Back in January, I put together a global renewable portfolio. The list was arbitrary and included auto companies that seemed to me to have a material investment in electric cars and utilities that had decent renewables exposure.
Broadly speaking, this portfolio has been incredible successful over the past 12 months.
My datasource, Factset, despite being both expensive and comprehensive, is still missing a few recent share prices, so this chart below shows the 12 month performance of those shares where a September 28 closing price was available, and as compared with the price on October 2, 2019.
Inverter manufacturers have done well as a group.
I wasn’t to know it, but you could have made an absolute killing on this portfolio. And, of course, past performance is no guarantee of future performance.
The overall portfolio had a median return of 33%, not bad during a Covid year and the average return, which includes Tesla, was 99%. More than nine stocks had returns of 100 per cent or more.
The portfolio has an aggegate market capitalization of close to US$0.9 trillion, so it’s not that small.
One of the many shares to catch the eye in the list was US inverter company Enphase, on the verge of bankruptcy a couple of years ago and now with a market cap over $US11 billion and a share price that has risen 250% in 12 months.
The performance of Enphase actually exceeded, at least in the past 12 months, the performance of SolarEdge, another inverter manufacturer. In my view Australia has more chance of being successful at inverter design and manufacture as opposed to batteries. There is still going to be this massive opportunity in the grid forming inverter market.
Industry averages are not necessarily representative. Auto is obviously dominated by Tesla.
And by country
What I take from the country splits is the variety of countries and opportunities.
Even relatively small economies like Denmark and Israel have been able to produce globally competitive renewable energy stocks such as Orsted and SolarEdge.
In my mind, the thought bubble is that Australia’s world leading behind-the-meter market, using nearly all imported technology is very fertile ground for hardware and software developers.
This is one area where the Federal Government, which does provide some grants for micro-grid development, could push a bit harder.
Equally, some university research labs could have half an eye on commercialisation. UNSW is world famous for its solar cell research but other than the significant but hard to count contribution that it makes to global greenhouse gas emission reductions, it’s hard to see the monetary benefit.
If the Government could just be less ideological….. but then pigs might fly.
Finally, I should add that although I have a vague idea of what most of the companies on this list do, there are some strangers there and there is pretty much zero due diligence on the numbers.
If you interested in investing in decarbonization this list might make a starting point.
David Leitch is a regular contributor to Renew Economy. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.