Archive for the ‘Articles’ Category

Select Alternative Energy Portfolio Reaches New Highs

by Harris Roen, Editor
Roen Financial Report
July 8, 2014
 
The Roen Financial Report Paradigm Portfolio has reached record highs as investors on Wall Street are looking more seriously at the alternative energy sector again. This select portfolio is up 50% since inception after accounting for additions, removals, and rebalancing*. No new stocks are being added to the portfolio this month, but one utility infrastructure company is being removed.

Paradigm Portfolio Returns*

Returns

The Paradigm Portfolio had a sharp increase this month, achieving a total return of 50.0% since its inception on January 1, 2013. This is more than 5% higher than it was a month ago.

The portfolio remains significantly ahead of the S&P 500 and NASDAQ indices, as shown in the chart at right. On an annualized basis, the Paradigm Portfolio is up 31% since inception, compared to an annualized gain of 24% for the S&P 500 and 28% for the NASDAQ over the same time period.

Paradigm Portfolio Returns*The rise in alternative energy stocks has remained broad, with winners beating losers by 12:1. Of the 36 companies that are up, 30 posted returns double digits or better, and three are up by triple digits.

SolarCity (SCTY) has enjoyed the best returns, up a stunning 261% after rebalancing. The three stocks that are down dropped an average of -9.2%.

 
 

Portfolio Update

Because of the increased interest in the alternative energy sector, it is hard to find high-quality stocks that looks undervalued enough to add to the portfolio at this point in time. In fact, several of the companies in the portfolio are currently under scrutiny for becoming overvalued, and are being monitored to ensure their values do not become too excessive.

One company is being removed from the portfolio, MasTec, Inc. (MTZ). This mid-sized utility infrastructure company gets a lowered rating because it has not passed enough of our rigorous financial screens, and is considered overvalued at current price levels. We will continue to watch this company to determine if it should be added back into the portfolio at a future date.

 

 

 


*Hypothetical gain from portfolio recommendations. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on this list. For an explanation of how hypothetical returns are calculated, please see the Returns section under How Investments are Picked in the Roen Financial Report User Guide.

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Bull Market in Alternative Energy Mutual Funds and ETFs

by Harris Roen, Editor
Roen Financial Report
July 1, 2014
 


The Roen Financial Report closely covers the universe of 31 alternative energy Mutual Funds (MFs) and Exchange Traded Funds (ETFs). We use a proprietary ranking method to pick the best funds, looking at measures that include fees, risk, tax liability, and the financial health of individual holdings within each fund. Subscribers: click here for a detailed report on green funds, including rankings and technical breakdowns, in both Excel and PDF format.


 

Robust Alternative Energy Mutual Fund Returns

Alternative Energy Mutual Fund Returns

Alternative energy mutual funds remain a strong investment sector, showing extremely robust returns in June. On average, MFs gained 28.1% for the year, and every fund posted double digit returns. Also without exception, all funds are up for the past three months.

More importantly, long-term returns for alternative energy mutual funds have greatly improved in the past year. In June 2013, the average three-year return was 3.0%, with three out of 10 funds showing losses…  [Read More]
 
 

Green ETFs Increase Gains

Alternative Energy ETF ReturnsGreen ETFs have significantly increased their gains since May, up 37.6% on average for the year. This is substantial improvement compared to the 25.7% average annual gain a month ago.

There is only one fund showing a loss for the year, Market Vectors Rare Earth/Strategic Metals (REMX). Otherwise all ETs have returned near 20% or better for the year. The two solar ETFs, Guggenheim Solar (TAN) and Market Vectors Solar Energy ETF (KWT) show the greatest gains by far…  [Read More]

 
 


IMPORTANT INFORMATION

Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.


Remember to always consult with your investment professional before making important financial decisions.

 
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Carbon Winners and Losers – There’s a New Rule in Town

by Harris Roen, Editor
Roen Financial Report
June 16, 2014

Greenhouse Gas Emissions by Economic Sector in 2012.

Greenhouse Gas Emissions by Economic Sector

 
 
A seismic shift in the power generation landscape is starting to sink in. It has been two weeks since the EPA announced its new proposed carbon rules, one of the flagship efforts of the Obama Administration to address climate change. This shift is meant to move the country in the direction of inevitable changes coming to the energy economy. It is important for investors to know which companies and sectors stand to benefit from the new rule.
 
 

What the rule says

The basics of the proposed rule are this: States need to come up with ways to reduce power plant emissions. The goal is to allow flexibility to States so that they can implement innovative strategies to reduce the “pollution-to-power ratio” of fossil-fuel fired power plants. The EPA believes that by doing so, U.S. power plants should emit 30% less carbon in 2030 than they did in 2005.

The EPA is framing the effort with four “building blocks” in order to reach carbon reduction goals. These are:

1.     Improved operations at power plants.
This means building more efficient plants, or retrofitting existing ones.
2.     Substituting high carbon generating plants with lower carbon generation.
In effect, replace coal-fired plants with natural gas.
3.     Substituting fossil fuel plants with low and zero carbon generation.
A call to enhanced deployment of renewables.
4.     Increase demand side efficiency.
Lower the energy use of homeowners, businesses, etc.

