3 Environmental Stocks One Could Play
3 Environmental Stocks one Could Play
Hello Traders! Thanks for clicking on this article, I hope it finds your happy, healthy, and living life to the fullest. Right now, I am writing this from sunny San Diego, in one of the most environmentally conscious states in the United States, California! Which by the title you should have already deduced, is about environmental stocks that we have the opportunity to play!
This month at Real Life Trading is Conservation Month where we spend the month reflecting on taking care of the environment. So this article only seemed appropriate to write!
With the world in general more concerned about health, as well as cheaper and more environmentally friendly ways of generating energy, the renewable energy sector is becoming more and more intriguing. It seems to me, that it is just a matter of time, before the shift occurs from fossil fuels to more environmentally friendly means of producing and distributing energy.
So without further ado, letâ€™s jump into some interesting and fun environmental stocks!
Brookfield Renewable (BEP)
The first one on my list to look into is Brookfield Renewable, ticker symbol BEP. Brookfield Renewable is a limited partnership that operates a large range of renewable resources and is headquartered in Toronto, Canada. It is 61% owned by itâ€™s parent company Brookfield Asset Management (BAM) which is â€œ…a global alternative asset manager with approximately $250 billion of assets under management, focusing on private equity, property, renewable energy, and infrastructure.â€ BAM has been trading in an upward channel since 2010 where, it like most other stocks, crashed in the 2008 bubble. A pretty good sign as this company has been going slow and steady for the last almost 10 years and has made itâ€™s buyers a pretty penny since then, even just buying and holding.
Parent company BAM Chart
Brookfield Renewable is just what itâ€™s name would suggest; a renewable energy guru. It has itâ€™s hand in a total of 15 different energy markets but is most well know for itâ€™s HydroElectric Power plants, of which makes up 88% of their managed portfolio!
Now for quick environmental lesson! Hydro electric power is produced when a generator is first placed inside of a dam. As water flows through the dam, it will spin turbine blades which are connected to generators. Power is produced by the spinning motion and is then used to send to itâ€™s customers. Of all the renewable energy sources, Hydroelectric is by far the most utilized across the board globally. It has minimal emissions and is relatively cheap and easy to maintain. With that being said, hydroelectric is not perfect. It does have itâ€™s pitfalls in that anytime you create a dam, it permanently alters the habitat around it (but that can be said about coal and other power plants as well). Power is also dependent on rainfall. For places with steady rainfall this is not an issue. However, the companies putting these up will run all sorts of tests, and look at tons of information to find the right place to put one of these. Rest assured they arenâ€™t putting a plant where it doesnâ€™t make sense. Thatâ€™s just common sense!
Below is a picture of the Percy Priest Hydroelectric Dam in Nashville, TN several miles north of us!
BEP operates one of the worldâ€™s largest renewable energy portfolios with over 215 of facilities being hydroelectric. They have a total of more than 250 renewable energy power facilities including anything from wind farms (of which they have 32), to biomass, to pumped storage. All of which are across North America, Latin America, and Europe. Globally Brookfield Renewable produces enough Megawatts to power over 12,000,000 homes. Brookfield makes money by selling a majority of itâ€™s energy though long term contracts that take into account inflation to adapt prices to changes in power over time!
All in all, I see a few trades we could do on BEP. Since 2012, BEP has been trading in an upward to sideways channel. Even with a slight dip below the support line in 2016 which is most likely due to 2016 election, BEP wasnâ€™t phased and within 3 months returned back to itâ€™s comfy, cozy channel.
So, long term on this bad boy, there is a nice support around $25.22.
It appears BEP is pretty sideways. The goal is to try and buy or invest into this one as low as possible. That $25.00 area would be sweet.
Regarding the daily chart, this is what I see right now. I like it overall and perhaps a quick trade could even be made on an hourly. BEP is breaking other supports, like the 200 SMA on a weekly. It could slowly drop lower, but I'll be keeping an eye on this for a possible longer term play. :-)
Vestas Wind Systems (VWS)
Letâ€™s blow in to the next one on the list: Vestas Wind Systems. See what I did there ;) This time I am picking a foreign, OTC company just to keep things interesting!
