Alternative energy stocks, especially the ones operating in the solar industry, have been in a downtrend for about a year-and-a-half, and most are currently trading near multi-year lows. For example, the Guggenheim Solar ETF (TAN) is down 29% YTD, after a steep 66% plunge in 2011. In this article, via an analysis based on the latest available Q1 institutional 13-F filings, we identify the alternative energy stocks that are being accumulated and those being distributed by the world's largest fund managers.
These mega fund managers, such as Fidelity Investments, Goldman Sachs, BlackRock Inc., Vanguard Group, and 22 others, manage between $100 billion and over $1 trillion each, and together control about 40% of the assets invested in the U.S. equity markets. Together, these mega fund managers are extremely bullish on the alternative energy group, adding a net $347 million in Q1 to their $9.52 billion prior quarter position in the group. However, overall they are still under-weight the group by a factor of 0.5; that is, taken together, the 25 mega funds have invested 0.15% of their assets in the group, about half of the 0.3% weighting of the alternative energy group in the overall market (for more general information on these mega funds, please look at the end of the article).
The following are the alternative energy companies that these mega fund managers are most bullish about (see Table):
Solazyme Inc. (SZYM): SZYM is engaged in the production of renewable oils from low-cost sugar feedstocks for use as fuels and chemicals, nutrition, and for skin and personal care. Mega funds together added a net 1.98 million shares in Q1 to their 6.99 million share prior quarter position in the company, and taken together mega funds held $107 million or 14.9% of the outstanding shares.
The top buyer was Vanguard Group, with $1.7 trillion in assets under management, that purchased 0.66 million shares. Other large mega fund purchasers included mutual fund powerhouse Fidelity Investments (0.58 million shares), with $555 billion in 13-F assets, and mega fund T Rowe Price Associates (0.57 million shares), with $520 billion in assets under management. Overall, institutional investors loaded up on SZYM in Q1, adding 1.97 million shares to their 12.00 million share prior quarter position.
In its latest Q1 (March), SZYM beat analyst earnings estimates (28c loss v/s 30c loss), and with revenues slightly down sequentially and up 75% year-over-year. Analysts are projecting strong revenue growth going forward from the current $45 million on TTM (trailing-twelve-month) basis to a projected $114 million in FY 2013 based on the average of twelve analyst estimates on Yahoo. Also, analysts are generally bullish on the company, with a mean price target of $19, well above current prices in the $11 range.
Other alternative energy companies that mega fund managers are bullish about include:
- Archer Daniels Midland (ADM), mainly a processer and marketer of agricultural commodities, and also the largest ethanol producer in the U.S., in which mega funds together added a net 13.54 million shares to their 176.50 million share prior quarter position in the company;
- First Solar Inc. (FSLR), that manufactures and sells solar modules using a thin-film semiconductor technology for residential and commercial markets in the U.S., Europe and Asia, in which mega funds together added a net 2.08 million shares to their 32.90 million share prior quarter position in the company;
- A123 Systems Inc. (AONE), that manufactures rechargeable lithium-ion batteries and battery systems for transportation, utility and consumer markets, in which mega funds together added a net 6.87 million shares to their 26.65 million share prior quarter position in the company; and
- Fuelcell Energy Inc. (FCEL), that is a manufacturer of stationary fuel cells worldwide for commercial, industrial, government, and utility customers, in which mega funds together added a net 4.97 million shares to their 16.81 million share prior quarter position in the company.
The following are alternative energy companies that mega funds are bearish about (see Table):
- Trina Solar Ltd. (TSL), that is a vertically-integrated Chinese manufacturer of mono-crystalline ingots, wafers and cells to the assembly of high quality solar modules, in which mega funds together cut a net 1.99 million shares from their 8.49 million share prior quarter position in the company;
- GT Advanced Tech Inc. (GTAT), that provides poly-silicon production technology and multi-crystalline ingot growth systems, and related photovoltaic (PV) manufacturing services for the solar industry worldwide, in which mega funds together cut a net 1.31 million shares from their 42.58 million share prior quarter position in the company;
- Ormat Technologies Inc. (ORA), that designs, develops, and operates geothermal and recovered energy-based power plants worldwide, in which mega funds together cut a net 0.34 million shares from their 4.55 million share prior quarter position in the company;
- Suntech Power Holdings (STP), that is a Chinese manufacturer of photo-voltaic cells and modules for worldwide distribution, in which mega funds together cut a net 3.17 million shares from their 9.25 million share prior quarter position in the company; and
- Sunpower Corp. (SPWR), that is an integrated solar products and services company that designs, manufactures, and delivers solar electric systems for residential, commercial, and utility-scale power plant customers worldwide, in which mega funds together cut a net 1.20 million shares from their 10.29 million share prior quarter position in the company.
Furthermore, the following are additional alternative energy companies that are among the top holdings of mega funds in the group (see Table):
- Rentech Inc. (RTK), that is engaged in the commercialization of its proprietary Rentech-SilvaGas biomass gasification process that converts multiple biomass feedstocks into synthesis gas (syngas) for the production of renewable fuels and power, in which mega funds together hold 40.62 million or 17.8% of the outstanding shares;
- Capstone Turbine Corp. (CPST), that manufactures micro-turbine generators with cogeneration, resource recovery and secure power applications, in which mega funds together hold 41.12 million or 13.8% of the outstanding shares;
- Yingli Green Energy (YGE), that is a Chinese manufacturer engaged in the design, development, marketing, manufacture, installation, and sale of photovoltaic products, including PV cells, PV modules, and integrated PV systems, as well as poly-silicon ingots, blocks, and wafers, in which mega funds together hold 9.32 million or 6.1% of the outstanding shares;
- LDK Solar Co. (LDK), that is a Chinese manufacturer of multi-crystalline solar wafers that are the principal raw material used to produce solar cells, in which mega funds together hold 12.61 million or 9.5% of the outstanding shares; and
- JA Solar Holdings (JASO), that is a Chinese manufacturer of mono-crystalline and multi-crystalline solar cells for solar modules and systems, in which mega funds together hold 11.01 million or 5.4% of the outstanding shares.
General Methodology and Background Information: The latest available institutional 13-F filings of the largest 25 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.
This article is part of a series on institutional holdings in various industry groups and sectors, and other articles in the series for this and prior quarters can be accessed from our author page.
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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