We recently compiled a list of the 8 Best Wind Power and Solar Stocks to Buy. In this article, we are going to take a look at where Clearway Energy Inc (NYSE:CWEN) stands against the other wind power and solar stocks.
It is arguably one of the best times to pursue investment opportunities around wind power and solar stocks as the United States moves to achieve 100% clean energy use by 2035 and reduce emissions by 50 to 52% by 2030. As the US advocates for various initiatives to help tackle the climate crisis and keep a 1.5 C limit on warming, the case for the best wind power and solar stocks to buy is becoming clear.
The US wind power and solar capacity were more significant than ever last year as part of the country’s long growth trend for renewable energy. A total of 425,235 gigawatts hours of electricity were generated from Wind power, accounting for more than 12% of the country’s grid. Wind power has been the country’s largest renewable energy source since 2019.
READ ALSO: 10 Best Chinese Stocks to Buy Right Now and 10 Best Oilfield Services Stocks to Buy Now.
On the other hand, solar energy accounted for less than 4% of all the US power generation, affirming plenty of room for growth in the coming years. Likewise, solar power generation is projected to grow by 75%, from 163 billion kWh in 2023 to 286 billion kWh by 2025. Wind power is projected to increase by 11%.
Nevertheless, clean energy stocks had one of the worst runs in 2023 as they posted an average annual return of -10.5%, slightly improving from an average return of -11% a year ago. The underperformance of 2022 was attributed to the high inflation levels that saw investors’ sentiments take a significant hit.
Likewise, the underperformance of wind and solar energy stocks persisted in 2023 owing to the rising interest rates as the US Federal Reserve tried to tame runaway inflation. Given that most solar and wind companies must rely on the debt markets to raise capital, most have faced significant challenges amid the high interest rate environment.
The situation was further exacerbated by supply chain problems amid difficulties obtaining renewable energy equipment like wind turbines and solar panels over the past two years. Matthew Donen, equity analyst at Morningstar, said:
“We see several challenges for participants in the wind energy sector. Wind turbine manufacturers have struggled to restore profitability from unprecedented cost inflation in 2021, and developers of wind projects have recorded billions in impairments due to higher equipment costs and an increase in interest rates.”
Fast forward, clean energy stocks are on the move as investors take note of their depressed valuations. The growing demand for wind and solar energy for use in electric vehicles, building heating, and use in industrial settings like data centers are some of the catalysts driving growth in the sector.
In the aftermath of the European Central Bank and the Bank of Canada cutting interest rates, the best wind power and solar stocks again started seeing increase in investor positioning.
However, there are growing concerns that clean energy companies could come under pressure amid uncertainty around the US presidential election. The prospect of Republicans taking over the Whitehouse and Congress, raises the prospects of tax credits under the Inflation Reduction Act (IRA) being affected.
Nevertheless equity analyst Donen believes it would be difficult for a Trump administration to get rid of all favorable tax policies that have bolstered sentiments around wind and solar stocks. Here’s what Donen said:
“We think it would be difficult for Trump to roll back favorable tax policy for renewable energy enjoyed from the 2022 Inflation Reduction Act. A Trump administration might be able to slow implementation of the Act, but that is unlikely to slow renewable energy growth in the short-run.”
With the world focused more than ever on combating the effects of global warming, including a shift from fossil fuels to clean energy, tremendous opportunities are cropping up. With the COP26 targeting net zero emissions by 2050, an investment of $4 trillion would be needed by 2030. This is one of the reasons investors should start paying attention to the best wind power and solar stocks to buy now, and let’s take a look at them now.
Our Methodology
To compile the list of the best wind power and solar stocks to buy, we scoured different solar and wind energy ETFs and picked 8 of the top companies with tremendous upside potential. Once we had consolidated the list, we ranked the stocks based on the number of hedge funds that owned it.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A wind farm in motion, its many turbines spinning in the breeze.
Clearway Energy Inc (NYSE:CWEN)
Number of Hedge Fund Investors: 30
Stock Upside Potential: 19.95%
Clearway Energy Inc (NYSE:CWEN) is a renewable energy company with 6,000 net MW of installed wind, solar, and energy generation projects. It also boasts 2.5GW of natural gas generating facilities. The facilities offer the company a reliable cash flow stream, allowing it to reward investors with a 6% dividend yield.
Clearway Energy Inc (NYSE:CWEN) has grown by purchasing wind and solar power plants from developers. It also boasts several investments in the pipeline that should strengthen its revenue stream and are expected to lead to further dividend growth with an 8% target by 2026.
Clearway Energy Inc (NYSE:CWEN) delivered solid second-quarter results, with earnings growing 30.3% year over year to $43 cents a share, even as revenues dropped 9.8% to $366 million.
In the first quarter, Clearway Energy spent $117 million in cash to acquire the Cedar Creek wind project. With the acquisition, it has bolstered its wind generating capacity by 160 MW. The project achieved commercial operations in the second quarter of 2024 and sells its power under a 25-year PPA with an investment-grade utility. Additionally, the project is expected to achieve a five-year average annual basis return of $13 million.
Clearway Energy Inc (NYSE:CWEN) also spent $44 million to acquire Dan’s Mountain wind project, adding a 55 MW wind project to its portfolio. The project is expected to achieve commercial operations in the first half of next year.
Clearway Energy Inc (NYSE:CWEN) is currently rated as a Buy on Wall Street with an average price target of $34.75, implying a 19.95% upside potential from current levels. According to the Insider Monkey database, 30 hedge funds out of 912 held stakes in the company as of the end of the second quarter. Steve Cohen’s Point72 Asset Management is the company’s largest shareholder, holding 1.02 million shares valued at $25.11 million.
Overall CWEN ranks 6th on our list of the best wind power and solar stocks to buy. While we acknowledge the potential of CWEN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CWEN, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.