SunEdison’s Bankruptcy Does Not Scare Hedge Funds Away From Solar

SunEdison, once the fastest-growing U.S. renewable energy company, filed for bankruptcy protection in April after its multi-billion-dollar acquisition spree resulted in unmanageable debt levels. The clean-power giant recorded $16.1 billion of debt in its bankruptcy filing, which makes it the biggest bankruptcy in the past year or so. Meanwhile, SunEdison’s two-publicly-traded subsidiaries, which were formed to buy the parent company’s clean-energy power plants, were not part of the bankruptcy. Nonetheless, solar project developers continue to enjoy robust demand despite investor concerns over a possible decline in demand due to weaker crude oil prices. However, other solar project developers in the industry do not seem doomed to the same fate as SunEdison, so the hedge fund industry has not been eschewing itself from channeling more capital into solar companies’ securities. Having this in mind, the following article will lay out a list of five most popular solar stocks, which includes SunEdison’s publicly-traded satellites.

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At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5. SunPower Corporation (NASDAQ:SPWR)

– Investors with long positions as of March 31: 15

– Aggregate value of investors’ holdings as of March 31: $161.85 Million

The hedge fund sentiment towards SunPower Corporation (NASDAQ:SPWR) declined during the first quarter of 2016, as the number of funds included in our database with stakes in the company dropped to 15 from 22 quarter-over-quarter. Similarly, the aggregate value of those hedge funds’ stakes decreased to $161.85 million from $163.84 million. The global energy company has seen its market value decline by 41% since the beginning of the year, as the company posted a wider-than-expected first-quarter net loss and issued disappointing guidance for the second quarter. Gordon Johnson of Axiom Capital Research, who rates the installer of residential solar systems a ‘Sell’, recently asserted that SunPower’s installations in 2016 will be significantly below the company’s guidance of 1.6 gigawatts-to-1.9 gigawatts due to “poor bookings execution”. A possible sizable negative guidance revision may put significant weight on SunPower’s stock performance. Steven Cohen’s Point72 Asset Management owns nearly 2.00 million shares of SunPower Corporation (NASDAQ:SPWR) as of March 31.

#4. Canadian Solar Inc. (NASDAQ:CSIQ)

– Investors with long positions as of March 31: 17

– Aggregate value of investors’ holdings as of March 31: $92.15 Million

There were 17 hedge funds tracked by Insider Monkey with long positions in Canadian Solar Inc. (NASDAQ:CSIQ) at the end of the March quarter, as compared with 16 recorded at the end of the final quarter of 2015. Even so, the overall value of those long positions shrunk to $92.15 million from a much higher figure of $147.01 million quarter-over-quarter. The 17 asset managers invested in the Ontario-based solar power company amassed almost 9% of the company’s outstanding common shares. The top-line figures posted by Canadian Solar have been on an increase in recent years. The Canadian company recorded total net revenues of $3.47 billion in 2015, up from $2.96 billion in 2014 and $1.65 billion in 2013. The top-line growth in 2015 was driven by higher shipments from the module segment, partly offset by lower selling prices of its solar modules and a decrease in revenue contribution from sales of solar power projects. Shares of Canadian Solar are down 32% so far in 2016. Kenneth Tropin’s Graham Capital Management was the owner of 8.00 million shares of Canadian Solar Inc. (NASDAQ:CSIQ) at the end of March.

#3. TerraForm Global Inc. (NASDAQ:GLBL)

– Investors with long positions as of March 31: 23

– Aggregate value of investors’ holdings as of March 31: $81.56 Million

TerraForm Global Inc. (NASDAQ:GLBL) received some love from the hedge funds monitored by Insider Monkey despite the mounting problems at its parent company that led to bankruptcy in April. The number of smart money investors from our system with stakes in SunEdison’s satellite rose to 23 from 21 during the January-to-March quarter, whereas the value of those stakes dropped to $81.56 million from $173.07 million quarter-over-quarter. A total of 19% of TerraForm’s outstanding shares were hoarded up by the 23 hedge funds tracked by our team. The so-called yieldco of SunEdison, an owner and operator of clean energy power plants, has yet to file its delayed 10-K with the SEC or it will be required to repay $810 million in defaulted loans. Partially due to SunEdison’s troubles and bankruptcy, TerraForm Global has not issued a quarterly financial report since the third quarter of 2015. As a result, the shares of the yieldco are down a massive 52% since the start of 2016, as investors are increasingly worried about the company’s operational performance and balance sheet. David Tepper’s Appaloosa Management LP acquired a new stake of 3.65 million shares of TerraForm Global Inc. (NASDAQ:GLBL) during the March quarter.

#2. TerraForm Power Inc. (NASDAQ:TERP)

– Investors with long positions as of March 31: 29

– Aggregate value of investors’ holdings as of March 31: $353.96 Million

TerraForm Power Inc. (NASDAQ:TERP), the other satellite of SunEdison, also received more attention from the hedge funds stalked by Insider Monkey during the first quarter of the year. The number of money managers with stakes in the yieldco climbed to 29 from 24 quarter-over-quarter, whereas the value of the stakes plummeted to $353.96 million from $608.80 million. The 29 “hedge fund” shareholders of TerraForm Power amassed roughly 29% of the company’s outstanding shares. As in the case of the other yieldco, TerraForm Power is late in submitting its 10-K annual report because of SunEdison, which means there is risk of technical default on its credit lines. The company has not yet filed its Form 10-Q for the March quarter because it had identified “material weaknesses in internal controls over financial reporting”, including the valuation of costs of the projects acquired from parent company SunEdison and other issues related to accounts payable and general and administrative expenses. TerraForm Power has seen its market capitalization sink 31% year-to-date. David Einhorn’s Greenlight Capital has 2.85 million shares of TerraForm Power Inc. (NASDAQ:TERP) in its portfolio as of March 31.

#1. First Solar Inc. (NASDAQ:FSLR)

– Investors with long positions as of March 31: 31

– Aggregate value of investors’ holdings as of March 31: $465.39 Million

A total of 31 hedge funds monitored by Insider Monkey were invested in First Solar Inc. (NASDAQ:FSLR) at the end of the March quarter, as compared to 30 registered at the end of the previous quarter. Meanwhile, the overall value of those hedge funds’ equity investments in the company dropped to $465.39 million from $471.19 million quarter-over-quarter. Although shares of First Solar are down 23% so far in 2016, the provider of comprehensive photovoltaic solar energy solutions is seen as one of the best solar stocks for the long term. The company’s net sales for the first three months of 2016 were $848.5 million, which increased 81% year-over-year. The increase in First Solar’s top-line figure was mainly attributable to additional interest and construction related to its Desert Stateline project, continued construction on its Silver State South and McCoy projects, as well as the start of construction on its Astoria project in late 2015. Cliff Asness’ AQR Capital Management owns nearly 1.40 million shares of First Solar Inc. (NASDAQ:FSLR) as of the end of the first quarter.

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