July and August saw some mild recovery for the stock market after a difficult first half of 2018. Clean energy income stocks continue to lag the broader market, but my Ten Clean Energy Stocks model portfolio has managed to maintain its lead over its broad market benchmark.
Through August 31st, the model portfolio is up 7.5%, compared to its broad dividend income benchmark SDY, which is up 5.3%. Its clean energy income benchmark YLCO is down 1.2, even after dividend income.The private portfolio I manage, the Green Global Equity Income Portfolio (GGEIP), is slightly behind the broad market of income stocks at 4.6%, but well ahead of YLCO.
Over the two months, most of these companies announced their second quarter earnings, and for most of them, there were few surprises, which no doubt contributed to the steady performance of most of the portfolio.
Details of the stocks’ performance are shown in the chart below.
Top Picks
In July, I highlighted Brookfield (BEP), Covanta (CVA) and Atlantica (AY) as my top short term picks. These three stocks were up 2.4%, 7.1%, and 3.9% over the last two months. This average increase of 4.5% was solidly above the portfolio as a whole at 2.3%. I currently think CVA, GPP and TERP have the best prospects for short term gains. Not that these prospects are great; I am taking an increasingly cautious approach towards the market as a whole and increasing my allocation to cash.
Stock discussion
Below I describe each of the stocks and groups of stocks in more detail.I include with each stock “Low” and “High” Targets, which give the range of stock prices within which I expect each stock to end 2018.
Seaspan Corporation (NYSE:SSW)
12/31/17 Price: $6.75.Annual Dividend: $0.50 (7.4%). Expected 2018 dividend: $0.50 (7.4%).Low Target: $5. High Target: $20.
8/31/18 Price: $9.22YTD dividend: $0.375 (5.56%)YTD Total Return: 43.3%
Leading independent charter owner of container ships Seaspan’s gave back a little of its gains from earlier in the year. The second quarter earnings call was “steady as she goes,” so I see the decline as mostly profit taking after the earlier large gains. I took some gains myself.
Covanta Holding Corp. (NYSE:CVA)
12/31/17 Price: $16.90. Annual Dividend: $1.00(5.9%). Expected 2018 dividend: $1.00 (5.9%).Low Target: $15. High Target: $25.
8/31/18 Price: $17.65 YTD dividend:$0.50 (2.96%) YTD Total Return: 7.8%
Covanta, the US leader in the construction and operation of energy from waste (EfW) plants reported second quarter earnings in July. The company is seeing improvements in profitability in most parts of its operations, and now expects full year results to come in at the high end of its previous guidance.
In August, the company reported several financial transactions that should improve overall profitability. It sold a small (13MW) hydroelectric project in Washington state to Atlantic Power (AT), and assumed the operation and maintenance of two EfW facilities in Florida. Since Covanta already operates six other EfW facilities in Florida, it should be able to achieve synergies in these operations that were not possible for the hydroelectric plant in Washington.
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