Clean Energy Penny Stocks with Big Opportunities for Growth
Clean energy stocks were THE theme last year with the clean energy fund posting a 177% return. After a big drop in February, these stocks are on sale once again and I’m going to show you how to get in on the biggest opportunities including the top five renewables energy penny stocks to take advantage of the rebound. We’re talking green energy, today on Let’s Talk Money!
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Clean Energy Stocks Fund Value Down Since February 2021
Nation, clean energy was the undisputed leader in stocks last year with the clean energy ETF, the First Trust Green Energy Index Fund, ticker QCLN) posting a 214% return through January of this year. Renewable energy stocks beat out electric vehicles, they beat self-driving stocks, they even beat the amazing 170% return on the Ark Innovation ETF!
But what a difference a month makes! Those same clean energy stocks are down 24% since early February, a quarter of the fund’s value vanished into thin air!
We’ve covered clean energy stocks on the channel before and I still think this could be one of the strongest themes over the next decade.
Biden Pushes Green Energy
One of President Biden’s first official acts…the day he was sworn in was to cancel the Keystone XL pipeline and that push to green energy is going to be a strategic part of the Administration. The $2 trillion infrastructure spending proposal has clean tech as its center piece and Biden’s laid out nine steps he wants to take to clean energy.
Prices are coming down for clean energy technology, demand for energy is going exponential and a 51% increase in the price of oil and other energy costs over the last three months is putting the focus once again on alternative fuels.
In fact, the only thing that has changed in the last month, is now these stocks are selling at a discount for a second chance in on this theme!
In this video, I’ll show you why clean energy stocks have fallen lately, I’ll share the forces setting the group up for a rebound and then, I’ll reveal the five green energy penny stocks I’m watching right now.
Why Clean Energy Stocks Went Downhill
Nation, the reason clean energy stocks have fallen so much lately is actually pretty simple but has absolutely no effect on the long-term potential of these companies. We’ve seen interest rates nearly double in just three months going from just 0.95% on the ten-year Treasury to over 1.7% recently.
The problem is in the most basic way a stock is valued, on how much future cash flows are worth to an investor today. Now I don’t want to go too far into this because I want to get to those five clean energy penny stocks. I’ll leave a link in the video description below that goes into more detail, highlights how much further stocks could fall and my strategy for investing.
How to Know How Much a Stock is Worth
Basically though, to find how much a stock is worth, that fundamental value, you add up all the expected future cash flows and discount them by an interest rate. So…as that interest rate increases, you’re taking more off those future earnings and the stock price falls. And since these green energy stocks have so much potential in future cash flows, they’ve fallen more than other stocks on the rise in rates.
But NONE of this has any effect on the potential for renewable energy or these companies. According to Allied Market Research, the global renewable energy market could grow to a $1.5 trillion opportunity by 2025 from just $928 billion in 2017. The U.S. Energy Information Administration estimates renewables consumption in the U.S. alone will rise to 13.4 quadrillion BTUs by next year, growth of 17% since 2019.
Clean Energy Stocks Build Momentum
The trend to clean energy is now unstoppable and with the U.S. rejoining the Paris Climate Accords, it’s only going to build momentum!
Now whenever we invest in these big multi-year themes, so EV stocks or biotech, clean energy, I like to first start with a couple of funds to add to the portfolio. And I’m doing this for two reasons.
First is since the theme we’re looking at is going to benefit from those broad trends, then we want broad exposure. Buying a clean energy fund with part of your money is going to give you that exposure to the entire group plus a lot of stocks that might not be available in your domestic stock market.
These funds are also excellent resources to start your search for individual stocks in that renewables theme. You can go to any website for an ETF, click on the Holdings tab in the menu and get a list of clean energy stocks to research further.
First here is one of the largest, the First Trust Clean Edge Green Energy Fund, ticker QCLN. The ETF invests in 44 companies across solar, biofuels and advanced batteries. Shares are up a whopping 183% last year and have produced a 16% annualized return over the last decade.
And you see the diversification here with a third of the fund in equipment providers, about 15% in autos and 15% in alternative electricity but really exposure across 10 industries. Here you can see the top stocks held with Tesla leading the pack, and making up 9% of assets, but some strong green energy stocks here; Plug Power we recommended in a video back in September and Albermarle back in January of last year.
The fund is a little expensive at an expense ratio of 0.6% annually but that’s going to be typical of this kind of theme investing. You’re not going to get the same 0.2% expense ratio you see in index funds.
If you want more specific exposure, the Invesco Solar ETF, ticker TAN, holds 37 solar energy stocks and produced a 233% return last year.
The fund is largely invested in the tech stocks making this happen but has a third of the assets in utility companies. The solar ETF is a little more diversified geographically here with just under half the stocks based in the U.S. but exposure to Asian and European companies as well.
And if you look at the solar stocks held, you’ll see some overlaps with that clean energy fund like Enphase and First Solar. You’ve also got a solid mix of stocks that aren’t available on the U.S. or Canadian exchanges so a great way to invest in solar globally.
