With oil stocks stagnating across the globe, and environmental sustainability becoming more important than ever as the Amazon Rainforest burns, alternative energy is one sector investors should be flocking to.
Not only is alternative energy hugely important for the future of the environment, but 2019 has also seen a record number of deals by some of the world’s biggest oil companies in the sector as it looks to move away from the “alternative” label and become the mainstream in terms of energy sources. When alternative energy stocks first arrived on the market, many speculators viewed them as risky bets given the oil industry’s dominance; however, thanks in part to large-scale government initiatives, they have become increasingly popular.
What are Alternative Energies?
Alternative energies, or renewable energy as they are often referred to, is a term used to describe any energy source that is derived in a manner that does not deplete natural resources or harm the environment. There are numerous different sources of renewable energy, such as solar, wind, biomass, geothermal, hydropower, and ocean resources. The US and Canada are two of the largest providers of alternative energies, ranking at third and seventh respectively, with China’s contribution of 14% being the largest.
The International Energy Agency, an intergovernmental organization based in Paris, publishes an annual report of the future of energy markets entitled Renewables. Last year’s report contained an in-depth analysis of bioenergies, which is renewable energy produced by living organisms and perhaps the most overlooked sector in the industry. Bioenergies were responsible for over half of the world’s renewable energy output in 2017 and accounted for four times the contribution of solar and wind energy combined, so it’s a really interesting sector for investors to look out for.
The same report also stated that alternative energies will grow by one-fifth in the next four years to make up 12.4% of global energy demand. While that may not seem like a huge figure, it is a step in the right direction, and in context, 12.4% of all the energy used around the world is still a pretty substantial market.
So, now we’ve looked at what alternative energy is and why it’s important, here are our picks of three of the best-performing stocks with a market cap of at least $2 billion USD.
Alternative Energy Stocks to Watch
MKS Instruments Inc (NASDAQ:MKSI) is a Massuchesttes-based semiconductor manufacturer that is benchmarked on the S&P Global Clean Energy Index. This company has been a real standout performer in recent months, having posted revenue of $2.1 billion USD for Q2 last year, an increase of 8% year-over-year and with expectations to increase revenue by 49% in the near future. With the increasing shift towards renewable energy, many analysts believe this stock is undervalued at $80.83.
First Solar Inc (NASDAQ:FSLR) is a manufacturer of one of the most important components in generating renewable energy—solar panels—as well as providing support services such as finance, construction, and maintenance. The company also claims to have the “strongest balance sheet in the industry,” which should be more than enough to attract potential investors. But if you need any more reason to consider this company for investment, First Solar is also excluded from tariffs on solar panels, sales of which have been increasing significantly over recent months.
First Solar stock is currently valued at $62.46 and has been showing positive growth over 2019, despite still being 9.7% down from a year-high of $69.24. With sales of solar panels widely expected to increase, this stock looks like a pretty safe option for some sustainable growth.
Atlantica Yield (NASDAQ:AY) is a UK-based sustainable infrastructure manufacturer and is perhaps the most intriguing pick on this list. The company got off to a bad start when it went public in 2014. Initially valued as high as $30, the company lost 60% of its share value in the following 18 months of trading. However, it has recovered gradually since then and is now back to around the $24 mark and showing no signs of slowing.
What makes AY such an attractive prospect is the diversity of its portfolio, with solar projects in the US, Spain, and South Africa, wind farms in Uruguay, and a mini-hydro facility in Peru to name but a few. AY is also backed by Algonquin Power & Utilities (NYSE:AQN), which provides the company with significant investment power that the company plans to put to good use by investing $200 million–$300 million USD per year on growth opportunities. With an already impressive portfolio and big plans to expand it, the future certainly looks bright for AY stock.
It’s clear that alternative energies are the future of energy provision around the world, and although the industry still faces challenges going forward, it’s definitely an investment worth considering. What do you think?
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