Vestas Wind Systems or VWS is a headquartered in Aarhus, Denmark and is a manufacturer, seller, installer, and servicer of wind turbines. Letâ€™s take a walk down memory lane and talk about the humble beginnings of this mighty wind giant!
Vestas Wind Systems was actually started in 1945! Fun Fact: Itâ€™s original full name was VEstjyskSTaaltenik, but was later shortened to Vestas, because well, you get it. They havenâ€™t always done wind power obviously enough. That year, Vestas actually invested in a patent for a milk urn cooler system and shortly thereafter focused on producing household appliances such as mixers and kitchen scales. Between 1945 and 1970, Vestas jumped around creating everything from coolers for turbo chargers to hydraulic cranes. But when they hired their first engineers in 1971 (shocker they made it that far without an engineer) that was the first step in the right direction on becoming the king of wind power. In 1978, they started to carry out their first wind turbine experiments in secret as to not upset investors or suppliers. And, the rest is history. After years of trial and error and research they were able to create the first prototype that has slowly morphed over the years to become the turbines they use today. And as of 1986, their hard work paid off and they decided to make the switch to solely creating wind turbines!
Wind Turbines are actually pretty basic (minus the whole science part of it). Most basically 2 or 3 wind blades are attached to a rotor, which is connected to a main shaft. The main shaft spins a generator as wind blows to create electricity! Generally, wind turbines are set up in â€œfarmsâ€ where sometimes hundreds will be put up close to each other. If you have never seen one before it is quite a site! Wind Energy, like hydro electric power, create no pollution when used, but in contrast Wind uses no water. Wind power does still have some draw backs in that they generally have to be placed far from city centers which therefore requires large systems and infrastructure to be put in to transport the electricity to those who will be using it, which can in some cases be disruptive to the environment. Some also consider them an eyesore, but hey, a coal power plant is also an eyesore and destroys the air.
Vestas is indeed the largest wind power maker in the world right now. It has installed a total of 92 GW of power in 79 countries. To put that into perspective approximately 1 GW will power 700,000 homes. Meaning Vestas could be responsible for powering around 64,400,000 homes. Their largest manufactured turbine can power 8,000 homes just by itself! And Vestas is continually updating and improving its products. Vestas makes money by selling itâ€™s turbines or selling the energy that they produce. Selling their energy has been a point of contention within the wind energy sector as many countries are phasing out fixed price contract deals and are going for more of an auction approach. Meaning wind energy companies are competing with each other to offer the cheapest price to its buyers. The good thing for Vestas? Being the largest gives you an advantage. With their massive scale they are already producing the wind energy cheaply, meaning it can take those cheaper prices and thus sell them lower than their competitors. Which is good for this giant as itâ€™s longterm goal is to be the best in the industry but also the cheapest! Plus, it is already profitable reporting a first-quarter net profit of 102 million euros ($122 million USD).
I feel like Vestas chart has been all over the place everywhere from $3.90 to $145 and in between. Which means I think the word 'volatile' applies well here. Which, for us as Real Life Traders, is a beautiful thing. I mean, take a gander at VWS on the monthly chart. WOW! So, what next? The unfortunate part is the daily volume on VWS is pretty 'blah' at only 7,000 on average. So if anything this would be a small or much longer term position.
The area around $50 is a nice support zone, but if VWS breaks below that, the chances of some lower lows are pretty strong. That could help you determine how long you plan on holding those shares.
