Can Investors Clean Up With Clean Energy?

Can Investors Clean Up With Clean Energy?

May 31, 2022

This week’s reader question: With gas prices high and oil supply chains disrupted, is now a good time to buy clean energy stocks?  

Adam Johnson, portfolio manager, Adviser Investments’ American Ingenuity strategy:

I’m a big believer in clean energy companies. Whether you call it “renewable,” “green” or “alternative” energy, we know some of these growing businesses will be the big brand names of tomorrow.

But right now, their stock prices are depressed for a litany of reasons.

Supply chain disruptions have been one major speed bump. Solar panel production is being impeded by the U.S. ban on imports of polysilicon from China due to human rights violations. Likewise, we’re seeing shortages of semiconductors and other key materials.

Interest rates are another headwind. Many clean energy firms are young companies that need to raise capital, and as rates go up, their financing costs escalate. On top of that, many don’t have earnings yet. When I try to place a value on future earnings, higher interest rates translate into lower values today.

Portfolio Manager Adam Johnson and quote saying "I believe long-term trends are providing a power tailwind for clean energy and the companies that provide it."

Overall, clean energy stocks fall into the “growth” category, which is decidedly out of favor with investors right now. But that’ll change. Despite the recent big price declines—or rather, because of the lower prices on offer today—now may be a pretty good time to be selectively buying in the aggressive growth portion of your portfolio.

But don’t buy willy-nilly. I think it’s crucial to hold out for quality companies that are on track to be the “best in breed.” To me, that means they have manageable amounts of debt and are growing their top-line revenue. Another critical factor is a quality management team that can clearly articulate a pathway to future profits.

Remember, we’re not talking about cryptocurrency; these companies are providing actual goods and services. I believe long-term trends are providing a power tailwind for clean energy and the companies that provide it.

Ask Us a Question!

We’re always interested in the topics or concerns you might like us to comment on. Ask us a question about investing, the markets or financial planning and one of Adviser Investments’ experts will answer it in a future edition of The Week in Review. CLICK HERE NOW TO POSE YOUR QUERY.

About Adviser Investments

Adviser is a full-service wealth management firm, offering investment managementfinancial and tax planningmanaged individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.

 


For informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities.  All investments carry risk of loss and there is no guarantee that investment objectives will be achieved. Past performance is not an indication of future returns.  Always consult a financial professional before taking specific action. Tax, legal and insurance information contained herein is general in nature, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

© 2022 Adviser Investments, LLC. All Rights Reserved.

Adviser Investments' logo is a registered trademark of Adviser Investments, LLC.