 
All four of these building blocks have strong implications for alternative energy investors. They are listed below in order of relevance to the companies we track here at the Roen Financial Report.
 

Substituting fossil fuel plants with low and zero carbon generation

This building block is at the heart of the mission of the Roen Financial Report, moving beyond fossil fuels and into the realm of renewables. These two very different companies are among my top picks to benefit in this category.

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Source: SolarCity Q1 2014 Earnings Conference Call


SolarCity Corp (SCTY) is an innovative, full service solar installation company that has had more digital ink spilled about it than most any other alternative energy company (including my own analysis). SolarCity takes the residential and commercial customers through design, installation and financing of solar systems. In addition to solar installs, SolarCity does home energy evaluation, energy efficiency upgrades, electric vehicle charging and energy storage. Growth has been outstanding for this company, and though it is a speculative investment, I have no doubt it will become profitable in the new two to three years.

Trina Solar Limited (ADR) (TSL) is a China-based integrated photovoltaic module manufacturer. It has a large production capacity and a global distribution network covering Europe, North America and Asia. Its sales have picked up since 2012, and Trina has posted positive earnings in its three most recent quarters. Trina Solar recently closed on $150 million of convertible senior notes and over $90 million of American Depositary shares. I see the fact that the company is looking to western capital and away from Chinese government loans as a positive sign.
 

Increase demand side efficiency

Efficiency is one of our favorite investment themes. This is low hanging fruit – it benefits end homes and businesses by saving money, it benefits utilities by reducing the need to build more capacity, and it benefits the environment. The three companies below are well positioned leaders in this category

EnerNOC, Inc (ENOC) helps commercial and industrial users reduce electricity use during peak demand, which can significantly reduce a company’s energy consumption. EnerNOC’s services include demand response, energy efficiency, energy procurement, emissions tracking and trading support. This Boston-based company recently won an auction for over $185 million in capacity payment in the PJM Interconnection capacity market for 2017/2018, which should bode well for its bottom line. ENOC is up 41% for the year, and over 220% from its lows in 2012.

Tetra Tech, Inc (TTEK) is a diversified company that provides environmental services, energy efficiency consulting, carbon management and other services. This large California-based company works on projects world-wide and brings in almost $2 billion in revenues annually. TTEK has been a component of the Paradigm Portfolio since its inception. We consider Tetra Tech to be trading below fair value at current levels in the mid-$20 range.

Ameresco Inc (AMRC) is a small Massachusetts-based company that provides a variety of measures to improve the efficiency of major building systems. These include heating, ventilation, air conditioning and lighting. Ameresco also installs small-scale renewable energy plants. AMRC had a solid vote of confidence by management, as CEO George P. Sakellaris recently purchased 85,000 shares in a month worth over half a million dollars. This positive insider trading activity brings his direct ownership to over $18 million.
 

Substituting high carbon generating plants with lower carbon generation

The case is now clearer than ever that coal will be phased out in favor of natural gas. Though substituting one fossil fuel for another may not be the ultimate solution to solving our climate problems, it is undoubtedly a critical short-term step to addressing base-load needs while reducing carbon emissions. Three companies have been selected which stand to benefit from this trend.

NextEra Energy, Inc (NEE) is a large, profitable Florida-based power company that generates more than half its power from natural gas. NextEra is in the process of completing a major development cycle where it is modernizing older, less-efficient fossil generation facilities and building more efficient, cleaner natural gas-fueled plants. For example, its Port Everglades plant was demolished in 2013 to be replaced with plant that should have half the emissions. Also, NextEra is developing a new natural gas pipeline to Florida targeted for completion in 2017. In addition, NEE generates 8,000 megawatts of electricity from renewable resources.

As a utility NextEra offers steady stock price growth with an attractive yield. With over 4.5 million customer accounts, NextEra Energy is well over the industry average in assets and earnings growth. We consider NEE to be above fair value at current levels, but it remains a good long-term investment.

Sempra Energy (SRE) Sempra Energy is a holding company that owns two southern California utilities, as well as energy assets in other parts of the United States, Mexico, and South America. This San Diego based company has over 17,000 employees and provides products and services to more than 31 million consumers worldwide. Sempra has a strong portfolio of natural gas pipelines, storage and generation facilities. As with NextEra, Sempra also has an array of solar and wind facilities that it manages. Sempra has had steady sales and strong earnings, but has a relatively high PE. It is deemed to be just above fair value, so is a good buy in the $85-$90 price range.

GreenHunter Energy, Inc (GRH) provides water management solutions for shale gas focusing on serving companies in the Marcellus, Eagle Ford and Bakken shale plays. Its services are essential to address environmental issues concerning hydraulic fracturing, or fracking, utilized in shale gas production. Though this microcap penny stock had a sketchy beginning, it has enjoyed a recent jump in its stock price due to increasing revenues leading to decreasing losses. Its earnings are still negative, though, so we consider this micro-cap to be a speculative investment.
 