On to this shining gem: SunPower! I feel like I couldnâ€™t go on any environmental write up without talking about at least one solar power company. I mean they ARE one of my favorite up and coming techs after all. Pretty amazingly enough photovoltaic energy (aka solar cells) started way back in 1876. William Grylls Adams and his student, Richard Day, made the breakthrough when they noticed that if selenium was exposed to light, it produced electricity. I could go into the science behind how solar panels work pretty in depth but they are so incredibly complicated plus they are often each a little different so I will just do a quick overview. Essentially, solar panels collect sunlight and convert it to DC electricity, the DC electricity moves to an inverter that converts it to AC electricity, and that energy can then either be used by you or sent back to the grid!
P.S. Like I said I am writing this from California right now and there are panels on every other house here and those who have them RAVE about them!
Overall, solar power is one of the energies that I am most excited about just because of the incredible potential it has! For one, it is non polluting and harnesses the energy of something that is quite literally limitless and something that no matter how much we use, we cannot hurt or destroy. To me, that fact is encouraging and the best part of itâ€™s power. The Solar constant of 1366 represents the watts of solar energy that hits each square meter outside of earth's atmosphere. In act, if we could harness it efficiently, just a few minutes of sunlight could meet the world's power demands for a year.
So why isnâ€™t solar the law of the land. Well that question is complex. Two of the main problems with solar energy are A: The efficiency and B: How much they cost to produce. If/when the industry tackles these issues, this will open up unlimited opportunities for this space to change the way the world consumes energy. Right now the most efficient consumer grade solar panel on the market is our friend, the SunPower X series, model SPR-X21-345 which has about a 22% efficiency. By efficiency we mean that 22% of the light that hits it is absorbed and able to be converted to energy while the rest is given off as heat. Thatâ€™s less than 1/4 of the energy being absorbed. And that is on the high end. Most consumer grade panel efficiencies are only between 16% to 20%. The good news is that current lab tests across many companies are producing results of around 50%. These however, are most likely years away. Price is also an issue as one of the reasons panels cost so much is because of how much the solar wafers cost to produce (In fact, I have a company I am watching that is trying to revolutionize this that I am waiting on and when it IPOâ€™s I will let you know.) A typical consumer PV system costs between $25,000 - $35,000 which is definitely not something that everyone will be able to afford, but as the tech grows, and as the manufacturing and installation gets cheaper, we can expect to see these prices to come down as well.
SunPower makes money by selling itâ€™s Solar panels directly to not only consumers, but also agriculture, businesses, government, schools, utility companies, plus so many more. Right now Solar companies are struggling to make a profit as panels are still costly to make and install. Most obviously SunPower, along with other renewable energy companies, fell slightly before and most definitely after Trump was elected into office as he is obviously pushing for more coal. But I am confident that the rise of Solar panels is not an IF statement but a when deal. With Carbon Pollution a huge problem for the environment and humans, it is just a no-brainer. When high efficiency Solar panels are mass produced cheaply, it will will start the slow death of dirty energy companies. And when that happens I am going to do an epic happy dance.
Do I think that SunPower is the end all be all of solar companies that you should put all your money into long term? Probably not. But as Real Life Traders we are able to trade no matter what the sentiment! I am sure that there are some private solar companies brewing out there that will produce some revolutionary product.
We can rest assured, knowing how volatile some of these companies are. This one is no different. Here's the SPWR chart on a monthly. What's exciting about this is... SPWR has been down here before. And then it bounced, some 1,000%. Could it happen again. Let's zoom in and find out.
Some nice volume is starting to come in on the weekly. That's a good sign.
SPWR is battling the 100 SMA on a weekly right now as well. However, no argument can be made that SPWR isn't in an accumulation phase. The only question is, will it break bullish? One approach, traders could absolute zero this bad boy. Take their risk and divide by $8.00. So, $1,000 R / $8.00 = 125 shares. Not a bad investment size with a guaranteed risk os $1,000. Certainly doable with a nice R:R. Just something to consider. Otherwise, you would have this, or this.
Simply something to consider, especially if you like the company!
I personally don't plan on playing these trades, but our job is to give our traders options on what is out there!
Thanks for going on this green adventure with me! Let me know if you have any questions at all :)