Three top stock picks in the struggling renewable energy sector. Moreover, a “complete capitulation” of the stock markets

The US Congress has failed to pass climate-friendly legislation and, according to Morgan Stanley strategist Stephen Byrd, this has left renewable energy stocks dejected and ripe for investment.

Last Friday, Democratic West Virginia Senator Joe Manchin announced that he would not support climate-related tax incentives, prompting a sell-out in the sector. Morgan Stanley now believes there are “multiple attractive buying opportunities” among cleantech stocks.

Notably, Mr. Byrd expects the U.S. electricity sector to meet its climate goals – 75% decarbonization between 2005 and 2030 – sooner than expected. This process to achieve these goals involves a substantial expansion of renewable energy and a considerable growth avenue for renewable energy stocks.

There are four big reasons the analyst thinks clean energy stocks are attractive in the current environment.

First, renewable energy costs have become increasingly attractive relative to the rising costs of natural gas and coal.

Second, despite recent congressional inaction, existing tax incentives should be expanded.

Third, Mr. Byrd’s projects have pursued 20% annual growth in rooftop solar and about 40% annual growth in large-scale solar installations.

The fourth reason is that the lack of investment, combined with a higher incidence of severe weather events, has rendered existing power grids unreliable and inefficient.

Among Morgan Stanley’s top picks in the sector are solar providers Sunrun Inc. (RUN-Q), a leader in rooftop solar, and The AES Corp. (AES-N) which specializes in utility scale solar energy. The third top pick is the one I own, clean hydrogen producer Plug Power Inc. (PKUG-Q).

Mr Byrd believes that for clean hydrogen, “the hype starts to become reality in 2022”. Plug Power is set to bring three major installations online this summer and Morgan Stanley expects orders for the company’s clean energy solution to continue, particularly in Europe where gas supplies are obviously at risk.

The S&P/TSX Composite Energy Index is down 18% from its peak in early June and some investors may be looking more to a less carbon-dominated future for power generation. At the very least, renewable energy stocks can help diversify national portfolios.

— Scott Barlow, Globe and Mail Market Strategist

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actions to ponder

Northland Energy Inc. (NPI-T) This international power producer has a reasonable valuation and a reliable (but not growing) dividend. Analysts are rather optimistic: there are 13 buy recommendations, with an expected total return of more than 16%. Jennifer Dowty reviews the investment case.

The summary

What the Contra Guys are doing with their wallets this summer

Ben Gallander and Ben Stadelmann agree on tons of things, but where we are in the economic and business cycle today leaves them with different views. Here’s a mid-summer update on their thoughts on the markets and portfolio opportunities.

Will soaring oil and gas prices destroy high prices?

Oil and gas prices continue to be stubbornly high, panicking both politicians and consumers. At the other end of the spectrum, the Bank of Canada seems to be more optimistic, predicting that world oil prices will gradually decline. In other words, central bankers are referring to the fact that the behavior of oil prices is typical of commodity prices in every economic cycle. But if they are wrong and oil prices continue to be high for years to come, will we be on the verge of a major economic catastrophe? Value investing professor Dr. George Athanassakos explains why he thinks things are worse than central bankers think.

Funds in ‘total capitulation’ as they cut equity allocation: BofA poll

Investor expectations for global economic growth and corporate earnings have fallen to their lowest on record, according to Bank of America’s Monthly Survey of Global Fund Managers for July, describing the picture as a “complete capitulation.”

Others (for subscribers)

Expected returns and analyst recommendations for all stocks in the S&P/TSX Composite Index

Wednesday analyst upgrades and downgrades

Tuesday analyst upgrades and downgrades

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Ask Globe Investor

Question: I want to invest in solid and reliable companies that pay dividends. How can I find out the history of a company’s dividend payments?

Answer: You can do one of two things: get the information directly from the company’s website or use a third-party site such as Globeinvestor.com.

Let’s take BCE Inc. BCE-T as an example, starting with how to find the company’s own data.

Start by doing an Internet search for “BCE Investor Relations”. When you get to the investor relations page, click on “shares and dividends”. Then scroll down to see a table of BCE’s most recent and upcoming dividend payouts.

Want even more information? Clicking on “view dividend history page” will take you to a list of BCE dividends dating back almost 40 years.

Not all companies are as comprehensive as BCE when it comes to presenting historical dividend data. But most understand the importance of dividends to their shareholders and publish at least a few years of information. (Note to companies that do not publish any historical dividend data: please spare your shareholders the annoyance and make this information readily available on your website.)

If you tried a company’s website and backed out, you can find historical dividend information on most third-party financial websites. Globeinvestor.com, for example, recently updated this feature and now includes over a decade of dividend data.

Returning to the BCE example, enter the stock symbol (BCE) into the search box on Globeinvestor.com to view the company’s stock quote. Then, below the stock price, click on “dividends” to view all of BCE’s quarterly dividends since 2005, including declaration, ex-dividend, record and pay dates. Globeinvestor.com also provides the five-year annualized dividend growth rate, which in BCE’s case is around 5.1%.

Whether you use Globeinvestor.com or another financial website, I strongly recommend that you double-check all dividend data against company numbers to ensure they are correct.

–John Heinzl

What’s up in the coming days

Ian McGugan will explain why investors may be underestimating interest rate developments.

Click here to view Globe Investor’s earnings and economic news calendar.

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Compiled by Globe Investor staff