10 Green Energy Stocks for 2009 - Q3 Performance Update

by: Tom Konrad, CFA

For the first 9 months of 2009, my ten green energy stocks for 2009 are up 23.4% vs. the S&P 500, and up 20.4% over my clean energy benchmark, the iShares S&P Global Clean Energy Index (NASDAQ:ICLN). For the third quarter, that amounts to a loss of 1% relative to the S&P 500, and a gain of 7% relative to ICLN.

In my second quarter update, I attributed the out-performance of both clean energy in general, and my picks to the Obama Effect. That is, green energy outperformed the market strongly in the first half of the year because of the strong political and financial support it received from the new administration and Congress.

In the third quarter, with the administration and congress distracted by the health care debate, the market as a whole made up a lot of ground against my general green energy index, but my picks were able to hold on to almost all of their gains, despite the less favorable climate.

Below is a detailed rundown of the 9 month results. The somewhat cryptic last pick, "3x $ - 2x SPY" is a hedge against a possible market decline. Rather than using a pure short, I wanted to give it approximately equal weight to the other picks. In order to have an initial investment of $1 in each pick, including the short, I sold a hypothetical $2 worth of SPY short, but kept the $2 cash proceeds, along with an extra $1 cash allocated to the pick. Hence that pick is a combination of $2+$1 = $3 cash and -$2 short of SPY. (I left out a few details here for simplicity. All the gory detail is here.)

Company Ticker

Change 12/27/08 to 9/30/09

Dividend & Interest

The Algonquin Power Income Trust AGQNF.PK 77.42% 11.16%
Cree, Inc. CREE 144.02% 0%
First Trust Global Wind Energy ETF FAN 37.42% 0.46%
General Electric GE 2.82% 4.51%
Johnson Controls JCI 50.89% 2.30%
New Flyer Industries NFYIF.PK 26.73% 9.98%
Ormat ORA 37.03% 0.44%
Trinity Industries TRN 0.24% 1.40%
Warterfurnace Renewable Energy WFIFF.PK 68.63% 3.27%
-2x S&P Depository Receipts + 3x Cash (was SDS until Feb 13) 3x $ - 2x SPY -54.81% -0.17%
Total Portfolio 41.51%


Standard & Poors 500 Index (S&P500) 17.13%
iShares S&P Global Clean Energy Index (ICLN) 21.11%
Click to enlarge

10for2009.PNGClick to enlarge

My Trades & Updates

I continue to expect a market decline, and am now more worried than 3 months ago, when I had sold most of my positions in Cree, Ormat, and General Electric. In the meantime, in addition to increasing the overall level of market hedging for my portfolio, I sold more of my GE stake.

If you want to delve deeper, I recently published an update on the Algonquin Power Income Trust. I'll also have an update on New Flyer Industries which will be published at the preceding link early next week (link broken until then). The original article has more information on the other picks.

Three months ago, I told readers, "If I had to buy any of these stocks today, it would be Trinity." In the three months since then, Trinity has risen 29%, compared to a rise of 14% for the S&P 500, a rise of 6% for ICLN, and a rise of 11% for my portfolio as a whole (relative to their prices at the time.) Trinity was not the best performer for the quarter, but readers who chose to buy it then will probably be happy with the results.

If I had to buy any of these stocks today, I wouldn't. I'd take a position shorting the market (i.e. 3x $ - 2x SPY.) Let's see how that works out in three months.

Other Portfolios I'm Tracking

I recently published the half year update for my quick mutual fund tracking portfolio. That portfolio had continued to outperform the mutual funds it was designed to track, and, in my investigation, I discovered it was because the portfolio had higher market risk (beta) than the funds it was drawn from. Since I've now determined that it is not a good tracking portfolio, I don't intend to update readers on its performance again, but I may use some of the lessons learned in future portfolio design.

I also need to update my ten green energy gambles for 2009, which I intend to do (schedule permitting) about 6 months after the list was published, or around October 11. The six month update is here. That portfolio also continues to do well, although it is much more vulnerable to a market decline than the 10 stocks I discussed here.

DISCLOSURE: The author and/or his clients own AGQNF.PK, CREE, FAN, GE, JCI, NFYIF.PK, ORA, TRN, WFIFF.PK.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.