Clean Energy Investment Expected To Recover And Who May Benefit

Includes: CLNE, MXWL, WARM
by: Josh Hutheson

Last week, Bloomberg reported that Goldman Sachs (NYSE:GS), the top arranger for renewable-energy stock offerings last year, is accelerating its funding efforts as it anticipates a rebound in an industry that's slumped every year since 2009. The investment bank is backing renewable energy that it expects will gain favor in a global shift it says is inevitable. That's why short-term volatility will be trumped by long-term gains as emerging technologies first become commonplace and then become indispensable, according to Stuart Bernstein, the Goldman partner overseeing its renewables unit. Furthermore, the website noted that clean energy is "central to the Goldman Sachs franchise," suggesting it too should benefit from the recovery in spending.

We are already seeing this shift as solar stocks posted strong gains in the last two months of 2012 while receiving a boost in interest from an investment from Warren Buffett's Berkshire Hathaway (NYSE:BRK.B). Solar stocks like First Solar (NASDAQ:FSLR), SunPower (NASDAQ:SPWR), and Yingli Green Energy (NYSE:YGE) posted gains of between 40% and 100% between the beginning of November and beginning of January. The Berkshire Hathaway investment in SunPower was announced on January 2nd and provided a big boost to shares.

MidAmerican Solar, a subsidiary of Berkshire Hathaway, and SunPower announced MidAmerican Solar's acquisition from SunPower of the 579-megawatt Antelope Valley Solar Projects, two co-located projects in Kern and Los Angeles Counties in Calif. Together, the two combined projects will form the largest permitted solar photovoltaic power development in the world and will create an estimated 650 jobs during construction. The Antelope Valley Solar Projects will provide renewable energy to Southern California Edison under two long-term power purchase contracts approved by the California Public Utilities Commission. SunPower's shares jumped nearly 50% on the announcement.

Further evidence of this phenomenon occurred in early December when SolarCity (SCTY) staged its initial public offering (NYSEARCA:IPO), in a first clean technology public offering since March of last year. In its debut, SolarCity closed 47% above its $8-a-share initial public offering price. The IPO went on to raise $92 million, giving SolarCity a market cap around $600 million. Investors have been rewarded handsomely and the stock is now trading at about $16 a share, a 100% return from the IPO price.

Here are three stocks that should benefit from the expected recovery in the space:

Maxwell Technologies (NASDAQ:MXWL) is a leading developer and manufacturer of innovative, cost-effective energy storage and power delivery solutions. The company's ultracapacitor products provide safe and reliable power solutions for applications in consumer and industrial electronics, transportation and telecommunications. Its high-voltage grading and coupling capacitors help to ensure the safety and reliability of electric utility infrastructure and other applications involving transport, distribution and measurement of high-voltage electrical energy. MXWL's radiation-mitigated microelectronic products include power modules, memory modules and single board computers that incorporate powerful commercial silicon for superior performance and high reliability in aerospace applications.

The company has a strong position in its field and has had a significant amount of insider purchases. Analysts expect EPS to stay flat at 35 cents a share next year while revenue is expected to jump 8% to $176 million.

HPEV (OTCQB:WARM) is an intellectual property and product development company with expertise in thermal dispersion technologies and their application to various product platforms. The company is currently commercializing its patented thermal technology and has additional patents-pending for various applications of its proprietary heat removal technologies. The markets that will be addressed by these technologies include myriad industries such as pumps, fans, compressors, batteries, motors, generators and bearings. In addition, management believes that the company's thermal technology will eventually be implemented in almost all components of the motor vehicle market including: motor control, battery, axle and brakes.

The company has a solid management team behind it as the company's President is Ted Banzhaf. As CEO, he led SpatiaLight from a $38 million market capitalization company to over $450 million market capitalization company in just over three years, having it added to the Russell 2000 and making it a top 5% performer on NASDAQ during his tenure from 2003 through 2006.

Clean Energy Fuels (NASDAQ:CLNE) is the largest provider of natural gas fuel for transportation in North America and a global leader in the expanding natural gas vehicle fueling market. The company has operations in compressed natural gas (CNG) and liquefied natural gas (LNG) vehicle fueling and construction and operation of natural gas fueling stations.

The stock staged a significant drop in value in the spring of last year when it fell from $24 a share to under $14 a share, where it is trading at now. However, this has created an opportunity in the stock. Analysts suggest that the fair value of the stock is just over $16 a share, which is upside of about 20% from today's levels. Even though the company is expected to post a loss next year, revenues are projected to rise 20% to nearly $400 million.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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