While the major market indexes were hitting new highs in May, small capitalization stocks and clean energy stocks (most of which are small cap) continued to lag. The broad market benchmark IWM gained just 0.2 percent and is down 2.3 percent for the year, while my clean energy benchmark PBW fell 3.2 percent cutting its gains for the year to a slim 1.2 percent.
Meanwhile my 10 Clean Energy Stocks for 2014 model portfolio managed to eke out a 0.3 percent gain. All of that gain was in the form of dividends paid, without which it would have been flat for the month. For the year to date, the model portfolio has edged ahead of both benchmarks with a total return of 2.8 percent.
The key to this relative out-performance has been my focus on income and value stocks. Growth stocks had a particularly painful two months in April and June, and growth stocks dominate the clean energy indexes and most clean energy mutual funds. The trend can also be seen in my model portfolio, as I pointed out last month when I contrasted the first six income oriented stocks with the remaining four, which I lumped together as "growth."
I was a little too casual about calling Power REIT (PW) and Alterra Power (MGMXF, TSX:AXY), "growth" stocks, however. While both do have expansion plans, the main reasons they are in the list are Alterra's low valuation compared to the value of its assets, and Power REIT's potential for a large legal windfall. Hence, if I were to categorize the investment theses more precisely, I would call Power REIT a "special situation" and Alterra a value stock. I make these distinctions because it re-emphazies the pummeling growth stocks have taken recently — Ameresco (AMRC) is down 33 percent and MiX Telematics (MIXT) is down 17 percent so far this year. These two are the only stocks in the portfolio which are down at all. The other eight picks are up an average of 10 percent, as you can see in the chart below:
Individual Stock Notes
(Current prices as of June 2nd, 2014. The "High Target" and "Low Target" represent my December predictions of the ranges within which these stocks would end the year, barring extraordinary events.)
Sustainable Infrastructure REIT Hannon Armstrong announced first quarter normalized earnings of $0.20 a share, slightly lower than analyst expectations, but re-affirmed full year guidance. The main cause of the temporarily lower earnings was the timing of maturing investments and the issuance of HASI's first "Sustainable Yield Bond" (SYB) at the end of December. By issuing the fixed-rate SYB, HASI reduced its exposure to the interest rate fluctuations on the balance of its bank line of credit, better matching the interest rate profile of its assets and liabilities. This comes at the cost of higher interest payments and lower earnings in the short term.
HASI also announced the purchase of a $107 million portfolio of land under wind and solar farms, along with the associated leases to the renewable energy facilities.
2. PFB Corporation (TSX:PFB, OTC:PFBOF).
12/26/2013 Price: C$4.85. Low Target: C$4. High Target: C$6.
Annualized Dividend: C$0.24.
Current Price: C$5.25. YTD Total C$ Return: 10.7%. YTD Total US$ Return: 8.8%
Green building company PFB announced a loss of C$0.27 per share for the first quarter compared to an adjusted loss of $0.12 a year earlier. The first quarter is always weak for the building industry, and the icy winter exacerbated that effect this year. PFB operates mostly in the northern US and Canada, and all of the decline came from its Canadian operations. Nevertheless, the company's backlog "remained robust" and it paid its regular C$0.06 quarterly dividend.
3. Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF).
12/26/2013 Price: C$4.05. Low Target: C$3. High Target: C$5.
Annualized Dividend: C$0.30.
Current Price: C$4.46. YTD Total C$ Return: 29.9% . YTD Total US$ Return: 27.6%