Top 3 Clean Energy Stocks to Buy for 2021

Top 3 Clean Energy Stocks to Buy for 2021

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The Best Clean Energy Stocks for Your Portfolio

Clean energy stocks were THE theme to invest in last year with the index up over 200%, even beating other runaway investment ideas like the ARK Innovation ETF and EV stocks!

Top 3 Clean Energy Stocks to Buy for 2021

In this video, I’ll show you why green energy stocks have further to run and how to start your list of renewable energy companies. Then I’ll reveal two clean energy ETFs and three of the best stocks to buy right now.

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Why You Need to Invest in Clean Energy Stocks

Nation, clean energy could be THE industry to invest in over the next four years and it’s not only on that shift in Washington policy.

Yes, 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.

But the momentum in renewable energy stocks has been rising for nearly a year. The Nasdaq green energy index is up over 200% in the last year, beating the S&P 500 market index by more than 14-fold.

Prices are coming down for clean energy technology, demand in 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.

Even after those solid gains over the last year, this is a long-term cyclical play with further to go!

Best Clean Energy Funds

Now whenever we invest in these 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.

We’ll start here using the discover feature on and I like to use this as a starting point because I can start a search and the drop-down is going to show me collections of stocks. For example, if I start to type clean energy, it shows me a list of clean energy stocks. I can go into solar and it’s separated these into residential, photovoltaics companies and a few others. Here we’ll search for renewable energy and click into that group and it gives us 126 stocks to research.

The research also shows you important dates, industry and market growth potential and compares the past investment return with other companies in the sector.

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Enphase Energy (ENPH)

Our first clean energy stock is one of the most popular and for good reason, Enphase Energy, ticker ENPH. The company develops and sells home solar solutions connecting solar cells, storage and management in an all-in-one system.

Revenue doubled in 2019 though growth was weak in the second and third quarter of last year. But what really struck me looking through the company’s financials is that, though sales were down 1% in Q3 versus the year prior, the operating margin jumped to 29%! The company was able to manage costs to a point that raised profitability by 10% and that drove operating profits higher by 51% on the year, even on lower sales.

Enphase has over $660 million in cash reserves against just $260 million in debt, so an excellent financial position and the serviceable available market is set to jump from $3.3 billion in 2019 to $12.5 billion by next year…almost a four-fold increase on new product expansions.

So if the company can grow sales along those lines, to $2.2 billion by next year and maintain the 24% net margin it reported over the last four quarters…that would mean roughly $528 million in income and $4.24 in per share earnings, three times what it reported in 2019!

That’s very strong growth and we could be looking at it for well beyond that 2022 horizon.

Brookfield Renewable Partners (BEP)

Our clean energy utilities stock is Brookfield Renewable Partners, ticker BEP, the leader in power generation from renewable sources. The company has generation in solar, wind, hydro-electric as well as storage facilities. Right now, just about half of output is from wind but solar is their fastest growing segment.

The company is also well diversified geographically with revenue from North America, Latin America as well as Asia and Europe.

Brookfield has grown its distribution by 6% annually over more than two decades, so here you’re not only getting the long-term growth potential but a solid dividend yield that was 3.5% last year.

Management has a target to grow funds by six- to eleven-percent annually, so there’s space there to keep growing the dividend and share price consistently. Look, utility companies aren’t going to set the bed on fire like the other two stocks we’ll look at but it’s a solid long-term return producer and a lot less risk than your other clean energy picks.

Plug Power (PLUG)

Next here, one of the most popular clean energy stocks over the last year, $30 billion Plug Power, ticker PLUG.

Plug is a fuel cell technology leader in hydrogen-produced electrolysis for electricity that can be used in everything from large industrial applications to heavy duty trucks and in the future, even aircraft.

The company has plans to build five green hydrogen plants in addition to an operational facility and expansion plans for Europe. It’s also targeting 500-plus refueling stations and $1.2 billion in sales by 2024.

Like a lot of you, I first got interested in Plug when I got it as a free share on Robinhood when the stock was around $3.30 each. At $64 a share now, it’s not cheap but the growth is there.

Sales grew 80% in the last quarter and that target of $1.2 billion through 2024 would be almost four-times revenue booked in the last year.

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Like a lot of the clean energy stocks, this one is trading on that future growth so if you’re going to invest, you need to have a long-term outlook and hold on to the shares to let that growth play out.

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