How to Know Which Energy Stocks to Buy

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While renewable energy debates rage on all over the world, the time is ripe to invest in clean and renewable energy sources. Here are our top ideas for how to add to your portfolio:

Nuclear

While this is far from new technology, it is precisely because nuclear power is well-established that it makes for a reliable investment. For the more risk-averse investor looking to buy into energy stocks, companies like Atomic Energy Canada or Gen4 Nuclear Energy have proven track-records in providing nuclear power or being involved with the mining and conversion of uranium. They should provide a reliable return on your initial investment, given their established standing on the stock market.

The establishment

Another way to hedge your bets when buying energy stocks would be to invest in companies that have committed to being more energy efficient and environmentally conscious in the way that they conduct their business. The benefit of this is a healthy cash flow to cement your investment in, while expecting growth as these companies garner public praise of their environmental mindset. Google, Amazon and Microsoft, are some of the big tech companies aiming to go green as quickly as their profit margins will allow. If you are looking to invest not only in stocks but in physical assets which support clean energy, then Volkswagon, General Motors and BMW should also be high on your list as they work on solutions which impact how many of us travel in future (Green Biz, January 26, 2018).

Government players

Buying into companies winning large-scale tenders for transforming government infrastructure to clean energy solutions would also be a good place to start. According to Investopedia (February 9, 2019), the following companies are strong stocks to buy when looking at those winning government contracts worth huge profits

  • MKS Instruments
  • BMX Industries
  • First Solar, Inc
  • Cosan
  • Pattern Energy Group, Inc.

Start-ups

For those who enjoy dabbling in the IPO and venture capitalist realm the options in renewable energy are vast. The number of companies offering off-grid solutions to individual households or grey water systems to small-scale agriculture is very much on the rise. While profits in these areas are not guaranteed, the potential profits are very high. There are companies looking to overhaul everything from food-packaging to how we dispose of old furniture, so doing your homework could reveal some very interesting and alternative thinking when looking to buy energy stocks.

Inevitable gains

There is no denying that fossil fuels are a limited resource and that they will become more expensive as deposits run out. Buying stocks in green energy now will pay increasing dividends as the attention of countries like China, India and Russia move more and more into renewable energy infrastructure (Green Biz, January 26, 2018).

Politically immune

Unlike fossil fuels which are variable in price due to political and economic pressures dictated by where they are found, clean energy offers a more stable return as every country has enough solar and wind power to support themselves. Buying the stocks of companies who operate all over the world is also a clever idea, as it means the longevity of your investment will go beyond however long it will take to convert the US to clean energy. Of course, once this new infrastructure is up and going there will be the ongoing need to maintain it, but it is on the initial project that the return on investment is likely to be considerable.

Where to start?

It is always best to look at domestic companies when buying stocks because you can gain easy access to financial records and up-to-date investor reports. The big gains are often to be made with companies that operate domestically and abroad, such as Atlantica Yield PLC or Vestas Wind Systems A/S (Investopedia, October 8, 2018). Third would be foreign companies operating either in the US, Europe or in developing markets where political stability is high. This may be especially true in the energy sector, where the ability to build and maintain infrastructure relies on government players who either make doing business in their country easy, challenging or dangerous. Bloomberg New Energy Finance (BNEF) has been tracking the success of renewable energy ventures in developing countries and found that most projects are highly successful and experience the full backing of those governments

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Now is definitely the time to diversify your portfolio into clean and renewable energy because demand will only go up as access to fossil fuels declines.