Growing concern surrounding climate change has consumers, businesses and lawmakers swiftly adopting a new attitude in an ongoing effort to lower their carbon footprint. With the demand for renewables becoming more mainstream, investors are ready to throw their weight behind clean investments but are not yet ready to let go of fossil fuels.
A survey of 2,000 American adults by The Motley Fool found that roughly 60% of investors currently own or trade renewable energy stocks or funds.
Despite the upside, around half of the respondents still have fossil fuel stocks in their portfolios. What’s more, a further two-thirds of those investors have said they will continue investing in fossil fuel companies.
The ongoing uproar for broader and more progressive renewable policies has steadily started trickling down into investor portfolios, as a growing number see potential in the future of renewables and clean energy companies.
Highlighting the importance of green energy stocks
With consumers, businesses and governments now pushing harder to bring clean energy policies to the forefront, the investment ecosystem has also started changing its tone regarding the decarbonization of investment portfolios.
The need for investors to take a more serious and supportive stance in the effort to mitigate the effects of climate change has led to many of them slowly adapting their assumptions and physical impacts on the environment and greater macroeconomic ecosystem.
Five clean energy stocks to hold onto in 2023
With the year already in full swing, investors are hoping to ride out the opportunities presented by green energy and other renewables as broader market conditions further falter, including the once-red hot tech sector. Here is a look at some green stock picks many are holding in their portfolios this year.
General Electric
First up is multinational conglomerate General Electric Co. (GE, Financial). While the American company that specializes in energy equipment and components does not necessarily evoke an image of clean and green energy, this is all set to change in the coming year with its GE Vernova spinoff.
The Vernova side of things will focus primarily on renewables, digital and energy financial services, as well as a host of new power generation leadership. The company is set to invest heavily in offshore wind turbines, hydrogen power and hybrid energy and storage units.
There is also speculation that GE will focus its efforts to provide more sustainable grid solutions for its renewable business and increase its investment capacity within this space. Something that could play in GE and Vernova’s favor is the Inflation Reduction Act, which could help bolster investor sentiment in the near term.
Wall Street analysts remain wary of the potential GE can offer investors in the coming months, although share prices managed to steadily rise after the company posted a 73% jump in fourth-quarter 2022 earnings.
NextEra Energy
Investors have been seemingly aggressive when it comes to NextEra Energy Inc. (NEE, Financial) after the company managed to gain roughly 8.4% over the last six months. This metric is against the Zacks Utility Power Industry's gain of roughly 13.7%.
One of the largest electric utility holding companies on the market, NextEra has several subsidiaries under its belt, including Florida Power & Light, NextEra Energy Resources and Gulf Power Company, among others.
Over the past couple of years, the company has made strategic moves to grow and expand its renewable business. One of the major projects NextEra is currently campaigning is to heavily reduce carbon emissions and to further make strategic acquisitions with green energy powerhouses and startups.
Gaining a better foothold in the renewable energy sector will not only give the company an upper hand compared to other utility providers, but it can also give it the institutional leverage needed to expand its green efforts.
NextEra holds a moderately positive position in the current economic climate, though several complications of its business model and operations could slightly hinder its potential.
Bloom Energy
Considerably one of the more undervalued players in the sector at the moment, Bloom Energy Corp. (BE, Financial) focuses on minimizing the effects natural gas, biogas and hydrogen electricity have on the environment.
Perhaps their key influence comes taking these gases and turning them into energy with a low-to-zero emission output.
For a company of its caliber, it holds a steady and progressive research and development team that focuses on reducing CO2 emissions output as much as possible.
Revenue for the 12 months ended December 2022 soared by 35.07%. While the company endured headwinds last year, seeing income from cash and short-term investments decline by 12%, its balance sheet remains steady.
There is a lot of investment opportunity for Bloom Energy. With a 52-week range of $11.47 to $31.47, Bloom Energy is an undervalued company that can deliver strong returns in the coming years as it increases its green energy investments.
First Solar
Time and again, First Solar Inc. (FSLR, Financial) has remained a steady contender in the green energy space, especially for investors who have more financial leverage and that are willing to bet on the long-term success and widespread adoption of solar energy.
There is, however, a downside. Following a recent rally, Deutsche Bank downgraded the stock, claiming FirstSolar's shares are too expensive. This led to a 1.4% decline in price on April 13.
Currently, First Solar has an average day range of $207.74 to $211.83, and year range estimates predict it could surpass the $220 threshold in the coming months.
Another analysis from Seeking Alpha's David Zanoni indicates First Solar has an attractive valuation, so ongoing revenue and earnings growth could help bolster stock prices even more.
FirstSolar presents a positive and highly attractive upside, with year-over-year revenue climbing just over 10%. Ongoing innovation in the solar energy space will give the company a solid lead, but more so, it is a safe long-term bet that could offer valuable returns for investors that are willing to ride out the renewable energy wave a bit longer.
Orsted
If you have never heard of Orsted AS (OCSE:ORSTED, Financial) (DNNGY, Financial), we do not blame you, even though it is the largest energy and power company in Denmark. Further, it has one of the biggest offshore wind farm projects in Europe. Estimates indicate the company has developed close to 30% of worldwide offshore wind power farm capacity, excluding mainland China.
The company recently said it is looking to expand further west, increasing its presence in the United States and other parts of North America.
As Orsted ramps up efforts to increase its offshore and wind farm capacity, its strategies have been clearly reflected in its latest financial report.
Revenue in 2022 soared by 70% compared to 2021 and has tripled since 2020. Net income has also steadily increased over the last several years.
For investors looking for a safer bet outside of their general scope, Orsted has a strong position and is an aggressive contender in clean and renewable energy.
Final thoughts
It is becoming increasingly hard for investors to choose from the plethora of green energy companies that have popped up over the last several decades.
The renewable energy sector is not scared to show its prowess on the global market, and the ongoing push from consumers and governments will likely only entice investors even more.
Global investment is another key factor that has helped fuel ongoing growth for these companies. For investors willing to bet on the long-term expansion of green energy and global sustainability efforts, it may be a good idea to get behind these companies while they are still well-priced and steadily approaching an inflection point.
