Alternative Energy Newswire

Tom Konrad CFA

Outlook 2013 photo via BigStock

Last December, I asked my panel of managers of green funds and
portfolios to predict the major trends of 2013, and pick
their top stock for the year to come.  I wrote a series of
articles based on their responses, which I’ll reference below.

I plan to ask them the same questions this year, but first I will
check on how they’ve done so far.

The Managers

Not everyone on my panel responded to all the questions, but here
are the ones who did:

• Jeff Cianci is Chief Investment
  Officer at equity investment fund Green Science Partners.
• Sam Healey is a portfolio manager at Lamassu
  Capital.
• Garvin Jabusch
  is cofounder and chief investment officer of Green Alpha ®
  Advisors, and is co-manager of the Shelton Green Alpha
   Fund (NEXTX)
  and the Sierra

  Club Green Alpha Portfolio. He also authors the blog
  “Green Alpha’s Next Economy.”

• Jan Schalkwijk,
  CFA is a portfolio manager with a focus on Green Economy
  investment strategies at JPS Global Investments in

  Portland, OR.

• Rafael Coven is Managing Director
  at the Cleantech
  Group, and manager of the Cleantech index (^CTIUS) which
  underlies the Powershares Cleantech ETF (NYSE:PZD.)
• Shawn Kravetz is President of Esplanade
  Capital LLC, a Boston based investment management company one of
  whose funds is focused on solar and companies impacted by the
  emergence of solar.
• Dr. Rob Wilder is Index Committee Chair for
  WilderHill Clean Energy Index (ECO), the first to
  capture and track this sector.   ECO underlies the
  PowerShares WilderHill Clean Energy ETF (NYSE:PBW.)

Trends

Here’s how their predictions turned out:

2013 seems to have been an inflection point,
with large gains led by Tesla Motors (NASD:TSLA)
and solar stocks reversing several bad years.  Four of my
managers polled: Wilder, Jabusch,  Schalkwijk,
and Coven get kudos for saying 2013 could
mark a new era for clean energy, but
none of them pinpointed the nature of the change.
 Wilder thought conservatives might start embracing renewable
energy, while Schalkwijk, and Coven thought investors would
start paying more attention to companies with strong fundamentals.
 Jabusch was closest to the mark when he said the green
economy might be closer to mainstream acceptance, although he
thought acceptance of climate change would be the driver for this
change.  Solar City
(NASD:SCTY)
is bringing solar into the mainstream, and Tesla Motors’ (NASD:TSLA)
cars are at least the object of mainstream desires, even if they
are still out of reach.

LED stocks did exceptionally well, but not
better than cleantech stocks in general.  Picks with
significant exposure to LEDs were Universal Display Corp.
(NASD:OLED,
formerly PANL, up 41%),  Cree (NASD:CREE,
up 63%), and Veeco Instruments (NASD:VECO,
up 8%.)  Again, three managers (Cianci, Schalkwijk, and Coven)
should get credit for highlighting

a successful sector, but I still have to reserve the highest
marks, since other cleantech sectors did much better.

Three managers had thoughts on Smart Grid company EnerNOC
(NASD:ENOC).
 The stock did well, up 48%,  so I have to give credit
to Healey and Jabusch,
who praised

it.  Coven, on the other hand, gets
dinged because he thought the stronger entry of utility companies
into the smart grid space (which did not happen) would either
“severely hurt ENOC or push it to be acquired by an Electric
Utility or services company.”

Solar Stocks shone most brightly in 2013, with
solar indexes more than doubling since last December, but no one
seems to have seen it coming.  The best call was from solar
specialist Kravetz, who expected solar
stocks to have their “first profitable year” after four years of
losses.  Jabusch and Coven
correctly predicted consolidation in the solar industry, but did
not express an opinion on the direction of solar stocks.

