Renewable energy stocks: 2 I’d buy and 1 to avoid

| January 12, 2022

Renewable energy stocks have gained significant popularity in recent years. There are a lot of reasons for this. For instance, many impact and sustainable investors see renewable energy as the best alternative to fossil fuels in the fight against climate change. What’s more, governments worldwide have continued to ramp up investments into the renewable energy sector.

According to Allied Market Research, the global renewable energy market is expected to grow to $1.97trn by 2030, with a compounded annual growth rate of 8.4% between now and then. Needless to say, that sounds like quite the opportunity for my portfolio. So, let’s explore two renewable energy stocks I’d buy and one I’m steering clear of.

Two renewable energy stocks I’d buy 

The first on my list is an ETF, iShares Global Clean Energy gives me broad exposure to the renewable energy market. This is due to its diversification within the sector. With the US rejoining the Paris agreement, the world is better poised to deal with climate change. 

2021 wasn’t a great year for most renewable stocks as most went southward. iShares Global Clean Energy had a large share of the downturn as the fund fell by about 39% over the past year. But with the market size of this sector anticipated to grow over the next few years, now could be a good time for me to jump in. And getting exposed to the entire industry sounds very attractive to me. 

While ETFs give me wide diversification, it carries some unique risks. Which includes costs and commissions. Aside from that, this stock has not performed so well over the years. In any case, I see the current trend as a buying opportunity.

Ormat Technologies, Inc. engages in geothermal and recovered energy generation (REG). Leveraging its capabilities and global presence, the company expanded its business into different energy storage services and solar photovoltaic (PV). This includes hybrid geothermal, solar PV and solar plus storage systems. 

Ormat’s expanding portfolio is encouraging in my mind as it could stand to benefit from the expected growth in the renewable energy industry. But it’s not without its risks. There are plenty of competing companies within this space trying to steal market share, preventing the business from establishing any meaningful pricing power.

I will avoid this stock for now

While I’d consider adding the above two shares to my portfolio, I’d be avoiding Brookfield Renewable Partners LP (NYSE:BEP) shares, at least for now. Brookfield’s portfolio comprises hydroelectric, wind, solar and storage facilities which spread across North America, South America, Europe and Asia.

Brookfield’s diversified market portfolio does place it in a strong position to profit from the growth within its industry. However, recently it hasn’t been able to deliver promising performance. In fact, over the last four quarters, earnings have failed to meet market expectations. That’s why I’m going to keep this stock on my watchlist for now.

Final thoughts on renewable energy stocks

With the deadline set by the Paris Climate Agreement getting closer, investing in renewable energy stocks might give me explosive returns in the long run. And with the pandemic causing the share prices of these businesses to tumble, now could be a good time to snatch up some bargains for my portfolio.

But It’s more so now that most stocks within the sector are yet to recover from the effect of the pandemic. At least I have good bargains in the sector.

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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies, assets, and strategies mentioned in this article are those of the writer and, therefore, may differ from the opinions of analysts in The Money Cog Premium services.

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