Renewable energy stocks suffered in 2023 amid rising interest rates and lack of incentives for the residential solar companies. The solar energy sector has a high exposure to interest rates. As the Federal Reserve began raising interest rates, solar companies began to waver. Restructuring, layoffs, cost reduction plans and bankruptcies marred the renewable energy space in 2023. But analysts believe the industry can see a turnaround in 2024.
Earlier this month RBC said in a report that the solar energy industry is "near an inflection point." RBC said the industry will see a "positive rate of change." While RBC's analyst Christopher Dendrinos said headwinds for the industry are expected to remain in the short-term, long-term growth catalysts for solar stocks include support from public policy, an expected decline in costs and rate cuts.
The broader solar industry recently saw an uptick after Enphase Energy Inc (NASDAQ:ENPH) management during its fourth quarter earnings call said the company is expecting a turnaround to begin in the second quarter. Enphase Energy Inc (NASDAQ:ENPH) CEO Badri Kothandaraman said the first quarter of 2024 could be the "bottom" quarter as demand in Europe is showing signs of recovery. Enphase Energy Inc (NASDAQ:ENPH) also expects "non-California" states to rebound "quickly."
As the world focused its attention on inflation, rate hikes and possibility of recession, solar and wind stocks remained on the backburner over the past several months. But that does not mean the renewable energy sector has lost its growth catalysts that made it one of the hottest investment areas in the world in the first place. A BloombergNEF report on renewable energy investments said that annual global investments in energy transition technologies jumped to $1.77 trillion in 2023. This was a new all-time high and showed a 17% growth on a year-over-year basis.
The Bloomberg report also said investments in renewable energy projects like wind, solar, biofuels jumped 8% in 2023 to $623 billion.
Wind turbines against a backdrop of the sky, signifying the power of renewable energy.
For this article we scoured different solar and wind energy ETFs and picked 12 stocks with the highest number of hedge fund investors. These are the best solar and wind stocks to buy according to hedge funds tracked by Insider Monkey as of the end of 2023. Some top names in the list include Tesla, Inc. (NASDAQ:TSLA), NextEra Energy Inc (NYSE:NEE) and General Electric Co (NYSE:GE). Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Number of Hedge Fund Investors: 17
Brookfield Renewable Partners L.P. (NYSE:BEP) is one of the world's largest investors in the renewable energy space with projects in hydro, wind, solar, distributed energy and sustainable solutions. Earlier this month Brookfield Renewable Partners L.P. (NYSE:BEP) posted fourth quarter results. FFO in the period came in at $0.38, beating estimates by $0.01. Revenue in the quarter jumped 10.9% year over year to $1.32 billion, beating estimates by $130 million.
ClearBridge Sustainability Leaders Strategy made the following comment about Brookfield Renewable Partners L.P. (NYSE:BEP) in its Q3 2023 investor letter:
“Utilities NextEra Energy Partners, LP and Brookfield Renewable Partners L.P. (NYSE:BEP) have struggled of late due to macro conditions and a general cooling of sentiment and outflows from the clean energy sector as a whole. We continue to own Brookfield, which we view as one of the highest-quality pure-play decarbonization investments, characterized by a 5% dividend yield, stable fundamentals (over 90% of its cash flows are contracted with an average term of 14 years), a best-in-class balance sheet and adequate access to capital.”
Number of Hedge Fund Investors: 22
New Jersey-based Clearway Energy Inc Class C (NYSE:CWEN) is one of the best wind and solar stocks to buy according to hedge funds. The company has over 5,500 net MW of installed wind and solar generation projects.
Earlier this month Clearway Energy Inc Class C (NYSE:CWEN) increased its dividend by 1.7%.
Like Clearway, hedge funds also like Tesla, Inc. (NASDAQ:TSLA), NextEra Energy Inc (NYSE:NEE) and General Electric Co (NYSE:GE).
Number of Hedge Fund Investors: 26
Virginia -based energy company Dominion Energy Inc (NYSE:D) is working on several major solar and wind energy projects. The company's 2.6-gigawatt offshore wind energy project Coastal Virginia Offshore Wind (CVOW) is ready to begin offshore construction in 2024.
However, on February 22, Dominion Energy Inc (NYSE:D) said it agreed to sell 50% non-controlling interest in the Coastal Virginia Offshore Wind commercial project to global infrastructure investor Stonepeak. Dominion Energy Inc (NYSE:D) will retain full operational control of the construction and operations of CVOW.
