We recently compiled a list of the 10 Cheap Clean Energy Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Vistra (NYSE:VST) stands against the other cheap clean energy stocks.
The Clean Energy Market is Booming
According to a report by the International Energy Agency (IEA), clean energy is expanding rapidly and the annual deployment of key technologies is accelerating, driven by policy support and cost reductions. Between 2019 and 2023, investment in clean energy surged by nearly 50%, reaching $1.8 trillion in 2023 and growing at an average annual rate of around 10% during this period. The clean energy sector has become a significant industrial player and a key contributor to the global economy. However, its benefits remain unevenly distributed, with the majority of clean energy deployment occurring in China and other advanced economies.
In 2023 the solar PV and wind capacity grew by 85% and 60% respectively, totaling nearly 540 GW. China led the market in both wind and solar capacity additions. China and advanced economies together made up 90% of wind and solar PV additions. Clean energy helped avoid annual fossil fuel energy demand of approximately 25 EJ, equivalent to 5% of global fossil fuel demand in 2023. This helped avoid around 580 million tonnes of coal demand, 180 billion cubic meters of natural gas, and almost 1 million barrels per day of oil demand. These avoided demands highlight the substantial impact of clean energy on reducing fossil fuel reliance globally.
Investing in a Greener Future
The clean energy market continues to attract significant interest from hedge funds and investment management companies. Norfund, a development finance institution owned by the Norwegian Ministry of Foreign Affairs is highly optimistic about the green energy sector. The organization has a goal to provide electricity to 6.5 million new households and finance 6.5 GW of new capacity by 2026 using a range of clean sources, including solar, wind, hydropower, biomass, and geothermal energy.
Norfund supports medium to large-scale grid-connected power plants, often through industrial partnerships. These projects typically operate under long-term contracts with utilities, benefiting from the significant cost decreases in solar and wind power. Norfund is also investing in enhancing grid capacity and reliability, which is crucial for integrating new renewable energy capacities.
In July, Norfund announced to invest $29.6 million in a rooftop solar project, a combined solar and battery storage project, and a hydropower project which is expected to reduce nearly half a million tons of CO2e annually. Additionally, Tinfos, a Norwegian hydropower company, is partnering with Norfund to develop small-scale hydropower projects in Indonesia, with a goal of 1 TWh of capacity by 2032. Norfund is also investing $25 million in Xurya, a company that provides rooftop solar rentals to businesses in Indonesia, which will help reduce high installation costs and facilitate the shift to renewable energy.
The rapid expansion of clean energy and accelerating deployment of technologies such as solar PV and wind play a pivotal role in shaping the future of global energy. As investment and innovation continue to drive the clean energy sector, a concerted effort to broaden its reach and impact will be essential for achieving a sustainable and resilient global energy future. With that in context, let’s take a look at the 10 cheap clean energy stocks to buy according to hedge funds.
Our Methodology
For this article, we used clean energy ETFs plus online rankings to compile an initial list of 35 clean energy stocks. From that list, we screened for companies that are trading at a forward P/E ratio of under 22.5, as of September 8. We then 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 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).
Solar panel workers installing a new farm for clean energy generation.
Vistra (NYSE:VST)
Number of Hedge Fund Investors: 92
Forward P/E Ratio as of September 8: 15.08
Vistra (NYSE:VST) is a Texas-based energy company with a vertically integrated business model. It operates across various segments of the energy sector, including electricity generation, wholesale energy sales, fuel production, and logistics. The company provides electricity and natural gas to residential, commercial, and industrial clients. Additionally, Vistra manages battery energy storage facilities and its nuclear assets are crucial for powering artificial intelligence (AI) applications.
In March 2024, Vistra (NYSE:VST) completed its acquisition of Energy Harbor and significantly boosted its nuclear capacity by 4,000 megawatts while adding around 1 million retail customers to its portfolio. The company has also integrated AI technologies into its operations to improve power plant efficiency, enhance thermal performance, and cut carbon emissions. Notably, the implementation of the Heat Rate Optimizer (HRO) across nearly 67 power-generation units in 26 plants led to an average efficiency improvement of 1%, saving the company millions in operational costs. As demand for renewable energy grows, especially driven by AI and data centers, Vistra (NYSE:VST) is strategically well-positioned to benefit from this trend.
For the quarter ending June 30, Vistra’s (NYSE:VST) operational net income rose to $492 million, up from $409 million the previous year. The company’s Adjusted EBITDA also saw a significant increase of 40%, reaching $1.41 billion compared to the same quarter in the previous year.
Vistra’s (NYSE:VST) stock is trading 15.08 times its earnings, which is an almost 13% discount compared to the sector median of 17.16. The company’s earnings are expected to grow by 40.17% this year. As of the second quarter, 93 hedge funds hold stakes in Vistra’s (NYSE:VST) stock with stakes worth $4.03 billion as of the second quarter. Lone Pine Capital is the largest shareholder with stocks worth $587.93 million as of June 30.
Overall VST ranks 1st on our list of the cheap clean energy stocks to buy. While we acknowledge the potential of VST 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 VST 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.
