In this piece, we will take a look at the 13 most profitable renewable energy stocks. If you want to skip our primer on the renewable energy sector and the latest news, then take a look at 5 Most Profitable Renewable Energy Stocks.
With 2023 coming to a close, the renewable energy sector is back in the spotlight. The year has not been kind to the industry since a high interest rate environment coupled with a broader inflationary pinch has led to lower spending and capital raising opportunities for high growth industries. Looking at the S&P Global Clean Energy Index, the collection of stocks is currently trading at multi year low levels. Right now, it's at 979 points, a 25% drop over the past year and a 16% low when compared to the bottom in 2020. Compared to its levels in December 2018, an investment in stocks that aim to remove the world's dependence on fossil fuels has yielded a 12% return only. Over the past decade, had prudent investors not cashed out at the peak of the low interest rate era, i.e. 2021, then the clean energy index would have produced just 4% in returns through a share price appreciation.
Yet, even though one stock index might be down, others that also focus on the broader economy have nevertheless illustrated strong returns. A great example of this is the NASDAQ OMX Green Economy Index. A collection of a broader array of stocks belonging to several sectors such as engineered industrial products, utility, technology, and consumer discretionary, this index is up by 17.6%, 96.76%, and 20.76% over the past three years, five years, and year to date, respectively. Different companies play different roles in the industry and depend on each other for materials and orders.
As an example, consider the world's largest electric vehicle manufacturer, the Austin, Texas based car maker Tesla, Inc. (NASDAQ:TSLA). Tesla's Tesla vehicles run purely on electricity, in contrast to others that rely on both gasoline and electricity. As a result, the firm has to source lithium from companies in the mining industry. Therefore, both Tesla and mining companies such as Sigma Lithium Corporation (NASDAQ:SGML), Lithium Americas Corp. (NYSE:LAC ), and Albemarle Corporation (NYSE:ALB), and Livent Corporation (NYSE:LTHM) benefit when potential long term catalysts for the industry make the news.
One such catalyst has been the COP28 climate conference held in the United Arab Emirates. The COP often dominates coverage by traditional media since it is a gathering of representatives from countries and companies that have the potential to make the right decisions for the environment. This year's event was no different, with one crucial one involving nuclear reactors designed by Bill Gates's TerraPower. At COP28, the U.A.E. and TerraPower signed a memorandum to accelerate the development of next generation nuclear reactors. Just like generating power from sunlight or wind movements, nuclear energy is also carbon free. While it requires extensive capital investments and stringent regulatory scrutiny due to the extremely dangerous materials involved, the benefits of this effort mean that the air is clean and global temperatures do not increase from excess carbon dioxide emitted into the atmosphere.
Commitments that countries made at the COP28, such as to grow global renewable energy capacity 11 terawatts by 2030 - or triple from current levels, provide at the very least an acceptance that more needs to be done to reduce the world's dependency on fossil fuels. If they met then the global clean energy industry should see sizeable catalysts, a conclusion that perhaps investors piling into the S&P's clean energy index have also reached. Even though its longer term returns leave much more to be desired, month to date as of late December 2023, the index is up by a more respectable 8.38%. For comparison, the S&P 500 and the NASDAQ Composite are up by 3.84% and 5.1% respectively, a price appreciation that underscores the holiday gift to investors for also considering the environment when managing money.
Amidst this optimism about a return to normalcy for climate stocks that tend to thrive the best when interest rates are low, we took a look at the most profitable renewable energy stocks. Profitability in the industry also depends on the ability of different market players and the general consumer to finance pricey products such as cars or solar power generation systems. This is the easiest to do when rates are low and money is cheap, and some top stocks that have managed to nevertheless make money in a tight market are Chubu Electric Power Company, Incorporated (OTC:CHUEF), China Yangtze Power Co., Ltd. (SHA:600900.SS), and Brookfield Renewable Corporation (NYSE:BEPC).
13 Most Profitable Renewable Energy Stocks
A bird's-eye view of a large hydroelectric dam powering a nearby city.
Our Methodology
To make our list of the most profitable renewable energy stocks, we ranked the top 30 holdings of BMO Global Asset Management's BMO Clean Energy Index ETF by their latest trailing twelve month net income and selected the top 13 stocks. For these stocks we have also mentioned hedge fund sentiment. 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). That’s why we pay very close attention to this often-ignored indicator.
