We recently published a list of 10 Best Alternative Energy Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Constellation Energy Corporation (NASDAQ:CEG) stands against other best alternative energy stocks to buy according to hedge funds.
Tyler Rosenlicht, Head of Natural Resource Equities at Cohen & Steers, in an interview with Bloomberg on July 31, shared his insights on the global energy landscape, emphasizing that the conversation around energy has shifted beyond just oil. While oil remains a significant driver of production and energy supply, natural gas, nuclear, and alternative energy sources are growing rapidly.
Rosenlicht noted that the growing demand for energy from data centers requires significant amounts of power to operate, however, energy consumption is also surging to satisfy the needs of technological advances, a rising middle class globally, urbanization, and traveling. Rosenlicht believes that the demand for energy will continue to grow, driven by population growth, economic expansion, and the increasing energy intensity of the global economy. He noted that his firm Cohen & Steers forecasts energy demand in 2040, taking into account factors such as population growth, economic growth, and energy intensity.
Rosenlicht expressed concerns that the assumption of increasing energy efficiency may be overstated, as new technologies may lead to higher energy usage. He emphasized that the world is in an “energy addition” phase, where new supply is needed to meet growing demand.
In terms of investment opportunities, Rosenlicht favors the U.S. natural gas sector, particularly liquefied natural gas (LNG) exports. He also favors energy companies that are pursuing emissions reductions using their existing infrastructure. On the alternative side, Rosenlicht’s company is bullish on companies building electrification assets and infrastructure, such as transmission wires and lines. Rosenlicht is also bullish on nuclear energy, which he believes will play a crucial role in meeting the demand for low-carbon energy.
READ ALSO: 10 Worst-Performing Industries in 2024 and 10 Most Promising Growth Stocks According to Hedge Funds.
Clean energy ETFs have also been a popular investment choice, especially between 2020 and 2022, when the industry experienced rapid growth. One major driver was the declining costs of solar and wind energy, which became increasingly competitive with fossil fuels. The Clean Energy ETFs also benefited from broader techno-optimism between 2020 and 2022. However, the interest rate hikes beginning in mid-2022 have significantly impacted the sector. For example, the iShares Global Clean Energy ETF (NASDAQ:ICLN) has declined by 20% year to date, as of November 11. The SPDR Kensho Clean Power ETF (NYSEARCA:CNRG), which invests in companies innovating and manufacturing renewable energy technology rather than generating power directly is down 13.3% year to date, as of November 11. The clean energy sector is expected to regain momentum driven by decreasing costs, technological advancements, and global carbon reduction targets, the industry has a solid long-term outlook. According to Straits Research, the clean energy market is expected to grow at a 9.47% annual growth rate from 2024 to 2032.
The alternative energy sector is set for significant growth, fueled by rising environmental awareness, favorable regulations, and advancements in technologies such as wind, solar, and hydropower. While the industry encounters challenges, including high upfront costs and technological barriers, the overall outlook remains positive.
Our Methodology
For this article, we scanned alternative energy ETFs plus online rankings to compile an initial list of 30 alternative energy stocks. From that list, we narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? 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 close up of a wind turbine producing electricity as the sun sets.
Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 71
Constellation Energy Corporation (NASDAQ:CEG) supplies natural gas and energy products and services to residential, commercial, and industrial clients across North America. Constellation Energy Corporation (NASDAQ:CEG) is a key player in nuclear power and operates one of the largest fleets of nuclear plants in the US. Around 90% of the company’s annual energy output is derived from carbon-free sources. Constellation Energy Corporation (NASDAQ:CEG) has set a goal to produce 95% carbon-free electricity by 2030.
On September 20, Constellation Energy Corporation (NASDAQ:CEG) announced the signing of a 20-year power purchase agreement with Microsoft that will pave the way for the launch of the Crane Clean Energy Center (CCEC) and the restart of Three Mile Island Unit 1, a nuclear power plant that was shut down in 2019 due to economic reasons. The agreement is Constellation Energy Corporation’s (NASDAQ:CEG) largest-ever power purchase agreement and will restore the plant to service, adding approximately 835 megawatts of carbon-free energy to the grid.
The plant will provide a reliable source of carbon-free energy to power Microsoft’s data centers in the PJM region and will be a significant contributor to the state’s energy mix, providing a reliable source of carbon-free energy and supporting the state’s economic development. The project is expected to be online in 2028 and will operate for at least 20 years. In its Q2 investor letter, ClearBridge stated the following regarding Constellation Energy Corporation (NASDAQ:CEG) in its Q2 2024 investor letter:
“On a regional basis, the U.S. and Canada was the top contributor for quarter, with U.S. electric utility Constellation Energy Corporation (NASDAQ:CEG) and U.S. rail operator CSX the lead performers. Constellation Energy is primarily a nuclear generation company and is the largest producer of carbon-free electricity in the U.S., serving states including New York, Illinois, Maryland, Pennsylvania and New Jersey. The company’s combined generation capacity is more than 32 GW and 90% of annual output is carbon free. Constellation has been a beneficiary of AI and subsequent power demand as its 24/7 base load nuclear generation can get premium contracts.”
Overall, CEG ranks 3rd on our list of best alternative energy stocks to buy according to hedge funds. While we acknowledge the potential of CEG, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CEG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.