It was another volatile week in the markets as stocks soared on Monday morning after Joe Biden’s victory in the U.S. presidential election and news from Pfizer (PFE) and BioNTech (BNTX) reporting promising data on their leading COVID-19 vaccine. While many companies hampered by the pandemic saw their shares rise, the vaccine news had the opposite effect on companies that have benefitted from the stay at home trend.
The continued volatility may have investors wondering where to put their money, and I believe we should focus on industries that will benefit from a Biden presidency. I see strong growth in one industry in particular: renewable energy. I see an opportunity in stocks such as NextEra Energy, Inc. (NEE), Enphase Energy, Inc. (ENPH), and Canadian Solar Inc. (CSIQ).
But first, let’s take a look at the markets over the past week; then, I will provide more insight on the stocks I just mentioned.
The S&P 500 index finished the week up 2.2%, after ending the day on a high note, with a record closing of 3585.18. This topped its previous record high in early September. The Dow Jones Industrial Index and Nasdaq Composite were both up 1% today as well.
This was after a mixed week, where markets started trending downwards late Monday after the vaccine news. We saw gains on both Tuesday and Wednesday, but a record jump in COVID cases on Wednesday, and renewed concerns on a stimulus plan, led to a drop on Thursday.
Investors are grappling with the short-term headwind of skyrocketing cases of COVID, which could lead to a lockdown of some kind, and the long-term tailwind of an approved vaccine at some point over the next few months.
The continued outbreak of cases is certainly concerning. If we do have a lockdown, it may affect fourth-quarter results for many companies starting to see the light at the end of the tunnel. As I mentioned last week, a second lockdown could be a boon for many stocks that have benefited from the stay at home trend.
Now that a vaccine is on the horizon, let’s look at companies that have not only benefited during the previous lockdown but will continue to benefit after the population is vaccinated and will undoubtedly benefit from a Biden Presidency.
A Biden administration should prove quite beneficial to renewable energy stocks. As the global economy moves away from fossil fuels toward cleaner and renewable alternatives, renewable energy is growing exponentially. According to the International Energy Agency, the share of renewables in global electricity generation reached almost 27% in 2019. It is expected to grow another 50% by 2024.
Biden’s agenda should accelerate this shift. The President-elect has indicated he plans on removing billions in federal subsidies from fossil-fuel companies and is considering putting a price on carbon emissions. In addition, China is expected to continue developing renewable energy resources, and in Europe, regulators are already providing incentives for alternative-energy sources.
The following three stocks have performed well based on these trends and should continue to gain with a Biden presidency.
NextEra Energy, Inc. (NEE)
NEE is the largest renewable-energy company in the U.S. Early last month, the company surpassed the market valuation of Exxon Mobil (XOM), which was the largest U.S. company by market cap, only seven years ago. If that doesn’t signal a changing of the guard, I’m not sure what will.
The company operates through two business segments, rate-regulated electric utilities that distribute power to consumers and businesses and an energy segment that generates electricity and transports natural gas. These two segments combine to produce more energy from wind and sun than any other company in the world.
The stock is rated in a “Strong Buy” in our POWR Ratings system. It holds straight “A” s in every POWR grade, including Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is also the #1 ranked stock in the Utilities – Domestic industry.
Enphase Energy, Inc. (ENPH)
ENPH has a strong position in the solar industry by delivering energy management technology. It designs, develops, and manufactures home energy solutions that connect solar generation, energy storage, and management.
The company revolutionized the industry by pioneering a semiconductor-based microinverter and is currently the leading manufacturer of microinverters in the United States. ENPH has a strong history of growth, with sales up 42.1% last year and earnings up 276.5%. The firm also has a strong balance sheet with a current ratio of 3.3 and a return on equity of 42.7%
The stock is rated a “Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade. The stock is also ranked #1 in the Solar industry.
Canadian Solar Inc. (CSIQ)
Another company in the solar industry, CSIQ, provides solar power products, services, and system solutions to Canada, the United States, Japan, and more. It has one of the world’s largest utility-scale solar project development platforms, with operations of more than 5.6 GWp of solar power plants.
CSIQ has a solid project pipeline and should benefit from an expected record number of solar installations in the U.S. next year. Sales and earnings are expected to grow by 30.7% and 20.3% in 2021. The stock is already up 75% this year, and with a P/E of only 9.1, its prospects look green.
The stock is rated a “Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade and a grade of “B” for Buy & Hold Grade and Peer Grade. CSIQ is the #4 ranked stock in the Solar industry.
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About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More…
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