Investing Topics: Renewable energy

With inflation again on the move, it’s fair to ask how vulnerable the Utilities sector is to another 70s-style meltdown.

It’s been more than four decades since the Hindenburg disaster slammed the brakes on the era of hydrogen-fueled dirigibles. But nature’s lightest element continues to capture the world’s imagination as a clean, plentiful and potentially cheap energy source.

Is it possible to invest effectively in renewable energy without the stocks of world’s two largest producers of wind and solar? Standard & Poor’s apparently wants us to find out.

This morning, America’s leading wind and solar power producer NextEra Energy (NYSE: NEE) announced outstanding Q3 results. This first major renewable energy producer to report gives solid confirmation that the global energy transition is alive and well, no matter what happens at the ongoing UN Climate Change Conference.

Yieldcos made their debut in the middle of the previous decade, as renewable energy’s answer to master limited partnerships but waned in popularity as MLPs collapsed, and the Trump administration instituted policies unfriendly to renewable energy. But there are two very good reasons to expect an eventual return of yieldco IPOs.

Our advice to heed the lessons of Robinhood.com has already proven timely: Build capital gains on solid business fundamentals, cash out of high-flyers and invest in successful adopters of wind and solar.

Dominion will be an early beneficiary of Biden Administration energy policies regarding permitting for offshore wind facilities.

Writing under the famous pen name Mark Twain, Samuel Clemens coined the phrase “history doesn’t repeat itself, but it often rhymes.”

I’m not the first to apply that bit of country wisdom to investing. But it’s always worth revisiting in the aftermath of extraordinary market events.

Renewable energy stocks were popular well before the recent US elections. Since then they’ve really blasted off, but one group of renewable energy stocks have yet to feel the love.

Strong regulated utilities combined with long-term contracted renewable energy generation: That’s the NextEra Energy (NYSE: NEE) business model. And not only does the formula work well, it’s become quite popular with investors.