Tuesday Dec 06, 2022

Clean Energy Remains A Long-Term Leader – Forbes


The global equity benchmark remains -21% off highs (-24%) to its recent June lows as shown in the Datagraph™ below.

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Within the ongoing global bear market, finding areas of relative strength outside of defensive groups has been especially challenging. The equities sell off has hit all areas at some point during this decline.

· Of the areas that led prior to the Bear Market, many continue to trade not only substantially off highs, but also with very poor relative strength trends. These include software, e-commerce, recent IPOs, and small-cap growth, amongst others.

· Just a few segments were former leaders during the strong rally from March 2020 lows and are still leading over the trailing 52-weeks and on a YTD basis. These include Oil and Gas Producers, Agriculture-related, Infrastructure, and Clean Energy. However, the recent pullback in Oil prices and the sharp decline in the stocks raises questions about whether fossil fuel companies will be leaders in the next Bull Market cycle.

William O’Neil + Co.

As seen in the table above, some of the strongest performers from the March 2020 low have suffered the most in the subsequent decline. In particular, E-Commerce stocks, new IPOs, and Biotechnology have been the biggest losers. In addition, over the last year, many laggards from the previous rise have outperformed strongly, especially those relating to the rise in inflation. Specifically, Oil and Gas Producers, Agricultural Producers, Infrastructure and Clean Energy did well in period from March 2020 till present period. The Datagraphs below demonstrate the strong absolute and relative performance of these four groups.

U.S. Oil&Gas Producers (XOP
)-Weekly Chart

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Agribusiness ETF (MOO
)-Weekly Chart

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U.S. Infrastructure ETF (IFRA)-Weekly Chart

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Global Clean Energy ETF (ICLN
)-Weekly Chart

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While not unprecedented, it would be unusual for the leaders of the previous cycle to be leaders in the next. However, Clean Energy has been one of favored global themes for the past couple of years and remains so now. Many industries are undergoing long-term shifts towards greener technologies with the most consequential end-markets will include Utilities, Transportation, and Construction/Building Materials. As a result, we believe this is one past leader that we think investors should keep at the top of their list of potential additions when a new Bull Market is underway.

We suggest looking at the ICLN ETF as a way to get exposure to the theme. This ETF is weighted towards clean energy (solar, wind, hydrogen) producers and product makers (another ETF more heavily weighted towards batteries, lithium, and semiconductors is the First trust Clean Energy-QCLN).

There are many macro drivers to Clean Energy. These are driven by both regulatory, economic and climate change issues. Some of these key figures are:

· According to the International Energy Agency (IEA), net renewable capacity additions set to expand by 8% in 2022 after 6% growth in 2021 and over 40% growth in 2020. Solar photovoltaic (PV) installations will remain the key driver, while wind is expected to recover after a down …….

Source: https://www.forbes.com/sites/randywatts/2022/07/21/clean-energy-remains-a-long-term-leader/

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