Investors have endured a tumultuous year, with major indexes experiencing their biggest headwinds since the financial downturn that came along with the Covid-19 pandemic back in 2020.
With the kick-off of the fourth and final financial quarter of the year, those who have experienced losses are entering with a bearish sentiment and an even bigger feeling of apprehension.
Under the pressure of the Federal Reserve aggressively hiking its base interest rate in an effort to tame rampant inflation, many institutional and retail investors have been hesitant while facing choppy conditions that look to continue well into the new year. Making things even tougher was investors who pulled from the market in a rush to park their cash in more secure investments as economists suggested the reality of a recession is now looming closer than anticipated.
Although the economic recovery following the pandemic has been slow but steady, Policygenius reported larger sectors, including real estate and property, have been witnessing declining sales as the cost of borrowing keeps climbing and consumers are trying to curb inflationary conditions.
Further, Fortune reported expert analysis by Morgan Stanley (MS, Financial), Goldman Sachs (GS, Financial) and Moody’s (MCO, Financial) has suggested that the coming year will see house prices drop between 7% and 10%. Against the backdrop of soaring interest rates, higher demand and a lack of supply, some experts predict the housing market downturn will be the second-largest price correction since the Great Depression.
These challenges are making it harder and more expensive for younger generations to jump onto the real estate market, whether by ownership or investment.
The meager market conditions have painted a vivid picture of what could lie ahead in the last financial quarter of the year.
In the hope of recouping their losses, a handful of investors are redirecting their attention to safer investments that can experience growth against the possibility of a recession. While there are several options for investors to choose from, some are considering industries and sectors that will still be able to perform and deliver probable returns even as the market bottoms out near correction territory.
All the while, investors are warming up to the alternative and renewable energy sector as it provides sizable share options. On top of this, there is growing interest coming from all sides, leaving the sector open to experience major growth in the coming years.
There are a lot of green energy companies on the market, and while some may still be in their primary startup phase, there is a good chance these companies could trail the green energy and technology sector as the world slowly transitions towards zero-carbon efforts.
With so many options, I will highlight three renewable energy stocks that could deliver good value.
NextEra Energy
As one of the largest producers of renewable energy globally, NextEra Energy Inc. (NEE, Financial) has seen substantial growth in recent years. At the beginning of 2022, the company announced it is planning to spend between $50 billion and $55 billion on green infrastructure in the U.S.
Aside from solar and wind power generation, the company also focuses on green hydrogen and battery storage technology. NextEra has established itself as one of the primary green energy companies in Florida due to its regulated utility engagements, which allows it to generate, transmit, distribute and sell most of the state’s renewable energy.
On the investor front, the stock has seen a mixed response, with the five-year decline leaving many discouraged, yet shareholders are still up by more than 165% over the same period.
Year over year, share prices are up 0.77%, a small cap against the backdrop of a larger plan. In its recent earnings call, the company witnessed a 14.08% increase in its earnings per share, while revenue gained 31.98% year over year.
Shares endured a positive September against a broader market sell-off, but since the start of the new quarter, prices have come down slightly with the possibility of making a rebound in the coming weeks.
First Solar
First Solar Inc. (FSLR, Financial) has been shining bright in recent weeks, showcasing to investors that broader market conditions are not able to impact its stock performance, even as bearish sentiment continues to spread.
The company is considered one of America’s largest manufacturers of solar panels based on cadmium-telluride solar cells, rather than the traditional polysilicon solar cells. The development of its contemporary solar cells means that amid supply chain constraints and a global shortage of materials, First Solar has been able to continue production and level supply with demand.
For interested investors, the stock has ranged between $59.60 and $140.64 over the past year and, in the last six months, prices have gone up by 60.71%. Year to date, shares have almost doubled.
The company has a healthy balance sheet with roughly $7.42 billion in net assets as of June 2022, an increase of 2.36% from the same period last year. Overall, annual cash flow has regained positive strength after witnessing negative growth between 2018 and 2020.
For investors that are interested in the sociopolitical aspects of First Solar, the company’s innovation of cadmium-telluride solar cells has helped it become less reliant on Xinjiang, a region in China that produces polysilicon. The U.S. has condemned the region and the Chinese government for forcing Muslim minorities to work against their will, leading to a slew of human rights violoations.
Ormat Technologies
In recent weeks, Ormat Technologies Inc. (ORA, Financial) has left investors and shareholders puzzled as an unusual number of insiders sold off their shares in a bid to reap higher earnings before a potential downturn.
Regardless, the Reno, Nevada-based geothermal energy and technology company has seen positive growth throughout most of the year.
In addition, investment giant BlackRock became its second-largest shareholder in August. The firm increased its initial holding of 8.3% to more than 12.5%, putting it behind Japanese company ORIX, which currently holds a 19.7% stake in Ormat.
While September's choppy conditions pulled the stock down about 6.12%, Ormat's shares have increased 11.56% year to date. On Oct. 3, the stock made a strong comeback, indicating investors are positive that the final stretch of the year could prove Ormat’s resilience.
Ormat has a 52-week range of $60.32 to $98.47 per share, which makes it still relatively affordable compared to other high-grossing market players. The company has a healthy balance sheet with revenue up 15.10% according to its last earnings call.
Why renewable energy stocks?
A considerable amount of money has been invested by the U.S. government in fast-tracking its development efforts for alternative and green energy sources. Earlier this year, the Biden-Harris administration allocated more than $1.7 trillion in federal funding toward climate resilience and clean energy for the next 10 years.
A report by the research group BloombergNEF has also shown that in 2021, wind and solar power surpassed 10% of the world’s electricity production for the first time. Currently, zero-carbon tech accounts for 39% of global power production.
The need for more advanced and progressive carbon-neutral energy production technologies has only incrased since the Russian invasion of Ukraine began, leading to a spike in oil and gas prices around the world.
As governments look to sidestep the need for Russian oil and gas in ongoing sanctions, the geopolitical tension has also brought to light the importance of finding alternative and greener solutions for energy production.
Aside from national governments investing federal dollars into green energy, private holders and consumers have also voiced their support for renewable energy in an ongoing effort to mitigate the challenges brought on by climate change.
The bottom line
Although economic uncertainty looms ahead and many investors are hesitant about the coming quarter, it could perhaps be time to re-evaluate and readjust investment strategies to help tread through choppy market conditions more smoothly.
While the renewable energy and technolony sector is not completely resilient against a major market downturn, it still proves to bring positive performance and growth despite the many challenges ahead. This could create the perfect opportunity for investors to direct their interests to the future of green energy production.
