The coronavirus's global spread has roiled energy markets, with the sector facing its worst existential crisis in history. Record low oil and gas demand, plunging profits, and massive asset writedowns have forced even diehard fossil fuel apologists and industry chiefs to concede that, indeed, the industry might never return to its pre-crisis levels.
While the global energy industry remains in deep crisis, renewable energy has been having its moment in the sun.
The renewable sector has mostly shrugged off coronavirus's devastating effects, maintaining growth and a healthy cadence of new deals and breaking records.
As Simon Eaves, asset manager at Capital Dynamics, has observed, Covid-19 has done little to slow down the sector and could, in fact, promote the green economic recovery.
It therefore comes as little surprise that the best performing and most resilient stocks in the energy sector are those by clean energy companies.
Many ETFs that track the sector are up in double-digits in the year-to-date at a time when the oil and gas favorite benchmark, the Energy Select Sector SPDR Fund (XLE), has lost nearly 40% of its value.
XLE Vs. ICLN 12-Month Change
Source: CNN Money
Best Performing Clean Energy ETFs
Clean energy ETFs (exchange-traded funds) invest primarily in stocks of companies involved in alternative energy sources such as wind, solar, wind, hydro, and geothermal.
Although many ETFs in this space share similar objectives, they can differ substantially in their holdings. In general, it's safer to invest in clean energy ETFs with higher assets under management (AUM), though some niche ETFs such as the relatively new SPDR Kensho Clean Power ETF (CNRG) can be a good way to gain exposure to maturing industries such as hydrogen fuel cells.
Here are the best performing clean energy ETFs so far this year:
#1. First Trust NASDAQ Clean Edge Green Energy Index Fund
Expense Ratio: 0.6%
YTD Returns: 32.03%
The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) seeks to replicate the performance of the NASDAQ Clean Edge U.S. Liquid Series Index, a modified market-cap-weighted index designed to track the performance of clean energy companies that are publicly traded in the U..S.
QCLN's top holdings include:
- Tesla Inc.--11.02%
- NIO Inc.--7.29%
- Brookfield Renewable Partners--5.78%
- Albemarle Corp.--5.48%
- SolarEdge Technologies--4.81%
#2. Invesco WilderHill Clean Energy ETF
Expense Ratio: 0.7%
YTD Returns: 29.75%
Invesco WilderHill Clean Energy ETF (PBW) is an exchange-traded fund designed to track US-listed stocks in the Clean Energy sector: specifically, companies that stand to benefit from the transition towards the use of cleaner energy, zero-CO2 renewables. PBW is rebalanced quarterly.
Top 5 holdings include:
- Workhorse Group Inc.--4.37%
- NIO Inc.--4.25%
- Ballard Power Systems Inc.--3.29%
- Tesla Inc.--3.19%
- Vivint Solar Inc.--3.15%
#3. Invesco Solar ETF
Expense Ratio: 0.7%
YTD Returns: 28.9%
Invesco Solar ETF (TAN) is an exchange-traded fund that's solely dedicated to companies in the solar sector. The ETF tracks the MAC Global Solar Energy Index, which itself tracks companies involved in a wide range of solar technologies, the provision of raw materials, manufacturing, installers, solar plant operations, and more.
TAN's top 5 holdings include:
- SolarEdge Technologies--7.83
- Xinyi Solar Holdings Ltd--6.68%
- First Solar--6.64%
- Enphase Energy Inc.--6.59%
- Sunrun Inc.--6.33%
Best Performing Clean Energy Stocks
#1. Enphase Energy Inc.
YTD Returns: 93.8%
Enphase Energy Inc. (NASDAQ: ENPH) is a Fremont, California-based company that designs and manufactures software-driven home energy solutions used in solar generation, home energy storage, and web-based monitoring and control.
ENPH has been sizzling hot thanks to the company's robust top- and bottom-line growth. The company posted Q1 revenue of $205.5M, good for 105.1% Y/Y growth with Q1 shipments totaling 643 MW DC, or slightly more than 2M microinverters. GAAP EPS of $0.50 represented 375% Y/Y growth; operating income of $44.71 million was good for a 527.1% year-over-year increase while net income of $68.94 million represented a 2,388.8% jump. Related: Will Working From Home Increase Emissions?
