6 Alternative Energy Picks From Mega Money Managers

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 |  Includes: AMRC, AONEQ, CPST, MXWL, PPO, PWER
by: GuruFundPicks

In this article, we identify the power generation and storage group of alternative energy companies that are being accumulated and those being distributed by mega managers. We do this by analyzing the latest available Q3 institutional 13-F filings of the investing activities of the world largest fund managers, managing between $100 billion and over a trillion dollars.

The biofuel group and the solar and wind energy group are addressed in separate articles. The power generation and storage group of alternative energy companies includes Li-ion battery manufacturers such as A123 Systems Inc. (AONE) and Advanced Battery Technologies Inc. (OTCPK:ABAT), micro-turbine generator manufacturers such as Capstone Turbine Corp. (NASDAQ:CPST), and fuel cell manufacturers such as Quantum Fuel Systems (NASDAQ:QTWW). The list includes prominent managers such as Wellington Management ($1.6 trillion in total assets under management), Vanguard Group ($1.4 trillion), Fidelity Investments ($640 billion), T Rowe Price ($330 billion), and Goldman Sachs Asset Management ($580 billion), among others.

Based on our analysis, we determined that mega fund managers are bearish on the power generation and storage group of alternative energy companies. During the September quarter, these mega fund managers together cut a net $265 million from their $4.93 billion prior quarter position in the group, selling $731 million and buying $466 million worth of stocks in the group. Furthermore, overall they are under-weight in the group by a factor of 0.9. Taken together, mega funds have invested 0.09% of their capital in the power generation and storage group of alternative energy companies compared to the 0.10% weighting of the group in the overall market.

The following are the power generation and storage group of alternative energy companies that these mega fund managers are most bullish about (see table):

Polypore International (NYSE:PPO): Although not an alternative energy in the strictest sense, one of the two main markets for its polymer-based membranes that are used in the separation and filtration processes is the energy storage market, and the other is the Separations Media market. In the energy storage market, Polypore offers membranes that provide the function of separating the cathode and anode in applications, include lithium batteries that are used in electric drive vehicles, and electricity grid storage systems. Mega funds added a net $65 million in Q3 to their $806 million prior quarter position. All together, mega funds hold 37.6% of the outstanding shares, significantly more than their 29.0% weighting in the group. The top buyers were Ameriprise Financial ($27 million) and Wells Fargo & Co. ($15 million), and the top holder by far is Fidelity Investments ($347 million). Overall, 269 institutions hold 96.8% of Polypore shares, with Fidelity Investments, American Century Companies ($158 million) and BAMCO Inc. ($109 million) being the largest holders with 15.0%, 6.7% and 4.6% of the outstanding shares respectively. Also, it is important to note that all three of the largest holders added to their holdings in Q3.

Maxwell Technologies Inc. (NASDAQ:MXWL): Maxwell is a leading developer and manufacturer of innovative, cost-effective storage and power delivery solutions, including the manufacture of high-voltage capacitors, ultra-capacitors and radiation-mitigated micro-electronics. Mega funds added a net $14 million in Q3 to their $112 million prior quarter position, and taken together mega funds hold 26.3% of the outstanding shares, less than their 29.0% weighting in the group. The top buyers were Fidelity Investments ($8 million), Wells Fargo & Co. ($6 million), and Capital World Investors ($5 million), and the top holders are Fidelity ($34 million) and Vanguard Group ($23 million). Overall, 119 institutions hold 83.2% of Maxwell shares, with Guggenheim Capital ($65 million), Fidelity, and Lord Abbett & Co. ($31 million) being the largest holders with 13.3%, 7.1% and 6.5% of the outstanding shares respectively. Also, it is important to note that all three of the largest holders added to their holdings in Q3.

Capstone Turbine Corp. (CPST): Capstone manufactures micro-turbine generators with cogeneration, resource recovery and secure power applications. The micro-turbines provide power at the site of consumption, and can be fueled by a variety of sources, including natural gas, propane, kerosene, diesel and biodiesel. Mega funds added a net $1 million in Q3 to their $44 million prior quarter position. All together, mega funds hold 15.6% of the outstanding shares, less than their 29.0% weighting in the group. The largest mega fund holders at the end of Q3 are Vanguard Group ($16 million) and Barclays Global Investors ($8 million). Overall, 118 institutions hold 42.0% of Capstone shares, with Gilder Gagnon Howe & Co. ($35 million), Cramer Rosenthal McGlynn ($19 million) and Vanguard being the largest holders with 12.0%, 6.3% and 5.5% of the outstanding shares respectively.

The following are power generation and storage group of alternative energy companies that these mega fund managers are most bearish about (see Table):

Power One Inc. (NASDAQ:PWER): Power One designs, manufactures, and markets power conversion and power management solutions for the renewable energy, communications infrastructure, and other high technology markets. Mega funds cut a net $10 million in Q3 from their $134 million prior quarter position. All together, mega funds hold 27.6% of the outstanding shares, less than their 29.0% weighting in the group. The top mega fund seller was Vanguard Group ($9 million). Overall, 183 institutions hold 66.8% of Power One shares, with Waddell & Reed Financial ($36 million) and Wells Fargo & Co. ($30 million) being the largest holders with 6.7% and 5.7% of the outstanding shares respectively.

A123 Systems Inc. (AONE): A123 manufactures rechargeable lithium-ion batteries and battery systems for transportation, utility and consumer markets. Mega funds cut a net $9 million in Q3 from their $83 million prior quarter position. All together, mega funds hold 26.9% of the outstanding shares, less than their 29.0% weighting in the group. The top sellers were Deutsche Bank ($4 million) and AllianceBernstein ($2 million). Overall, 138 institutions hold 45.0% of A123 shares, with Alliance Bernstein ($17 million), General Electric Co. ($16 million) and Wellington Capital Management ($13 million) being the largest holders with 6.0%, 5.9% and 4.6% of the outstanding shares respectively.

Ameresco Inc. (NYSE:AMRC): Ameresco is an independent provider of comprehensive energy efficiency solutions for facilities throughout North America. Its solutions include upgrades to a facility’s energy infrastructure, and construction and operation of renewable energy plants. Mega funds cut a net $2 million in Q3 from their $33 million prior quarter position. All together, mega funds hold 10.1% of the outstanding shares, significantly less than their 29.0% weighting in the group. The top sellers were Deutsche Bank ($0.7 million) and Bank of America Corp. ($0.7 million). Overall, 78 institutions hold 34.5% of Ameresco shares, with Frontier Capital Management ($10 million) being the largest holder with 3.3% of the outstanding shares.

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Table

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General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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