As of the end of the fourth quarter of 2023, 26 hedge funds tracked by Insider Monkey had stakes in Dominion Energy Inc (NYSE:D).
Number of Hedge Fund Investors: 32
Solar technology company Solaredge Technologies Inc (NASDAQ:SEDG) ranks ninth in our list of the best wind power and solar stocks to buy now.
As of the end of the fourth quarter of 2023, 32 hedge funds out of the 933 funds tracked by Insider Monkey had stakes in Solaredge Technologies Inc (NASDAQ:SEDG). The biggest stake in Solaredge Technologies Inc (NASDAQ:SEDG) is owned by John Overdeck and David Siegel's Two Sigma Advisors which owns an $103.4 million stake in Solaredge Technologies Inc (NASDAQ:SEDG).
ClearBridge Select Strategy made the following comment about SolarEdge Technologies, Inc. (NASDAQ:SEDG) in its Q3 2023 investor letter:
“Solar energy technology companies SolarEdge Technologies, Inc. (NASDAQ:SEDG) and Shoals, meanwhile, saw headwinds from destocking in the U.S. and Europe. U.S. demand could slow further due to new net metering rules that reduce the value to consumers from sending excess residential solar energy back to the grid. SolarEdge, which makes inverters for solar systems as well as residential and commercial battery systems, is also facing rising battery competition in the U.S. from Tesla.”
Number of Hedge Fund Investors: 33
Nextracker Inc (NASDAQ:NXT) provides integrated solar tracker and software solutions used in utility-scale and ground-mounted solar projects.
Insider Monkey's database of 933 hedge funds updated for the fourth quarter of 2023 shows that 33 hedge funds had stakes in Nextracker Inc (NASDAQ:NXT).
Last month Nextracker Inc (NASDAQ:NXT) posted solid Q4 results and upped its guidance. Adjusted EPS in the period came in at $0.96, beating estimates by $0.47. Revenue in the quarter jumped 38.4% year over year to $710.43 million, beating estimates by $92.94 million.
Number of Hedge Fund Investors: 35
Sunrun Inc (NASDAQ:RUN) ranks seventh in our list of the best wind power and solar stocks to buy now. A total of 35 hedge funds in Insider Monkey's database of 933 hedge funds had stakes in Sunrun Inc (NASDAQ:RUN) as of the end of 2023.
Last month, Goldman Sachs published a list of stocks it believes could gain based on the relationship between weak pricing power and EBIT margins. Goldman said stocks with weak pricing power typically outperform as EBIT margins improve. Sunrun Inc (NASDAQ:RUN) made it to the list.
William B. Gray's Orbis Investment Management had a $279 million stake in Sunrun Inc (NASDAQ:RUN) as of the end of 2023.
Number of Hedge Fund Investors: 43
Enphase Energy Inc (NASDAQ:ENPH) is in the spotlight after Enphase Energy Inc's (NASDAQ:ENPH) CEO Badri Kothandaraman said the company could begin to see a turnaround in business in the second quarter of 2024. Net income of Enphase Energy Inc (NASDAQ:ENPH) fell to $21 million in the fourth quarter of 2024 from $154 million in the same quarter last year. Here are the comments of the CEO that are causing a renewed hope in the solar sector and lifting many solar stocks:
"We think Q1 could be the bottom quarter. Europe is already showing early signs of recovery, and we expect the non-California states to bounce back quickly.
Read the entire Q4 earnings call transcript here.
In addition to Tesla, Inc. (NASDAQ:TSLA), NextEra Energy Inc (NYSE:NEE) and General Electric Co (NYSE:GE), Enphase is a top renewable energy stock according to hedge funds.
ClearBridge Sustainability Leaders Strategy made the following comment about Enphase Energy, Inc. (NASDAQ:ENPH) in its Q3 2023 investor letter:
“Against this backdrop the Strategy underperformed, with the majority of detractors renewable- or utility-related companies suffering largely from cyclical interest rate pressures that have pushed up financing costs for the companies and weighed on income-producing sectors such as utilities. Most acutely, higher interest rates have dampened near-term U.S. residential solar demand, hurting Enphase Energy, Inc. (NASDAQ:ENPH) in particular. As a result, we sold Enphase, and invested proceeds into SolarEdge Technologies, which has greater exposure to European and utility-scale end markets, which are under comparatively less pressure.”
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Disclosure: None. 12 Best Wind Power and Solar Stocks To Buy is originally published on Insider Monkey.
