Russia’s invasion of Ukraine and the subsequent ongoing armed conflict is having the predictable impact of sending oil prices higher.
And when oil prices jump, another predictable reaction is that renewable energy equities and the related exchange traded funds join the party. The SPDR Kensho Clean Power ETF (CNRG) is confirming that thesis. CNRG, which tracks the S&P Kensho Clean Power Index, is higher by nearly 13% over the past week.
“While that’s been a boost for traditional oil and gas stocks, renewables have been on a strong run. Solar specialist Sunrun (RUN) has gained 33% since the invasion began, Sunnova Energy International (NOVA) is up 32%, and Sunlight Financial (SUNL) is up 26%. NextEra Energy (NEE), the world’s largest producer of wind and solar energy, has risen 7%,” writes Morningstar analyst Leslie Norton.
With the exception of Sunlight Financial, all of the stocks mentioned above are among CNRG’s 45 holdings, confirming that the $282.06 million has multiple avenues of leverage for capitalizing on rising oil prices benefiting clean energy stocks.
Additionally, CNRG could offer more upside as market participants and energy experts are reminded of the point that renewables will play pivotal roles in energy independence in the West in the years to come.
“Instead, the invasion underlines the importance of energy independence. In the United States, for example, a winter storm is rolling into Texas, just a year after a winter storm left millions without access to electricity for days. That has made solar and other renewable energies more valuable,” notes Norton.
Approximately 20 industry groups are represented in CNRG, indicating that the fund has one of the deepest industry-level benches in this category. In other words, unlike some competitors, CNRG isn’t heavily dependent on just solar and wind equities.
Two other factors could make CNRG a compelling near- to medium-term bet. First, after some disappointing showings last year, some clean energy stocks, including some CNRG member firms, are now attractively valued. That rarely happens in this growth-heavy category. Second, CNRG resides 33.3% below its 52-week high, which is potentially a sign that there’s ample room for the fund to run higher.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.