Other Trends: Coven
made a few predictions which did not make it into any of my
articles, but that was no fault of his own, they just did not fit
the themes in others’ predictions.  He thought a strong move
towards Natural Gas Vehicles would help NASD:CLNE, NASD:FSYS, and
NASD:WPRT, but these three were flat for the year.  He also
called for the reductions in Solar PV subsidies in Northern States. This
happening where I live in New York, and the addition of a net

metering charge in Arizona is also a move in that direction.
He accurately predicted continued acquisitions by
conglomerates,  poor performance of Japanese cleantech
companies, increased focused on grid security, and
predicted consolidation

in the wind industry.  Overall, I’d say his other
predictions were pretty good.

Stock Picks

Below, I’ve put together a chart of the performance of each
manager’s “top pick.”

Several did not limit themselves to one stock as I’d asked.
 Jabusch picked four stocks, Coven listed many of which I
selected the six that he seemed to recommend most highly, and
Healy picked two.  For these managers, I’ve included yellow
bars with the average return of the stocks they picked.  Dr.
Wilder takes his role as the manager of a passive index seriously,
and does not pick stocks.  Since Jabusch has a mutual fund
which went public in March, and Coven and Wilder each manage the
indexes behind the ETFs PZD and PBW, respectively, I’ve included
the performance of these funds as red bars.

Finally, the last three columns (“Avg.”) show composite portfolio
formed from these picks.  The blue bar is the result of
equally weighting the 14 stock picks (hence giving more weight to
managers who picked more stocks) for a 49%.  If instead the
portfolio is equally weighted by manager, the return is a higher
54% shown in yellow.  This boost results from the relatively
higher weight given to Amtech Systems’ (NASD:ASYS) 160%

return.  Finally, a portfolio composed of NEXTX, PZD, and PBW
weighted equally, would have returned 46% (red bar), at least if
the NEXTX investment had been kept in cash until that fund went
public in March.

As is fitting in a year that solar stocks performed so well, the
best stock pick was solar supplier Amtech Systems (NASD:ASYS).

 It was picked by solar specialist Shawn Kravetz.  Of
 the others, only JAbush chose a solar stock, First Solar
(NASD:FSLR),

as one of his four picks.

Both Coven and Jabusch outperformed their own funds.  This
might tempt us to conclude that they could do better by focusing
more on their top picks.   However, Jabush’s NEXTX became
public in March, and given the strong performance of cleantech
stocks at the start of the year, it probably would have been up
another 10% to 15% if it had been around for the full year.
 After adjusting for that, the difference between the
performance of their top picks and the funds they manage is
probably too small to reach any conclusion.

Awarding Grades

Predicting the stock market and picking the best stocks is always
hard.  For those managers who stuck to the rules and picked
only one stock, it was even harder, since company events can often
overwhelm the trends.

It’s also hard to compare these managers against each other, but
of the seven, Shawn Kravetz deserves praise for
having, by far, the best stock pick.  Rob Wilder
also did well, by being true to his calling as an index manager,
and riding that index to strong returns in a year when none of
these prognosticators foresaw the incredible rise of solar stocks.
 Finally, I think Garvin Jabusch needs to
be singled out both for the strong performance of his mutual fund
in the seven months it’s been public, and and for picking four
stocks that did better than any other manager’s in my panel
besides Kravetz’s single pick.  He also recently commented to
me that his favorite pick among the four became First Solar
(NASD:FSLR) when, a day later, JP Morgan picked it as their one “stock
to avoid” for 2013.  It’s up 85% since then.

As for the others, returns ranging from 8% to 41% would not have
been anything to complain about in a normal year, and they had
some good insights into the sector.  As a green money manager
myself, I’d say I also fall in to this group: Our returns have
been decent, but nothing like those of solar stocks or sector
indexes like Rob Wilder’s.

In any case, one (or three) years’ returns are not enough to
judge a manager’s skill.  How will green stocks and these
managers do in 2014?  I plan to ask them soon, so check back
in December.

This article was first

published on the author’s Forbes.com blog, Green Stocks
on November 26th.

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