First Solar, Inc. (NASDAQ:FSLR) is an American company that sells products used in solar power generation systems. Unlike other renewable energy stocks, its shares are up 15.14% year to date. Over the past month, they have gained 5.49%, indicating a fresh bout of optimism for a lower interest rate environment.
During Q3 2023, 49 out of the 910 hedge funds part of Insider Monkey's database had held a stake in First Solar, Inc. (NASDAQ:FSLR). Robert Pohly's Samlyn Capital was the biggest shareholder as it owned $293 million worth of shares.
Along with China Yangtze Power Co., Ltd. (SHA:600900.SS), Chubu Electric Power Company, Incorporated (OTC:CHUEF), and Brookfield Renewable Corporation (NYSE:BEPC), First Solar, Inc. (NASDAQ:FSLR) is one of the most profitable renewable energy stocks.
Avangrid, Inc. (NYSE:AGR) is a diversified American utility that generates power from both traditional and renewable power sources. It hasn't been doing well financially as of late by having missed analyst EPS estimates in three out of its fourth latest quarters. The shares are also rated Hold on average.
By the end of September 2023, 19 out of the 910 hedge funds tracked by Insider Monkey were the firm's shareholders. Avangrid, Inc. (NYSE:AGR)'s largest investor is Cliff Asness's AQR Capital Management due to its $26.5 million stake.
Enphase Energy, Inc. (NASDAQ:ENPH) makes and sells power systems that work with solar panels. Its shares saw a bit of action in December 2023 when the firm announced layoffs to deal with the challenging environment that the industry is facing right now.
By the end of this year's third quarter, 40 out of the 910. hedge funds profiled by Insider Monkey had held a stake in Enphase Energy, Inc. (NASDAQ:ENPH). Bruce Emery's Greenvale Capital was the firm's biggest shareholder since it held 975,000 shares that are worth $117 million.
Constellation Energy Corporation (NASDAQ:CEG) is an American renewable energy company that uses solar, nuclear, and other clean sources to generate power. The firm joined a group of more than one hundred companies at the COP28 that have pledged to triple global nuclear energy capacity by 2050.
During this year's third quarter, 45 out of the 910 hedge funds part of Insider Monkey's database had held a stake in the company. Constellation Energy Corporation (NASDAQ:CEG)'s largest hedge fund investor is William B. Gray's Orbis Investment Management courtesy of its $671 million investment.
9. Energias de Portugal, S.A. (ELI:EDP.LS)
Latest TTM Net Income: $784 million
Energias de Portugal, S.A. (ELI:EDP.LS) is a Portuguese diversified renewable energy company with a presence all over Europe and North America. It is one of the most strongly rated stocks on our list since analysts have rated the shares as Strong Buy on average and set an average share price target of €5.60.
Corporación Acciona Energías Renovables, S.A. (BME:ANE.MC) is a Spanish renewable energy firm headquartered in Alcobendas, Spain. It uses solar, hydro power, biomass, and other clean energy sources to generate power.
7. EDP Renováveis, S.A. (ELI:EDPR.LS)
Latest TTM Net Income: $852 million
EDP Renováveis, S.A. (ELI:EDPR.LS) is another Spanish renewable energy company. The firm has thousands of megawatts of power generation capacity in the U.S., Brazil, Spain, and other countries. Despite a broader slowdown in the renewable energy industry, it has done well on the financial front and beaten analyst EPS estimates in all four of its latest quarters.
Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR) is a Brazilian renewable energy utility with dozens of dams and two nuclear power plants in its power generation portfolio. The firm's third quarter earnings saw it beat analyst estimates and post $302 million in net income.
Insider Monkey dug through 910 hedge fund portfolios for their September quarter of 2023 shareholdings and found seven Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR) shareholders. Ken Griffin's Citadel Investment Group was the biggest investor since it owned $1.4 million worth of shares.
Chubu Electric Power Company, Incorporated (OTC:CHUEF), Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR), China Yangtze Power Co., Ltd. (SHA:600900.SS), and Brookfield Renewable Corporation (NYSE:BEPC) are some highly profitable renewable energy stocks.