How Are the “Tree Huggers” Doing?
|Written by GSCR Staff|
|Friday, 06 February 2015 07:04|
For several weeks we have been discussing the low oil and gas environment and trying to play the market accordingly.
Today we thought we would look back at some of our alternative picks with the Market Monitor, no pun intended, in the green energy sector. Please take no offense with the headline, it was said in jest.
The chart below illustrates the one year price changes for our green energy market proxy, iShares Global Clean Energy ETF (NASDAQ – ICLN), which tells the overall tale of the sector, for the most part. As many of you are aware, 2014 started out great and ended poorly.
1-Year Chart for ICLN
Here is a brief history lesson and some advice going forward for some of our prior picks.
We featured Orion Energy Systems (NYSE – OESX - $4.96)in late October 2013 at $4.04. The stock is up over 21% since then and peaked at $7.52 about a year ago. The Company designs, manufactures, and markets various light-emitting diode (LED) retrofit fixtures for the commercial and industrial applications.Recently, the Company received yet another patent for its retrofit fixtures, and continues to land multi-million dollar contracts. We think the business is de-coupled enough from oil and gas and is geared toward saving overhead costs for its customers. We think OESX can climb back over $6 by late summer.
Another pick that has not provided investors with some green is Quantum Fuel Systems Technologies Worldwide, Inc. (NASDAQ – QTWW - $2.69) which we highlighted just about a year ago at $8.30. For those doing the math, that’s a 67% drop. Ouch!
The Company develops, produces, and sells natural gas fuel storage systems; and integrates vehicle system technologies in the United States, Germany, Canada, India, Spain, and Taiwan. Its products include high pressure gaseous fuel tanks, packaged fuel system modules, gaseous fuel electronic vehicle control systems and software, and hybrid control and motor control software systems. On the macroeconomic level, long term low oil and gas prices could really be a detriment to Quantum Fuel. However, the deal flow for the Company remains fairly steady. The Company received orders for its Q-CabLITE and Q-RailLITE fuel modules from a leading refuse company that is expanding its natural gas vehicle fleet last month. Additionally, the short term and medium term EMA are very bullish. This may be a sign to get in for a short term trade. At this point there are two schools of thought. One, cut your losses, or two hang on to QTWW, which we still believe is a solid long term investment.
Finally, we made Canadian Solar, Inc. (NASDAQ – CSIQ - $25.34) one of our picks in mid-November 2013 at $28.23. The stock is off 10% from our initial pick but, like many stocks in the sector, peaked in February 2014 at well over $44, which was nearly a 50% increase over our initial feature. The Company designs, develops, manufactures, and sells solar wafers, cells, and solar module products worldwide. Like Quantum, the short and medium term EMA is very bullish for CSIQ. Additionally, a forward P/E of 5 versus a trailing P/E of 8 is another good sign.However, the short float of 12.2% indicates a prominent short position. The U.S. Energy Information Agency projects a 22% growth rate in the solar energy consumption in the U.S. alone for 2015. We think CSIQ is worth holding onto and could climb back over $30 this year.
Have a great day!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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