Five Solar Stocks to Own After Climate Deal and Tax Credit Vote

Considering the recently inked Cop21 agreement in Paris, the future of green energy is more than obvious and all the countries seem to acquiesce to this direction. Moreover, the recent Congress’ vote to extend tax credits for solar companies through 2019 has resulted in a lift-off for most US solar stocks, helping them to recover from the losses that most of them suffered during the previous months. For investors it is a high time to gain exposure to companies that will be driving most of our future energy. Hence we have jotted down five solar stocks that have gained considerable traction from professional money managers and could serve as an essential guide for retail investors.

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 3 year period beginning from September 2012 (read the details here).

#5 SunPower Corporation (NASDAQ:SPWR)

Investors with Long Positions (as of September 30): 20

Aggregate Value of Investors’ Holdings (as of September 30): $102.24 Million

Despite a 27% drop in SunPower Corporation (NASDAQ:SPWR)’s stock price during the third trimester the total number of hedge funds having exposure to the company increased by 13 during this period while the aggregate value of these holdings fell by $12.5 million. Mike Master‘s Master Capital Management tops this list as it owns 935,000 shares of SunPower Corporation (NASDAQ:SPWR). Shares of SunPower have posted a recovery,  however, and are now down by just about 5% since the start of this year. The company recently announced a $400 million offering of convertible notes carrying a 4% interest rate and a $30.53 initial conversion price.

#4 Canadian Solar Inc. (NASDAQ:CSIQ)

Investors with Long Positions (as of September 30): 22

Aggregate Value of Investors’ Holdings (as of September 30): $106.08 Million

After dropping by over 20% during the July-September period shares of Canadian Solar Inc. (NASDAQ:CSIQ) have been gaining back their  ground. On a year-to-date basis the stock is now up by 5%. Hedgies reduced their support during the third quarter as the total number of funds long in the company fell by 10 and the aggregate value of these holdings slid by $137 million. However, the company’s stock jumped on Wednesday on the back of the announcement that it will sell an illumination solar power plant to an affiliate of DIF Infrastructure III in a deal worth $48.4 million. Renowned investor Israel Englander‘s Millennium Management heads the list of Canadian Solar Inc. (NASDAQ:CSIQ)’s stockholders within our database as it owns some 2.65 million shares of the company.

#3 SolarCity Corp (NASDAQ:SCTY)

Investors with Long Positions (as of September 30): 29

Aggregate Value of Investors’ Holdings (as of September 30): $871.76 Million

While the total number of hedge funds with investments in SolarCity was reduced by five during the third quarter, the subsequent slide in the aggregate value of these holdings amounted to $403 million. The company’s share price slumped by 17.5% during the same period. SolarCity has given up on its goal of having  a million customers by mid-2018 owing to the maturing solar industry and is now focusing on cash-flow growth. This makes for an interesting entry point in SolarCity Corp (NASDAQ:SCTY). Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, boosted its stake in SolarCity Corp (NASDAQ:SCTY) by 47% during the third trimester to 4.45 million shares.

#2 First Solar, Inc. (NASDAQ:FSLR)

Investors with Long Positions (as of September 30): 34

Aggregate Value of Investors’ Holdings (as of September 30): $350.91 Million

During the third quarter the total number of hedge funds holding First Solar in their portfolios increased by four, while the aggregate value of these holdings appreciated by 25%. Although the stock price fell by 7.3% during this period, it is up by over 34% year-to-date. Oppenheimer recently reiterated its ‘Outperform’ rating for the company and increased its price target to $66 from $61. Recently, shares of First Solar, Inc. (NASDAQ:FSLR) have taken a hit after the company announced its 2016 guidance, which failed to impress the investors. However, it is in more of a consolidation phase during which the company is looking to upgrade equipment to improve efficiency and hence the gross margins. Millennium Management holds about 1.06 million shares of First Solar, Inc. (NASDAQ:FSLR).

#1 Sunedison Inc (NYSE:SUNE)

Investors with Long Positions (as of September 30): 73

Aggregate Value of Investors’ Holdings (as of September 30): $1.06 Billion

The $1.44 billion developer and seller of photovoltaic energy solution’s acquisition binge has landed itself in considerable trouble as concerns of bankruptcy eroded its market value. So far this year the stock is down by about 70%. However, this might be just the right time to gain exposure to the world’s leading renewable energy developer as the concerns seem to be extremely overplayed. Sunedison Inc (NYSE:SUNE)’s stock recently gained back some ground when the company sold $209 million worth of assets to Terra Nova. In addition the management has reduced workforce, cut off some projects and renegotiated the deal to acquire Vivint Solar (NYSE:VSLR). Hedge funds collectively held about 47% of Sunedison’s outstanding stock at the end of September. During the third quarter the total number of hedge funds having investments in the company shrank by 20 and the corresponding value of these aggregate holdings fell by a whopping 80%. David Einhorn‘s Greenlight Capital holds about 18.61 million shares of Sunedison Inc (NYSE:SUNE) valued at $133.59 million as of the end of September.

Disclosure: None