Although ENPH has enjoyed a big runup, Needham still rates it a buy due to the upcoming launches of several new products during the second half of the year.
#2. Daqo New Energy Corp.
YTD Returns: 73.4%
12-Month Returns: 104%
Daqo New Energy Corp. (NASDAQ: DQ) is a Chinese company that manufactures monocrystalline silicon and polysilicon solar PV systems. Like Enphase, Daqo has been posting strong results with revenue expanding $168.8M (+107.9% Y/Y) during the first quarter while GAAP EPS of $2.28 exceeded the Wall Street consensus by $0.67.
The company reported that it produced 19,777 metric tons (MT) of polysilicon during the quarter, up 22% Y/Y, and marking its highest quarterly amount while its production cost of $5.86 per kg marked an 8% sequential decrease. While those results were impressive, what stood out was the fact that Daqo has struck strategic contracts with big customers that have helped the company maintain its full-year sales guidance of 73K-75K mt despite the impact of Covid-19.
#3. SolarEdge Technologies Inc.
YTD Returns: 54.2%
12-Month Returns: 132.1%
SolarEdge Technologies Inc. (NASDAQ: SEDG) is an Israel-based provider of power optimizers, solar inverters and monitoring systems for solar PV systems. The company has demonstrated strong revenue momentum, managing to grow the topline for six consecutive quarters.
SolarEdge posted mixed Q1 results, with revenue of $431.2M (+58.6% Y/Y) beating expectations by $9.04M but GAAP EPS of $0.81 missing by $0.24. Meanwhile, Q1 GAAP net profit more than doubled to $42.2M from $18M in the prior year. Further, SEDG issued a revenue warning, saying that the adverse impacts of Covid-19 could wipe out as much as $126M from Q2 revenues to $305M-$335M.
SEDG has received two notable downgrades, one from Canaccord analysts who downgraded the shares to Hold from Buy with a $128 price target while Goldman Sachs has cut its rating to Sell with a $126 price target saying the company's U.S. residential market share has peaked (current share price of $149.25).
#4. Boralex Inc.
YTD Returns: 27.5%
12-Month Returns: 60.8%
Wind-power stocks have generally underperformed solar stocks, as evidenced by the lower YTD return of 1.5% by First Trust Global Wind Energy ETF (FAN) compared to 28.9% by Invesco Solar ETF (TAN).
Boralex Inc. (OTCPK:BRLXF) is a Canadian electricity producer whose core business is the development and operation of wind, hydroelectric, thermal, and solar-based power stations. The stock is not available on the main exchanges but can be traded over the counter (OTC).
The company reported relatively modest results, with Q1 revenue of C$232M good for +8.4% Y/Y growth with total wind power production growing 9%. The earnings call's key highlights were the company's 38% Y/Y growth in wind power production in France, the signing of its first corporate power purchase agreement, and the commissioning of its first energy storage unit.
#5. Northland Power Inc.
YTD Returns: 21.4%
12-Month Returns: 28.2%
Northland Power Inc. (OTCPK: NPIFF) is another Canadian clean power producer that develops, builds, owns, and operates power infrastructure assets in Canada and Europe. Northland generates electricity using wind, biomass, natural gas, and solar technology. Just like BRLXF, NPIFF is another OTC stock that's not available on the leading American exchanges.
Northland reported revenue of C$668M (+33.9% Y/Y) for the March quarter, GAAP EPS of C$1.02, while net income increased 35% to C$27million. The company reiterated its 2020 full-year guidance with adjusted EBITDA expected to clock in in the range of $1.1 billion to $1.2 billion and free cash flow per share in the range of $1.70 to $2.05.
By Alex Kimani for Oilprice.com
More Top Reads From Oilprice.com:
- China’s June Crude Oil Imports Hit Record High
- Big Oil Should Focus On The World’s Cleanest Energy Source
- Colombia’s Gamble On Oil Could End In Disaster