significantly since 2009. The company has committed to complete decarbonization by 2050. It has a dividend yield of 3.92%, paying a quarterly dividend of $0.68 per share of common stock.

On September 14, Argus analyst Marie Ferguson raised the price target on Southern Company to $87 from $83, keeping a Buy rating on the shares. Ferguson ascertains that the company offers an efficiently-operated base of regulated utility assets, and a strong presence in U.S. states with favorable population trends. The analyst further goes on to contend that the company’s new Vogtle nuclear plants will propel Southern Co. to long-term growth and push it to be one of the best clean energy stocks to invest in. He states that as Southern decreases the use of coal-fired plants in favor of renewables, the company’s propensity for growth looks extremely promising. Hedge fund sentiment around Southern Company has increased in Q2 2022, with 29 funds long the stock, compared to 28 in the previous quarter.

6. Dominion Energy Inc. (NYSE:D)

Number of Hedge Fund Holdings: 30

Based in Richmond, Virginia, Dominion Energy (NYSE:D) is a North American power and energy company which supplies electricity to parts of Virginia, North Carolina, and South Carolina. It also provides natural gas to Utah, West Virginia, Ohio, Pennsylvania, North Carolina, South Carolina, and Georgia.

On August 18, Barclays analyst Eric Beaumont lowered the price target on Dominion Energy to $86 from $93, keeping an Equal Weight rating on the shares. At the end of 2021, the company reported 30.2GWs of electricity generating capacity, more than 10,000 miles of electric transmission lines, 78,000 miles of electric distribution lines, and 95,700 miles of gas distribution mains. With a fast-moving transition to net-zero carbon emissions, the company is also well-positioned to benefit from the recent Inflation Reduction Act, making it one of the best clean energy stocks for investment.

5. Sunrun Inc. (NASDAQ:RUN)

Number of Hedge Fund Holdings: 31

Based in San Francisco, California, Sunrun Inc. (NASDAQ:RUN) is an American company which specializes in the production and development of photovoltaic solar energy generation systems and battery energy storage products, and is one of the best clean energy stocks to invest in. The company beat EPS estimates by $0.07 in Q2 2022, posting an EPS actual of -$0.06 against consensus -$0.13.

On August 18, Morgan Stanley analyst Stephen Byrd raised the price target on Sunrun Inc. shares to $79 from $70, keeping an Overweight rating on the shares.

Here is what Horizon Kinetics had to say about Sunrun Inc. in their 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 in 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”… Click Here to Continue Reading

4. General Electric Co. (NYSE:GE)

Number of Hedge Fund Holdings: 49

Based in Boston, Massachusetts, General Electric Co. is an American multinational conglomerate which has a global electric generation capacity of more than 400MWs. The company also has wind turbines with rated capacities from 2-6MWs to suit variety of environments. As of Q2 2022, the company posted a total revenue of $18.65 billion, with an EPS of $0.78, beating estimates of $0.37 by $0.41.

On August 16, Bernstein analyst Brendan Luecke conferred General Electric Co. with an Outperform rating and with a price target of $100, down from $105.

Here is what Longleaf Partners had to say about General Electric Co. in their Q2 2022 investor letter:

“General Electric Company (NYSE:GE) – Aviation, Healthcare and Power conglomerate GE was punished in the quarter amid top-down economic fears for this collection of seemingly cyclical businesses. However, the market is not giving the company credit for the material improvements CEO Larry Culp has made in his tenure. The balance sheet today is stronger than it has been in a very long time, and each of the three primary business segments each have strong paths to increasing earnings, regardless of the economic environment. Healthcare has historically not been a cyclical business. While Aviation typically has some economic sensitivity, the business still has a strong COVID rebound tailwind that should continue even in an uncertain environment. Power is a less cyclical business, and GE maintains a steady business servicing approximately one-third of the world’s electricity. GE is another example of strong insider buying indicating management’s confidence in the business, while the company also began buying back discounted shares. GE is still on track to break the company into three separate businesses, and we believe this will help the market properly weigh the value of each core segment.”

3. Enphase Energy Inc. (NASDAQ:ENPH)

Number of Hedge Fund Holdings: 53

Based in Fremont, California, Enphase Energy (NASDAQ:ENPH) is an American energy technology company which focuses on the development and manufacture of solar micro-inverters, battery energy storage, and EV charging stations, primarily targeting residential customers. It is one of the first companies in the world to produce and commercialize the solar micro-inverter, which successfully facilitates the transition from direct current power generated by a solar panel, into grid-compatible alternating current for use or export. Enphase has reported an annual revenue growth of 67.75% year-on-year in Q2 2022, posting a total revenue of $530.2 million. In Q2 2022, the company posted an EPS of $1.07, beating estimates of $0.84 by $0.23. As of the second quarter of 2022, the company stock seems to be heavily valued based on multi-year estimates.

On August 8, JPMorgan analyst Mark Strouse elevated the price target on Enphase Energy to $321 from $261, keeping an Overweight rating on the shares.

