We recently compiled a list of the 10 Best Clean Energy Stocks According to Reddit. In this article, we are going to take a look at where NextEra Energy (NYSE:NEE) stands against the other clean energy stocks.
The clean energy or the renewable energy market is one of the most largest growing sector globally. Clean energy sources, such as wind, hydropower, biofuel, and solar energy, are gaining momentum due to environmental concerns and government regulations in countries around the world. These factors have significantly boosted the sector, leading to a rise in installed capacity for clean energy sources. Additionally, the growing demand for power and rising energy consumption are driving the expansion of the clean energy market.
The U.S. Energy Information Administration (EIA) forecasts a 17% increase in clean energy deployment in 2024, potentially reaching 42 GW and accounting for nearly a quarter of the nation’s electricity generation. This growth could lead to a temporary rise in clean energy costs due to higher expenses for financing, labor, and land. Despite these challenges, tax credits from the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) are expected to help maintain the competitiveness of solar and wind energy. The solar and energy storage markets are poised for further growth, supported by tax incentives and government programs such as the DOE’s Loans Program. Conversely, the wind and hydrogen energy sectors face obstacles, with wind energy experiencing higher costs and approval delays, and hydrogen development slowed by a lack of government incentives.
In a recent interview, Bruce Flatt, CEO of Brookfield Asset Management, discussed the transformative impact of decarbonization on industries and investments, describing it as a major trend reshaping the market. The company has launched a renewable energy fund and raised $15 billion, with plans for a second fund to help companies reduce carbon emissions, with solar and wind projects in 15 countries. Brookfield’s strategy includes building renewable infrastructure and directly supplying power to corporate clients to help them meet net-zero goals. Flatt highlighted that the U.S. Inflation Reduction Act (IRA) has provided incentives that accelerate clean energy projects, which will lead to improved completion rates and benefit the sector. Brookfield targets returns of 9-10% for debt products and around 20% for equity investments in the clean energy sector, with optimism for future growth and returns as more capital flows into the market.
As the world shifts towards more sustainable energy solutions, the demand for clean energy is expected to increase significantly, driven by rising environmental concerns and government incentives. Some of the largest players in the energy market are transitioning towards clean energy and are well-positioned to benefit from the ongoing push towards a more sustainable future.
Our Methodology
For this article, we sifted through several active subreddits to compile an initial list of 30 clean energy stocks that retail investors were bullish on. 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. We also included the market cap of these companies as of September 4. 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 wind turbine, its blades spinning to generate clean renewable energy.
NextEra Energy (NYSE:NEE)
Number of Hedge Fund Holders: 73
Market Capitalization as of September 4: $166.83 Billion
NextEra Energy (NYSE:NEE) is the world’s leading producer of wind and solar energy and a pioneer in battery storage technology. Through its subsidiaries, such as Florida Power & Light, the company serves millions of customers and plays a key role in advancing the transition to a low-carbon economy through its investments in clean energy.
NextEra Energy (NYSE:NEE) operates two main businesses: Florida Power & Light (FPL), an electric utility, and NextEra Energy Resources (NEER), one of the world’s largest clean energy producers and a leader in battery storage. NEER focuses on developing, constructing, and operating long-term clean energy assets, primarily in the U.S. and Canada.
The company has over two decades of experience in developing and operating clean energy projects, NextEra Energy (NYSE:NEE) holds a strong competitive advantage. In 2022, the company held 56% of the wind energy market and 38% of the overall renewable market from 2019 to 2022. NextEra Energy Resources (NEER) operates a clean energy portfolio totaling around 34 GW, consisting of 24 GW from wind energy, 7 GW from solar energy, and 2 GW from nuclear energy. Additionally, NEER has 1 GW of battery storage capacity spread across 16 U.S. states.
Approximately 93% of NEER’s revenue is generated from long-term Power Purchase Agreements with data centers and tech companies which provide a stable and predictable cash flow. The company’s financial performance remains strong, with adjusted earnings growing by 10.8% in Q2 2024, driven by strategic investments and an expanding clean energy portfolio. Looking ahead, NEER expects its earnings per share (EPS) to grow by 6-8% annually through 2027 and plans to increase dividend payments by 10% per year. In their second quarter investor letter, ClearBridge stated the following regarding NextEra (NYSE:NEE):
“AI-related momentum was a key driver of performance in the second quarter, lifting the enablers in technology as well as holdings like renewable power producer NextEra, Inc. (NYSE:NEE) that supply the increasing energy needs of data centers. Parts of the market lacking an AI connection, like our medical device holdings, underperformed despite no change to fundamentals. We have managed through several similar momentum periods over our tenure and have delivered long-term results for shareholders by staying true to an approach that emphasizes diversification across three buckets of growth companies (select, stable and cyclical) and seeks to take advantage of attractive entry points into quality growth businesses.”
NextEra’s (NYSE:NEE) is valued at $166.83 billion as of September 4. The stock is held by 73 hedge funds with stakes worth $2.10 billion as of the second quarter. GQG Partners is the largest shareholder in the company and has stocks worth $884.56 million as of June 30.
Overall NEE ranks 2nd on our list of the best clean energy stocks to buy. While we acknowledge the potential of NEE 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 NEE 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.