Improved operations at power plants

Though many people may not consider it a renewable energy company, General Electric (GE) is a key player in many aspects of the energy industry. As a leader in power plant design and turbine development, GE will surely benefit from planned power plant retrofits and reconfigurations.

Sales and earnings for GE have been flat since the beginning of the decade, but it has had climbing dividends every year since 2010. Though we see GE as overvalued at current levels, this company can be a stable large-cap component of a balance portfolio. We estimate fair value to be in the low 20’s, so accumulate on the dips.
 

Summary

The Obama administration made a bold move to address climate change by issuing these carbon rules through the EPA. While the proposed regulations are still in a draft phase, there is no doubt that the changes already occurring in the utility business will continue. Savvy investors well positioned in the proper companies and industries will be sure to benefit from this continued energy transformation.




DISCLOSURE

Individuals involved with the Roen Financial Report and Swiftwood Press LLC owned or controlled shares of NEE, TSL. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.


Remember to always consult with your investment professional before making important financial decisions.

 
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New Company Added to Select Alternative Energy Portfolio

by Harris Roen, Editor
Roen Financial Report
June 5, 2014
 

PP_comp_20140602The Roen Financial Report Paradigm Portfolio is a select group of alternative energy stocks. These companies are considered best positioned to benefit from the economic paradigm toward cleaner energy alternatives shift and away from foreign oil and polluting coal.

The portfolio has maintained excellent returns, up 44% since inception after accounting for additions, removals, and rebalancing*. One profitable recycling company has been added to the portfolio, and manufacturer in efficiency products is being removed.

Returns

PP_20140602The Paradigm Portfolio remains ahead of the S&P 500 and NASDAQ indices, as shown in the chart above. The portfolio is up 44.2% since its inception on January 1, 2013. This compares to a gain of 35.0% in the S&P 500 and 37.1% in the NASDAQ over the same time period.

The rise in alternative energy stocks has been broad, with 33 out of 38 companies showing gains. SolarCity (SCTY) enjoys the best returns, up a stunning 208% after rebalancing. Even the five stocks that are down have only dropped an average of 4.2%.

Portfolio Update

LKQ Corp (LKQ), the newest addition to the Paradigm Portfolio, is a Chicago-based auto parts dealer that has a large recycling business. For example, LKQ has a tire recycling program that processes over 4,000,000 tires each year. This profitable Chicago-based company has more than 23,000 employees and over $5 billion in annual sales. Its revenues and earnings per share have grown every year since 2007, and the company has a very healthy cash flow. Even though the stock is considered above fair value, we see much upside potential from here for the long-term investor.

Veeco Instruments Inc. (VECO), which sells equipment used in the production of light emitting diodes (LEDs), solar panels and other devices, is being removed from the portfolio. The stock shows poor fundamentals so has not fared well in our stock screening process. The Roen Financial Report sees the stock as overvalued at current levels, trading above its fair price channel. We feel it is best to lock in any gains made on this stock when it is above the 30.42 purchase price. CREE Inc. (CREE) remains in the Paradigm Portfolio as a better investment opportunity in the LED lighting industry.

 

 

 


*Hypothetical gain from portfolio recommendations. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on this list. For an explanation of how hypothetical returns are calculated, please see the Returns section under How Investments are Picked in the Roen Financial Report User Guide.

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Alternative Energy Mutual Funds and ETFs See Flattening Returns

by Harris Roen, Editor
Roen Financial Report
May 30, 2014
 


The Roen Financial Report closely covers the universe of 30 alternative energy Mutual Funds (MFs) and Exchange Traded Funds (ETFs). We use a proprietary ranking method to pick the best funds, looking at measures that include fees, risk, tax liability, and the financial health of individual holdings within each fund. Subscribers: click here for a detailed report on green funds, including rankings and technical breakdowns, in both Excel and PDF format.


 

Alternative Energy Mutual Fund Returns

20140529_MFAlternative energy mutual funds have given back some of the gains they have enjoyed since the beginning of the year, though they are still up almost 20% on average. All MFs are in positive territory, with annual returns ranging from 9.8% to 40.9%. MFs are also up nicely for the week and month, but on average are down slightly in the past three months.

These returns are very different than those of just five months ago, when alternative energy MFs were doing almost twice as well…  (subscribers click here for more)
 

Alternative Energy ETF Returns

20140529_ETFAlternative energy Exchange Traded Funds are up 25.7% for the year on average, with all except one posting gains. Solar ETF Guggenheim Solar (TAN) has the greatest gains, up 63.1% in 12 months. Market Vectors Rare Earth/Strategic Metals (REMX) is still down for the year, off 20.1%.

Quarterly returns are much more mixed, with only 5 out of 17 ETFs up in the past three months. The largest three month loser is iPath Global Carbon ETN (GRN), down 27.9%….  (subscribers click here for more)

 
 


IMPORTANT INFORMATION

Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.


Remember to always consult with your investment professional before making important financial decisions.

 
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