by Harris Roen, Editor
Roen Financial Report
March 14, 2014

Investors who bought alternative energy stocks have been nicely rewarded over the past year. Since its inception in January 2013, The Roen Financial Report Paradigm Portfolio has posted extremely robust returns, up 47% after accounting for additions, removals, and rebalancing*.

This portfolio contains a carefully filtered list of about 40 alternative energy stocks. These investments are hand-picked from a universe of +/- 250 publically traded companies in  energy efficiency, environmental, fuel alternatives, smart grid, solar and wind.
 

Returns

The lift in alternative energy stocks has been broad, with 87% in the Paradigm Portfolio showing gains. More impressively, fully three-quarters of companies are up double digits or greater. In fact, the top ten gainers are up an average of 98%! SolarCity (SCTY) has the greatest gains by a long shot, up 314% after rebalancing.

The bottom performing stock is the waste-to-energy company Covanta Holding Corp (CVA). There was a large price drop for Covanta back in October 2013 due to lowered cooperate guidance. Even though Covanta has had flat sales and a dip in earnings, long-term we believe this company’s investment story is still intact.

 

Portfolio Update

There are no additions or removals from the Paradigm Portfolio this month. We are monitoring a few companies for removal, including CLARCOR, Inc. (CLC). If fair value calculation for this environmental stock becomes less favorable, it will be considered for removal.
 

Alternative Energy Investment Outlook

We still have an overall bullish posture on alternative energy stocks in the medium to long term. There are several positive tailwinds on the sector, one of which is decreasing overall deployment costs for renewables. This is especially true when the cost of developing renewable sources is compared to that of conventional power plants. Also, there are large investments being made in upgrading and modernizing the electric grid, which will greatly benefit distributed energy sources such as wind and solar. This smart grid investment will also benefit companies in the energy efficiency products and services business.

The biggest tailwind on the sector has been the low price of natural gas, since natural gas is the largest competing fuel source for electric generation. While there has been a spike in natural gas prices as of late, we believe prices of this domestically abundant fuel source will remain relatively low several years out. Though that is good news in terms of carbon emissions, since natural gas is far less polluting than coal or oil, it puts competitive challenges on renewables. Still, on balance alternative energy stocks are likely riding a long-term trend that is here to stay.

 

*Hypothetical gain from portfolio recommendations. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities on this list. For an explanation of how hypothetical returns are calculated, please see the Returns section under How Investments are Picked in the Roen Financial Report User Guide.

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IMPORTANT INFORMATION

Individuals involved with the Roen Financial Report and Swiftwood Press LLC do not own or control shares of any companies mentioned in this article. It is also possible that individuals may own or control shares of one or more of the underlying securities contained in the Mutual Funds or Exchange Traded Funds mentioned in this article. Any advice and/or recommendations made in this article are of a general nature and are not to be considered specific investment advice. Individuals should seek advice from their investment professional before making any important financial decisions. See Terms of Use for more information.

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Remember to always consult with your investment professional before making important financial decisions.