Here is what ClearBridge Investments had to say about Enphase Energy in their Q1 2022 investor letter:

“Enphase Energy (NASDAQ:ENPH) is a key solar holding that should be able to take advantage of greater incentives for solar installations in many geographies. The company was also a strong contributor for the quarter, overcoming pressures of a higher discount rate on their strong projected future earnings, raw material inflation and supply chain challenges as their long-term value was reaffirmed.”

2. NextEra Energy Inc. (NYSE:NEE)

Number of Hedge Fund Holdings: 59

Based in Juno Beach, Florida, NextEra Energy is an American energy company with over 58GWs of generating capacity. As of Q2 2022, NextEra Energy Resources is the world’s largest generator of renewable energy, with approximately 65% of NextEra Energy’s (NYSE:NEE) generating capacity coming from renewables like wind, solar, and hydroelectric power.

On September 14, Credit Suisse analyst Nicholas Campanella raised the price target on NextEra Energy to $98 from $79, keeping an Outperform rating on the shares.

Here is what ClearBridge Investments had to say about NextEra Energy in their Q2 2022 investor letter:

“We increased our exposure to the energy transition during the quarter with new positions in Iberdrola (OTCPK:IBDSF), a Spanish-based integrated utility that is also one of the leading renewable energy developers in the world, and NextEra Energy, Inc. (NYSE:NEE), an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. The war has opened the eyes of the world that energy independence is critical. Renewables are for many countries the only way to get to the target. It is expected that existing renewable project pipelines will be executed faster, and more projects added to existing pipelines.

The energy transition would be extremely helpful for climate change and Iberdrola ranks well on our ESG matrix. NextEra, meanwhile, recently raised future earnings forecasts, citing a very favorable macro environment for rapid renewable generation expansion driven by decarbonization of the U.S. economy and the relative attractiveness of renewable generation in the context of high natural gas and power prices.”

1. Tesla Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holdings: 72

Based in Austin, Texas, Tesla Inc. is an American multinational automotive and clean energy company. Widely regarded as one of the most valuable companies in the world, the company has a market cap of more than $862.7 billion, as of September 26. In fiscal 2021, the company reported record sales of BEVs and PHEVs, capturing effectively 21% of the battery-electric (purely electric) market and 14% of the plug-in market (which includes plug-in hybrids). Furthermore, in addition to being one of the biggest producers of battery energy storage systems in the world, The Tesla Energy Plan is an energy tariff which automatically transfers one’s reserve energy to the local grid during times when demand is high, offering 100% renewable electricity support. As of the second quarter of 2022, Citadel Investment Group is the largest shareholder in the company. In Q2 2022, the company posted an EPS of $0.76, beating estimates of $0.60 by $0.16. It also reported a revenue of $16.93 billion in Q2 2022.

On September 20, Morgan Stanley analyst Adam Jonas conferred Tesla Inc. with an Overweight rating and $383 price target. In his research note, he stated that although the company is facing ruthless competition from domestic Chinese EV companies in the present and is heavily dependent on their demand and supply ecosystems, it is well-leveraged to overcome this dependency by the end of 2023. This will occur in the backdrop of capacity growth in the U.S. and Europe in addition to greater levels of vertical integration. Jonas maintains that Tesla’s (NASDAQ:TSLA) NAFTA and EU subsidiaries will soon comply with initiatives such as the IRA and other similar legislative acts enforced by the EU. This will lead China to roll back its penetration into Tesla’s (NASDAQ:TSLA) demand footprint and supply ecosystem.

Here is what Baron Funds had to say about Tesla in their Q2 2022 investor letter:

“In 2014, before we began to invest in Tesla (NASDAQ:TSLA), I called Roger to ask whether he thought Elon Musk’s electric car business would succeed. I did not believe that Roger, an owner of dealerships that sell cars powered by internal combustion engines (ICE) would likely have a favorable opinion of Tesla’s prospects. That was principally for two reasons:

1. First, automobile manufacturing and distribution is unusually complicated, capital intensive, and highly regulated, which makes profitability problematic;
2. second, cars with ICE motors require extensive annual maintenance, and dealer services revenues, not profits from automobile sales, are the most important contributor to profits of perpetual licensed ICE car dealerships.

Penske Automotive Group is principally an ICE car dealer. Since electric cars are powered by batteries and need little service, franchised dealerships are incented to sell ICE not EV automobiles. Further, Roger had been a long-term director of General Motors. General Motors’ ICE automobile business would be disrupted if Tesla were successful.

Regardless, I was right to have spoken with Roger. That was since he outlined numerous issues we needed to consider, study, and question before we determined whether we believed Tesla could be a successful business…before we ultimately chose whether to invest in that company.

When we completed our initial due diligence on Tesla, which diligence has been ongoing since 2014, we decided to invest $360 million in Tesla over the next two years. I then called Roger and outlined why I thought we could earn 20 times our capital over the next 10 years. Roger was so certain I was wrong that he offered to bet me $1 million that Tesla would fail. “Roger, I can’t bet you a million dollars. First, if you are right, I couldn’t afford to pay you. Second, if I’m right, you’re my friend, and I couldn’t take your money.”

You can also take a peek at 10 Best Gun Stocks to Invest In and 15 Largest FMCG Companies in the World.

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This article is originally published at Insider Monkey.