So I like both of those clean energy funds but I want to add that potential upside you only get by picking the best stocks in the group and not just any stock but the best penny stocks.
5 Unstoppable Clean Energy Penny Stocks to Buy While the Price is Right
Our first green penny stock is Uranium Energy Corp, ticker UEC, a $620 million explorer and processor of uranium for nuclear energy.
I highlighted uranium in a video a few weeks ago on the massive buildout in nuclear reactors and the jump in prices. The uranium spot price has jumped more than 70% since the 2016 low and construction of 53 new reactors globally should drive that for years to come.
UEC is a pre-production miner with the potential for up to four million pounds a year with three projects in the United States, an interest in the Athabasca Basin in Canada and a portfolio of projects in Paraguay.
The company is fully licensed on its projects with a potential production profile of four million pounds of uranium annually from Texas and Wyoming fields. In fact, the Reno Creek project is the largest permitted uranium project in the U.S. in pre-construction with over 26 million pounds of measured and indicated resources.
UEC has recently begun a physical uranium initiative, buying drummed uranium at the spot price but below industry mining costs and has more than 1.4 million pounds of warehoused uranium. The company’s Hobson processing plant in Texas has two million pounds per year in processing capacity and benefits from proximity to those local mines for a critical cost advantage.
The company has $95 million in balance sheet cash and investments against just $10 million in debt, so net cash of $85 million gives it plenty of financial flexibility to take these assets to production. I’ll leave a link to the company’s full investor presentation in the video description.
This next penny stock is a fun one, ElectraMeccanica Vehicles, ticker SOLO, is a Canadian EV manufacturer with a twist. Its main product is a single-seat three-wheeled electric car.
This is an untapped niche in the electric space, with solid potential in the personal daily use market. The car has a 100 mile range per charge and is fully charged in under four hours…that’s half the time it takes to charge the average electric vehicle. The car has an 80 mile per hour top speed and is priced at just $18,500 each.
Production began last August with a capacity of 20,000 annually. They’re selling now through 10 retail stores in California, Arizona and Oregon with plans to expand throughout the West Coast and Colorado. This is another one with a rock solid balance sheet of $101 million Canadian dollars in cash and no debt.
A great penny stock play in pollution control here and one of the smaller companies on the list, $91 million Fuel Tech, ticker FTEK.
Fuel Tech develops multi-pollutant emission control systems that can be attached to industrial factories and utilities. The market for pollution systems is expected to reach $101 billion by 2027 from just $67 billion in 2019 with 95% of the global population living in areas designated as unhealthy air quality by the World Health Organization.
Revenue is evenly split between the pollution control segment and a chemical technologies segment that promotes boiler efficiency in coal, oil, biomass and solid waste boilers.
With more than 1,200 control systems installed globally, customers include utilities like FirstEnergy and Duke, industrial users like Dow and BP and global producers.
The pandemic did hit its 2020 sales but it’s refocused with an improved cost structure and expects stronger sales this year.
Next here is probably the riskiest penny stock of the group even though its also the largest, $865 million American Battery Metals, ticker ABML.
The company is a pre-production miner of lithium and unless you’ve been living under a rock, you know lithium is THE metal in tech right now. Lithium demand is expected to grow 40% annually through 2025 for use in electric vehicles, cell phones and power storage.
The company holds 26,000 acres in Nevada with 1,300 claims around the Railroad Valley lithium project with initial surveys showing economic concentrations throughout.
Now this is a pre-production company so no revenues yet and it still needs to complete geologic surveys and permitting. The demand is definitely there for lithium, the company just needs to get it out of the ground.
Next on our clean energy penny stocks list, $296 million Beam Global, ticker BEEM and I know you’re looking at that $37 price per share and thinking this isn’t a penny stock but remember, penny stocks are about the size of the company…not the share price. Beam has a market cap under $300 million which puts it in the smallest third of stocks traded in the U.S. exchanges and that penny stock growth potential we’re looking for. For example, if the company were to grow to even the size of say Enphase Energy at $20 billion, that would mean a 6,800% return for investors.
Beam makes infrastructure products for electrification including EV charging as well as outdoor media. It has two chargers for electric vehicles already patented with two more products in development including a drone recharger.
Bloomberg forecasts 559 million electric vehicles could be on the road by 2040 but the big bottleneck is charging capacity. We simply don’t have enough chargers available to meet that demand.
Beam already has hundreds of products deployed across the U.S. with customers including the Department of Energy, McDonald’s and General Motors. It owns eight patents in the U.S., China and the European Union.
It’s a pristine balance sheet with $12.3 million in cash and no debt generating $4.5 million in sales each year.
Due to rising interest rates, some of these clean energy stocks are twenty- and thirty-percent off recent highs and selling at discounts to typical PE ratios. This could be your last opportunity to find the best green energy stocks to buy before they move higher.