For both the stock market and the weather, March was more lion than lamb. My broad market benchmark fell 2.2 percent to end up 1.5 percent for the quarter. Volatile clean energy stocks were down 4 percent, to end the quarter up 15.7 percent.
My annual Ten Clean Energy Stocks model portfolio is designed to avoid much of the sector's notorious volatility, and fell only 0.6 percent, ending the quarter with a 3.9 percent total return.
In dollar terms, the first six (income oriented) picks returned an average of 3 percent in March and 9 percent for the quarter, while the last four (growth oriented) picks fell 8 percent in March and 4 percent for the quarter. The two speculative picks gained 21 percent in March and 17 percent for the quarter. Local currency returns were slightly higher due to the weak Canadian dollar so far this year.
Two of the companies in the portfolio, Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF) and Primary Energy Recycling Corp (TSX:PRI, OTC:PENGF), announced long-awaited contracts, as did speculative pick Finavera Wind Energy (TSX-V:FVR, OTC:FNVRF) which is not included in the model portfolio due to its speculative nature. Offsetting the gains from these announcements were disappointing earnings and forward guidance from Ameresco, Inc. (NASD:AMRC).
I discuss Ameresco's setback and other companies' progress after the performance chart.
Individual Stock Notes
(Current prices as of February 3rd, 2014. The "High Target" and "Low Target" represent the ranges within which I predicted these stocks would end the year, although I expect a minority will stray beyond these bands due to unanticipated events.)
Sustainable Infrastructure REIT Hannon Armstrong rallied strongly for the first three weeks of March, only to fall back as quickly at the end of the month, all without any news. Eventually investors are going to recognize that HASI is a stable income stock which can be left in the back of a portfolio to gather dust and dividends. Until that time, the volatility is giving late-comers a chance to acquire this income stock at a very attractive price.
2. PFB Corporation (TSX:PFB, OTC:PFBOF).
Current Price: C$5.60. 12/26/2013 Price: C$4.85. Annual Yield: 4.5%. Low Target: C$4. High Target: C$6.
YTD Total C$ Return: 16.7%. YTD Total US$ Return: 12.9%
Green Building company PFB did not report any news of significance during March.
3. Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF).
Current Price: C$3.84. 12/26/2013 Price: C$4.05. Annual Yield: 7.4%. Low Target: C$3. High Target: C$5.
YTD Total C$ Return: 18.3% . YTD Total US$ Return: 14.4%
Independent power producer Capstone announced the long-awaited contract for its Cardinal co-generation facility with the Ontario Power Authority (OPA). I discussed my expectation for this contract in detail last November in Capstone Infrastructure: The Bad News Is Priced In. The actual contract seems to fall somewhere between my low estimate (the "Bad News") of the title and my "Expected" estimate.
The crucial variable will be the plant's capacity factor (the percentage of time it is running and producing power), which will in turn depend on electricity and natural gas market conditions. A fixed payment will cover Cardinal's fixed operating costs and return of capital, while the plant will operate whenever the spread between electricity prices and natural gas prices is sufficient for it to operate profitably. Cardinal's relative efficiency will allow it to operate more frequently than other natural gas turbines, and its capacity factor is likely to increase as Ontario's Nuclear refurbishment program periodically takes much of that capacity off the market.