For climate-aware investors, there is some good news in the form of the fact that some clean technology and renewable energy stocks are currently sporting attractive valuations.
For investors that want to get in on that act while eschewing the stock-picking burden, there’s good news as well because select exchange traded funds are homes to some of those undervalued renewable energy names. That group includes the VanEck Low Carbon Energy ETF (SMOG).
SMOG, which follows the MVIS Global Low Carbon Energy Index and turns 16 years old in May, is home to 70 stocks. In the eyes of some analysts, some SMOG components are indeed trading at valuations that may be too good to ignore.
Take the case of Ballard Power Systems (BLDP), a giant in the fuel cell industry and a member of the SMOG portfolio.
“While competitors have diversified their businesses beyond fuel cells to hydrogen production or electrolyzers, in recent years Ballard has kept a narrow focus on its core fuel cell technology. As such, we view Ballard’s most credible argument in support of a moat to be its intellectual property around PEM fuel cells (and to a lesser extent its brand, given its long history),” according to Morningstar research.
Plug Power (PLUG) is rising to acclaim in the green hydrogen space, which some market observers could be the next big thing in renewable energy, potentially reaching par with or even surpassing solar and wind. That underscores the long-term opportunity with this SMOG holding. Additionally, Plug Power possesses notable advantages over rivals.
“Green hydrogen as a fuel to decarbonize is in its infancy. Customers face numerous challenges with adopting hydrogen technology, including economics and lack of green hydrogen production and infrastructure. Within this context, we view Plug’s efforts to provide customers a one-stop-shop solution of technology and fuel as aiming to lower the barriers for customer adoption. While this strategy brings greater capital intensity, it positions Plug as the only all-in-one provider within the industry,” added Morningstar.
Both Ballard Power and Plug Power command four-star ratings from the research firm and are two of just three renewable energy stocks with that status.
Among SMOG’s top 10 holdings, Enphase Energy (NASDAQ: ENPH) and Solaredge Technologies (NASDAQ: SDGE) are two more examples of renewable energy equities that trade at modestly attractive price-to-fair-value ratios as measured by Morningstar.
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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.