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 Enphase Energy, Inc. (NASDAQ:ENPH) 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 solar panel array stretched across a large open field, its glimmering panels reflecting the sun.
Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 42
Enphase Energy, Inc. (NASDAQ:ENPH) is a global energy technology company that specializes in solar microinverters, energy storage solutions, and energy management devices. Enphase Energy, Inc.’s (NASDAQ:ENPH) microinverters convert direct current (DC) from solar panels into alternating current (AC) for use and are critical for optimizing solar energy systems, enhancing efficiency, and reliability, and are also easy to install. The company is a market leader in residential solar in the U.S. Europe and emerging markets in Asia.
In Q3, Enphase Energy, Inc. (NASDAQ:ENPH) reported $380.9 million in revenue, shipped around 1.73 million microinverters and 172.9 megawatt hours of IQ batteries, and generated $161.6 million in free cash flow. The company’s gross margin for Q3 with net Inflation Reduction Act (IRA) benefits was 48.1%. The company is strategically well-positioned to benefit from the U.S. Inflation Reduction Act (IRA) as its microinverters can help customers qualify for a 10% Investment Tax Credit (ITC), which translates to savings of about $0.40 per watt, under the Domestic Content Bonus Credit provisions of the Inflation Reduction Act. This advantage is expected to help the company achieve higher sales and enhance gross margins. In Q4, Enphase Energy, Inc. (NASDAQ:ENPH) aims for revenue to be within a range of $360.0 million to $400.0 million, ship 1.3 million microinverter units from its US facilities and 140 to 160-megawatt hours of IQ Batteries.
California is a major market driven by NEM 3.0, or the net billing tariff, which reduces compensation for solar-only customers to encourage installed battery storage, which has increased the demand for Enphase Energy, Inc.’s (NASDAQ:ENPH) battery storage systems. In Q3, the company reported a 13% growth compared to the previous quarter, with distributor sell-through and high battery attach rates of nearly 50%. In non-California states, distributor sell-through was up by 14% quarter-over-quarter. Enphase Energy, Inc. (NASDAQ:ENPH) is also expected to drive growth in international markets, particularly in high-growth markets such as Brazil, India, Vietnam, and the Philippines.
Overall, ENPH ranks 6th on our list of best alternative energy stocks to buy according to hedge funds. While we acknowledge the potential of ENPH, 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 ENPH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
