The Pros Pick Three Green Income Stocks For 2014

December 28, 2013 by  
Filed under Green Energy News

Tom Konrad CFA

bigstock-green 2014.jpg

Disclosure: I am long ACCEL, SBS, and HASI

For the second year in a row, I’ve asked my panel of green money
managers for their top green stock picks for 2014.  You can
see how their 2013

picks did here.

This year, I asked them for three picks each.  This is the
first of a series of articles discussing those picks.

Green Income Stocks

Green investing began to mature in 2013, with a number of
income-oriented green investments becoming available to retail
investors.  Until recently, it had been impossible to build a
diversified portfolio of clean energy stocks suitable for an
income investor.  That is now changing, and I’m working with
Green Alpha Advisors
to launch a fossil-fuel free equity-income strategy for separately
managed accounts, potentially followed by a mutual fund using the
same strategy if there is sufficient demand.

As investors become aware of this new type of green investing,
and especially as income funds focusing on the sector are
launched, I expect valuations to rise, so the next couple years
are likely to be an opportune time to invest in the best green
income stocks.  You can be sure there will be several green
income stocks in my annual list of “Ten Clean Energy Stocks for
2014″ which will be published around New Year’s on AltEnergyStocks.com. For
now, here are the three income picks from my panelists.

Jan Schalkwijk CFA is
a portfolio manager with a focus on Green Economy investment
strategies at JPS
Global Investments
 in Portland, OR.  I co-manage
his JPS Green Economy
Fund
.  Schalkwijk had two green income picks this year.
  Here’s what he has to say about them:

Accell Group NV
 (Amsterdam:ACCEL, OTC:ACGPF) is

a bicycle company located in The Netherlands. It is reasonably
cheap at 12.4x earnings and paying a 4.7% dividend. What has
kept a lid on Accell is the seemingly perpetual European
economic malaise, unfavorable weather conditions during the bike
buying seasons in the last couple of years, and lack of analyst
enthusiasm. In my view, Europe is likely to follow in the
footsteps of our slowly improving economic recovery, which
should bode well for European stocks and consumer spending.
Additionally, Accell is well positioned for the continued
electrification of the bike in northern Europe.

Companhia de
Saneamento Basico do Estado de Sao Paolo
(NYSE:SBS),
is a mouthful, but also a very interesting water utility and
waste water treatment company in Brazil. It had been on a tear
until early 2013, when the regulated water rate increase
disappointed the market. There is a good chance that come
February/March, the company will get a more favorable rate
reassessment. Meanwhile the stock is trading at 7.7x earnings,
pays a 4.6% dividend, and might have a chance to ride the wave
of investor interest that is likely the accompany the Brazilian
World Cup in 2014 and Olympics in 2016.

Shawn Kravetz 2013.jpg

Shawn Kravetz is President of Esplanade Capital
LLC, a Boston based investment management company one of whose
funds is focused on solar and companies impacted by the emergence
of solar.  Last year, his top pick last year was Amtech
Systems (NASD:ASYS.)

 It’s up 137% in the 12 months since he picked it. His income
pick this year is Hannon Armstrong Sustainable
Infrastructure,
(NYSE:HASI)
one of the new income investments I mentioned above that IPOed in
2013.

HASI is a “broken” IPO, meaning that it has been trading almost
exclusively below its issue price of $12.50, but it has touched
$12.50 several times over the last few days.  Kravetz says
that HASI

Provides and arranges secured and generally senior
debt and equity financing for sustainable infrastructure
projects (e.g., clean energy generation and energy efficiency).
 Established as a REIT pre-IPO, this 32 year-old firm is
headed by veteran management team.  We see them ramping to
a $1.17 annualized dividend early in 2014, nearly a 10% dividend
at today’s stock price.  At a peer multiple, the stock
should command a price of at least $17, implying at least 40%
upside.

Conclusion 

Will Kravetz have the top pick in 2014 as well as this year?
 It’s quite possible, but I hope it’s not with Hannon
Armstrong.  Although I personally own all three of these
stocks, it’s not because I expect 100%+ gains, but because they
have the potential for appreciation, but are much safer than the
growth stocks which dominate the available green investments.

If any of these three picks is the top pick for 2014, it will be
because other green stocks will have had terrible year, and these
advanced in a flight to safety.

Broad market valuations are high, so there is a real risk of a
broad market decline in 2014, and this would probably affect green
stocks as well.  Even without a broad market decline, it
would be unreasonable to expect another spectacular year like 2013
for green stocks.  Nevertheless, there are still a large
number of green stocks that did not participate in this year’s
rally and remain great values.

My panel of managers have picked fifteen of their favorites.
 You can read about the other twelve in my next few articles.

This article was first
published
on the author’s Forbes.com blog, Green Stocks
on December 17th.

DISCLAIMER: Past performance
is not a guarantee or a reliable indicator of future
results.  This article contains the current opinions of the
author and such opinions are subject to change without
notice.  This article has been distributed for
informational purposes only. Forecasts, estimates, and certain
information contained herein should not be considered as
investment advice or a recommendation of any particular
security, strategy or investment product.  Information
contained herein has been obtained from sources believed to be
reliable, but not guaranteed.

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