The stock market has seen more than its usual number of dramatic ups and downs in 2020. Following the Covid-19 market crash, U.S. indexes traded up to record highs within months as investors bet on the recovery, with tech leading the pack.
One area of the stock market that did unexpectedly well was clean energy. After solar and renewable utility stocks struggled in recent years, there was undeniably a fair amount of fear that they would fold under the pressure of a weakened economy, especially given the overproduction of oil that has been plaguing the fossil fuel industry and driving down the cost of petroleum products. However, that turned out to be far from reality and many clean energy stocks have exploded off the charts in 2020, providing some of the best returns in the stock market.
The iShares S&P Global Clean Energy Index Fund (ICLN) ETF, an exchange-traded fund that tracks clean energy stocks globally, has a year-to-date return of over 144%, outpacing even the Nasdaq's 43% gain.
One major reason driving the optimism for clean energy is that it is a growth market, as opposed to the already-saturated oil market. Big oil already has the markets flooded, with production so high among competing players that at one point in early 2020, oil producers began running out of places to store the stuff, sometimes even paying more to store it than the price they could sell it for. Meanwhile, nowhere near enough solar and other clean energy projects have been completed to produce even a bit of a global oversupply, leaving plenty of room to grow.
Another reason is that, despite initial worries that the pandemic would end up halting large-scale solar projects and residential sales, the opposite ended up happening. Outdoor working conditions are deemed relatively safe, with Covid-19 finding it a lot more difficult to spread in open air than in enclosed spaces, so outdoor clean energy projects were quickly resumed as planned. In addition, residential solar has boomed alongside the housing industry due to record-low mortgage rates.
With this in mind, here are the five large-scale clean energy stocks that had the highest returns in 2020 while also earning financial strength and profitability rankings of at least 4 out of 10 from GuruFocus, which indicates that even if unfavorable market conditions were to strike, these companies would likely be able to make it through intact.
SolarEdge Technologies
SolarEdge Technologies Inc. (SEDG, Financial) is a photovoltaics company based in Israel. The company produces power optimizers, solar inverters and monitoring systems that are aimed at increasing the energy output of solar power arrays.
The stock had a total return of 200.44% over the past 12 months and trades around $321.73 as of Dec. 31 for a market cap of $16.41 billion.
GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rating of 7 out of 10. The three-year revenue growth rate is 37%, while the three-year earnings per share without non-recurring items growth rate is 18.8%.
Solaria Energia y Medio Ambiente
Solaria Energia y Medio Ambiente SA (XMAD:SLR, Financial) is a Spanish electric services company and the leading green development and power generation company in southern Europe. The renewable utility provider aims to produce 6.2 gigawatts of clean energy in its region by 2025.
The stock had a total return of 248.21% over the past 12 months and trades around 23.80 euros ($29.07) as of Dec. 31 for a market cap of 2.97 billion euros.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10. The three-year revenue growth rate is 8.5%, while the three-year earnings per share without non-recurring items growth rate is 39.5%.
West Holdings
West Holdings Corp. (TSE:1407, Financial) is a Japanese utility company that is primarily involved in the design, manufacturing, sales, operation and maintenance of both public and industrial solar power generation systems. It also provides energy-saving services.
The stock had a total return of 241.21% over the past 12 months and trades around 4,745 yen ($45.95) as of Dec. 31 for a market cap of 148.50 billion yen.
GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. The three-year revenue growth rate is 25.4%, while the three-year earnings per share without non-recurring items growth rate is 45.1%.
JA Solar Technology
JA Solar Technology Co. Ltd. (SZSE:002459, Financial) is a solar development company that designs, manufactures and sells solar cell and solar module products in China and internationally. It is also involved with engineering solar power plants.
The stock had a total return of 264.22% over the past 12 months and trades around 40.72 yuan ($6.24) as of Dec. 31 for a market cap of 64.54 billion yuan.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rating of 5 out of 10. The three-year revenue growth rate is 199.1%, while the three-year earnings per share without non-recurring items growth rate is 194%, though it should be noted that these extreme numbers are unreliable due to a complicated situation where it completed a merger and a going-private transaction of its U.S. listings around the same time in 2018.
Xinyi Solar Holdings
Xinyi Solar Holdings Ltd. (HKSE:00968, Financial) is a Chinese investment holding company that primarily manufactures and sells solar glass. It is also involved in the operation of utility-scale solar farms and provides engineering, procurement and construction services for solar farms.
The stock had a total return of 269.26% over the past 12 months and trades around 20.35 Hong Kong dollars ($2.62) as of Dec. 31 for a market cap of HK$176.63 billion.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The three-year revenue growth rate is 8.8%, while the three-year earnings per share without non-recurring items growth rate is 1.2%.
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