2009: A Banner Year for My Clean Energy Stock Picks

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 |  Includes: AQUNF, CREE, FAN, GE, ICLN, JCI, NFYIF, ORA, SDS, TRN, WFIFF
by: Tom Konrad, CFA

2009 was a banner year for my clean energy stock picks, which are up 57% over 12 months, greatly exceeding their benchmarks.

Over the last 12 months, my ten green energy stocks for 2009 are up 57% vs. 29% for the S&P 500, and 12% for my clean energy benchmark, the iShares S&P Global Clean Energy Index (NASDAQ:ICLN), the two indexes I specified for benchmarks when I published the list a year ago.

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Below is a detailed rundown of the results.

Company Ticker

Change 12/27/08 to 12/27/09

Dividend & Interest

The Algonquin Power Income Trust AGQNF.PK 113.04% 13.13%
Cree, Inc. CREE 265.60%
First Trust Global Wind Energy ETF FAN 26.86% 0.46%
General Electric GE -3.32% 5.13%
Johnson Controls JCI 64.64% 3.07%
New Flyer Industries NFYIF.PK 43.72% 16.21%
Ormat ORA 27.66% 0.84%
Trinity Industries TRN 7.24% 1.87%
Warterfurnace Renewable Energy WFIFF.PK 60.22% 4.37%
-2x S&P Depository Receipts + 3x Cash (was SDS until Feb 13) 3x $ - 2x SPY -72.44% -0.18%
Total Portfolio 57.15%

Benchmarks

Standard & Poors 500 Index (S&P500) 29.07%
iShares S&P Global Clean Energy Index (ICLN) 12.14%
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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.)

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Outlook for 2010

In the panic of late 2008, picking good companies at reasonable prices was like shooting fish in a barrel. Today, the world is much different, with confidence back and many investors scouring the markets for relative (if not absolute) value stocks. My soon-to-be-published list of ten clean energy stocks for 2010 was much harder to choose, so although I expect to beat the market for a third year running, I don't expect to do so by as much as I did in 2009. Only two of these stocks, Waterfurnace and New Flyer, made it onto the 2010 list.

I also expect the market as a whole to fall in 2010, although probably not so badly as it did in 2008. I'll publish my list of ten clean energy stocks for 2010 in the next couple days in order to continue the tradition, despite my opinion that now is the wrong time to buy.

A better option might be to buy my list of ten clean energy stocks for 2010, but hedge the resulting market exposure with a selection of the short ideas in my Clean Energy Investing for Experts series. For non-experts, you can simply wait in cash a few months for the market to fall. In the stock market, avoiding the big losses is worth it even if you also miss out on the big gains.

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