Stock market crashes are an integral part of investing, although they can be shocking to investors. However, if you are prepared for these events with a stock buying list that you would appreciate being able to acquire at a discount, the dips can actually help you build a diversified portfolio.
So which renewable energy companies should be on your buying list the next time stock prices fall? For three of our contributors, the answers to this question are Flowering energy (NYSE: BE), Brookfield Renewable Power (NYSE: BEP), and Lucid Motors, which will join the public market later this month via a merger with SPAC Churchill Capital IV (NYSE: CCIV).
The game of hydrogen energy
Travis Hoium (Flowering energy): One of the most exciting growth markets in renewable energy is hydrogen technology, and Bloom Energy is one of the industry leaders. Bloom manufactures fuel cell “servers” that use hydrogen to generate electricity, and solid oxide electrolyzers that use electricity to generate hydrogen from water. Between these systems, Bloom occupies two key places in the hydrogen economy, which is a great place as this segment of the energy market grows.
Bloom Energy didn’t get as much attention as Connect the power (NASDAQ: PLUG) or Ballard Power Systems (NASDAQ: BLDP), who both have higher valuations than him. But Bloom is a better trader with more revenue and higher gross margins. And with an energy solution designed for large-scale deployments, it has a long growth track to a total addressable market that management believes could exceed $ 2 trillion.
What Bloom Energy has yet to generate are profits – these have so far eluded the entire fuel cell industry. But with its margins rising and its deliveries growing, Bloom Energy could be profitable in the coming years. If this happens and investors can access the stock for less than current levels, it could turn out to be a great buy.
A wind power boon
Howard Smith (Brookfield Renewable): Market declines often give investors the opportunity to buy more of their favorite stocks at better prices. For companies like Brookfield Renewable, they offer a second benefit. The stock dividend pays around 3% at recent prices, and a stock market crash could offer investors the opportunity to secure income at an even more desirable yield.
Brookfield Renewable has a portfolio of nearly $ 60 billion of renewable energy assets globally. Hydroelectric assets accounted for around 65% of its electricity production in 2020, wind generating an additional 25% and most of the rest coming from solar installations.
Investors have recognized the growth potential of the renewable energy sector, and Brookfield shares have risen about 40% in the past year. As of March 31, it had a capacity of approximately 20,600 megawatts (MW), but also had a project development pipeline with a capacity of 27,000 MW.
These assets generate stable cash flow that supports its dividend payments. In the first quarter of 2021, funds from operations (FFO) increased by 21% compared to the same period of the previous year. The company expects this growth to continue. In its first quarter report, management said it “focuses on opportunities that build on our strengths – where we can invest for value, leverage our operating capabilities to increase our cash flow “. Brookfield aims to increase distributions to shareholders from 5% to 9% per year.
It will also continue to invest for growth. Brookfield made its first investment in offshore wind power in the first quarter after several years of monitoring the development of this technology. Including dividends, the company expects shareholders to see long-term annualized returns in the range of 12% to 15%. Investors who buy Brookfield Renewable shares for sale during a market liquidation should be generously rewarded.
Massive industrialization of luxury electric vehicles
Daniel Foelber (Lucid Engines): No one knows for sure when or how the next market correction will occur. But in the long run, stocks have proven time and time again to be one of the best ways to build wealth.
When considering a business like Lucid Motors, it’s best to ignore short-term market fluctuations and focus on the big picture instead. This means investors need to keep a close watch on the reception of its highly anticipated Lucid Air Dream Edition to see if it lives up to the hype and if it can ramp up production to meet its mass-manufacturing goals.
Lucid recently announced that it will hold a special meeting of shareholders on July 22 to vote on its proposed business combination with Churchill Capital. Assuming everything goes as planned, on July 23 Churchill Capital will be delisting NYSE, and the shares of the new combined company will be listed on Nasdaq under the LCID symbol.
Lucid’s marketing strategy resembles that used by You’re here (NASDAQ: TSLA): He plans to start with the low-volume deployment of a high-margin vehicle and then move to a lower-margin, higher-volume strategy over time. The company wants to establish its brand, be recognized for its quality and performance, achieve sales and profits to its credit, and then grow. This game plan is less capital intensive and in many ways less risky than moving quickly to mass production. Considering the failure rate of American automakers, gradual expansion seems like a reasonable path to take.
The company claims that the Lucid Dream Edition has a rated range of 503 miles on a full charge and that its 1,080 horsepower engine can go from 0 to 60 mph in 2.5 seconds or less. The specs speak for themselves, but it will take a lot more than a hot car for Lucid to become a rival to automakers like Tesla.
Lucid has set itself ambitious business goals, including the goal of being profitable by next year and positive Free Cash Flow (FCF) by 2025. Even if it achieves all of its goals, it will have to continue. on its momentum for years to justify its current valuation.
Lucid Motors could very well become a stock of millionaire electric vehicles. But it could also fail epically for a variety of reasons. The battle for electric vehicle fame will only intensify as a multitude of new companies clash with established automakers. In this hyper-competitive environment, delays and missed targets could have far-reaching consequences. When it comes to its potential for long-term success, the competitive advantages of Lucid’s technology and its ability to increase manufacturing will be far greater than the ebb and flow of the broader stock market.
Large stocks to buy at a reduced price
We are bullish on all of these stocks for the long term, but investors who can enter at lower prices will naturally be positioned for better returns. The clean energy revolution still has a long way to go, and whether you’d rather invest your money in hydrogen, wind and solar or electric vehicles, there are some intriguing investment options worth considering. be explored.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.