Skip to main content
The Globe and Mail
Get full access to globeandmail.com
Support quality journalism
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
The Globe and Mail
Support quality journalism
Get full access to globeandmail.com
Globe and Mail website displayed on various devices
Just$1.99
per week
for the first 24 weeks

var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){console.log("scroll");var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))}pencilInit(".js-sub-pencil",!1);

What are we looking for?

Renewable-energy companies that could be attractive long-term investments.

The screen

Last week, two European energy giants – Germany's Siemens and Spain's Gamesa – merged. The main motivation was to achieve scale in their renewable-energy businesses, specifically wind turbines. Renewable energy is becoming a bigger slice of the global energy pie, with an especially large focus on implementing this technology in emerging markets. This combination of a rapidly developing technology in developing markets could be very lucrative for investors with a longer time horizon and the ability (and nerve) to handle risk.

Investing directly in foreign markets comes with obvious challenges, but a lot of renewable-energy companies in developing countries are listed in North America for access to capital. We screen for companies listed in North America and we also look at "primary country of risk," a Thomson Reuters metric that shows the country that is the source of the majority of revenue and growth opportunities for the company.

Next, we consider relative valuation and look for only companies with a forward price-to-earnings ratio of fewer than 15.

To mitigate risk, we filter out the smaller companies and include only those with a market cap greater than $200-million (U.S.).

Finally, we consider short interest. When a stock is sold short an investor has made an active bet that it will decrease in value. Short interest measures the percentage of shares outstanding that have been sold short, and we filter for a short interest not exceeding 6 per cent.

More about Thomson Reuters

Thomson Reuters delivers trusted news and intelligent information to more than one billion people in 140 countries every day. Our content, software and technology support the way professionals work in a rapidly changing, ever more complex world. Thomson Reuters Eikon is the platform used by financial and corporate clients to access top research, portfolio analytics, charting and screening for every asset class.

What did we find?

This screen produces seven companies, with either the United States or China as the primary country of risk for six of them.

One Chinese company that is particularly interesting is Daqo New Energy Corp. Daqo uses a process developed by the aforementioned Siemens to produce polysilicon for use in solar panels. Last year, it reached an annual capacity of more than 12,000 tonnes and it has a profit margin significantly higher than the rest of its domestic competition.

Those not ready to take direct exposure to China may want to look at Enviva Partners, based in Maryland. Enviva sells utility-grade wood pellets to customers in Northern Europe for use in power generators. Earlier this month, it signed new long-term contracts with customers that bring its average length of contract to more than eight years.

This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.

Hugh Smith, MBA, works in the financial and risk unit of Thomson Reuters and specializes in wealth and asset management.

Select renewable energy stocks

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Latest Videos

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies