The public relations firm Waggener Edstrom released a survey of investors and analysts seeking opinions on what was in store for alternative energy for 2009 (link to the survey at the end of this article). Of the 81 respondents, 47 were institutional investors, 26 were brokerage analysts, five were from independent research firms and three were classified as "Other industry participants". Overall, 58% of respondents were from the buy side, 32% from the sell side and the remainder from "Other". Here are a few tidbits that caught my attention.
Storage: The Next Boom?
Overall, 50% of respondents expect alternative energy stocks to outperform the market in 2009 because of Obama's policies. Survey respondents are most bullish on energy storage stocks (including battery stocks) and wind stocks, with 43% believing that they will perform above or far above average (other categories include: biofuels, hydrogen & fuel cells and solar). Energy storage edges out wind in terms of bullishness with 15% of respondents believing storage stocks will perform far above average in 2009 (vs. 8% for wind).
This is an interesting development in my view and probably borne out of the recognition that, without significant technological improvements and cost decreases in storage technologies of all scales, alternative energy deployment will eventually plateau.
Unsurprisingly, biofuels receive the most bearish assessment with nearly a quarter of respondents believing the sector will perform far below average this year.
It's The Policies, Stupid!
When asked: "How do you think the following factors / variables will affect the performance of alternative energy stocks in 2009?", 38% of respondents say the Obama administration will have a very positive effect on the sector (1st overall choice), while 33% say government incentives in the U.S. will also have a very positive effect (2nd overall).
Access to capital is viewed as having the most negative effect (33%) on alternative energy stocks, followed by oil and gas prices (14%). When asked: "Generally speaking, public interest and commercial investment in alternative energy will (continue to) diminish whenever oil and gas prices decline", 53% of respondents either agreed or strongly agreed vs. 38% who disagreed or strongly disagreed.
This appears to indicate that while financing is the single largest risk to sector growth, investors are concerned about low energy prices lessening the case for alternative energy. Nevertheless, policy and regulatory developments are top-of-mind for investors. Apparently, several respondents (although the number isn't stated) revealed that their alternative energy investment theses rested on government incentives.
Journalists Have Some Homework To Do
Overall, respondents feel that both the mainstream and business press do a poor job of covering the alternative energy sector, with the former often being overoptimistic and the latter being too skeptical.
Only 24% of respondents agree that "generally, the media cover the industry fully and fairly", with the balance (76%) believing that "journalists and other media often overlook or are under informed about important aspects of the industry".
Stars & Dogs For 2009
An investor survey wouldn't be the same without stock picks. Without further ado, here are respondents' views regarding the best and worst performing alternative energy stocks for 2009.
|Best & Worst Performing Alternative Energy Stocks for 2009|
|Rank||Top picks||Top Dogs|
|#||Company Name||Ticker||Company Name||Ticker|
|1||First Solar||FSLR||Solaria Energia||SEYMF.PK|
|5||Covanta Holding||CVA||Aventine Renewable||AVR|
Interestingly, the top picks don't include any storage or battery stocks while only one of the dogs is a biofuel stock (Aventine (AVR)).
Either respondents don't want to reveal what they're buying or they won't put their money where their mouth is. I find it a little difficult to believe that respondents truly view storage as THE alternative energy sub-sector to be in for 2009 but can't identify a single storage stock they collectively like.
DISCLOSURE: Charles Morand does not have a position in any of the securities discussed above.