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SX Greentech Advisor
High Profit ESG Investing

October 26, 2022

I’d like to thank each of you for your interest in renewable energy, decarbonization and ESG investing. I remain a steadfast believer in the long-term transition to clean energy and the profits that it will offer to investors. Since I began investing in the sector in 2007, I’ve never been more optimistic about its future, regardless of the markets right now.

Our assertion in last week’s issue that the stock market may have found a bottom continues to hold. The current market looks bearish for Greentech – our benchmark average is still below its 20-day and 40-day moving averages – but bear markets never bottom out on good news. A major test for equities will come about 7% above current stock market levels when the New York Stock Exchange Composite and S&P 500 Index will hit resistance at their 200-day lines. Greentech has a path to rise 17% from here before it needs to slay long-term resistance at its 200-day line. The 200-day moving average is typically the most considerable support or daunting resistance for any stock.

My money’s been investing alongside yours. In our final update, here’s how I suggest going forward with our current portfolios and what I’m doing.

Real Money Portfolio

Clean Earth Acquisitions Corp. Shares, Warrants and Rights (CLIN, CLINW, CLINR)
The SPAC is merging with Alternus Energy, an Irish renewable energy owner/operator. This merger will allow us to execute on our strategy entering the trade. We bought units we then split into shares, warrants and rights. When Clean Earth asks shareholders to vote on the merger, we will vote on two separate things: to approve the merger and whether or not we want the return of share capital held in the trust. You can vote to approve the merger and still vote for the return of capital to you. The return of capital will be the per-share trust value of $10.10. This will lock in a 1.1% profit on the trade before the warrants and rights.

Assuming the merger is approved and closes – which is not guaranteed in the current market – we will receive one share for every 10 rights we hold, regardless of whether we swap our shares for trust capital. We will also hold warrants that can be converted into shares, one warrant for one share, at the price of 11.50. The merged company will be able to force conversion of the warrants if shares trade at or above 18 for 20 days of any 30-day period.

In sum:

CLIN (shares): Vote FOR the merger and vote to exchange your shares for the trust capital of 10.10. If the merger fails, you will be able to claim the per share trust value next year, when the SPAC must close and return that money to shareholders.

CLINW (warrants): Warrants and rights are our profit. You can either sell them in the market soon for a small profit (warrants are at 9 cents lately) or wait until the merger closes and for the resulting business to get its legs in the market, which should eventually boost warrant prices. Because the warrants can be called at 18, they have a theoretical maximum value of 6.50 (the difference between the $11.50 cash warrant holders will have to deliver to acquire a share at 18). If the warrants are ever called, you MUST exchange them through your broker or sell them in the market. If you do nothing, your warrants will be cashed out for 10 cents each. The warrant will expire essentially worthless five years from the merger closing if you don’t ever sell them.

CLINR (rights): Rights are potentially the biggest profit contributor. We acquire shares from the rights only if the merger is completed, 10 rights equal 1 share. If you believe the merger will happen, you will be swapped into shares at the merger price, providing you with shares worth 10 at first, which will then fluctuate with the market. Assuming the merger, we recommend selling the resulting shares immediately, booking another $1 profit per unit we bought (because each unit came with one right). If you don’t expect the merger to close, you can either hold the rights in hopes Clean Earth will find a new merger target in the next year before the SPAC must close, or sell them in the market now. The rights are trading today at 12 cents each. Rights will expire worthless when the SPAC closes if there is no merger.

Clearway Energy (CWEN/A)
We’ve collected $0.714 in dividends so far which puts us down about 5% overall on Clearway right now. Our sell stop is “around 28” and our goal is to raise the sell-stop to our buy price once shares advance higher again. HOLD

Energy Recovery (ERII)
ERII bounced off its 200-day average and has rallied well the past two weeks. Our sell-stop is “near 20.” Watch for shares as they get back to 26 – if they break through resistance there, continue to hold and raise your sell-stop to your buy price. If they test 26 but fail to close higher, sell and take modest profits. HOLD

Enovix (ENVX)
Earnings will be released after the close of trading on November 1. Our sell-stop is “beneath 15.90.” The 200-day support line is around 14.60 now, so you can give shares the added leash if you desire. 25-26 is a recent triple top, meaning there will be a lot of pushback at those prices. If ENVX breaks through there on a closing basis, continue to hold and raise your sell-stop. If they fail to close at or above 26 on a big trading range day in that zone, it’s probably best to sell the position. HOLD

Enphase Energy (ENPH)
Enphase beat its earnings expectations last night and shares have gapped 13% higher today, putting us in a profit and setting up a test of the all-time highs at 318-320. We expect ENPH to be a long-term winner in Greentech, so if you have a long horizon, you can tuck these into your portfolio and weather the volatility. That said, ENPH has seen half a dozen drawdowns of 40% or more the past four years (that is, a decline from a price peak). If that would be too much for you, you have a few options: set your sell-stop at your buy price – you will likely get stopped out soon on normal volatility, unless shares really rally from here; or stick to our current sell-stop of “around 230,” which would be a break of notable support, or set a sell-stop for a break below the 200-day line, currently at 210. HOLD

First Solar (FSLR)
The American solar panel maker has moved back into a bullish stance today. With shares over 132, FSLR is well ahead of its 200-day line at 89, which often means shares will see a long pause or drawdown to essentially pull the price and 200-day support closer together. WATCH

Growth for Good Shares, Warrants, Rights (GFGD, GFGDW, GFGDR)
The approach here is the same as Clean Earth, above. Hold the shares to get a return of the 10 per share trust capital and therefore all our initial capital back. That will occur either at a merger vote or when the SPAC by rule must fold and return money to shareholders. The warrants and rights are your profit. Our approach with those: if Growth for Good proposes a merger that isn’t in the search area it said in its IPO prospectus – an ESG business – then sell the warrants and rights in the open market after the merger announcement and book a modest profit. SPACs that merge outside their preferred sector perform more poorly after the merger closes than those who find a business within their search parameters. They also are less likely to successfully close the merger. Remember, the rights expire worthless if the SPAC closes without a deal. The warrants will expire essentially worthless 5 years after a merger closes or when the SPAC closes. HOLD

Li Auto (LI)
LI has triggered our sell-stop this week and we recommended selling. China has always been problematic in Greentech. You want to have some exposure to it, because of the size of its economy and its move toward renewable and clean energy. But last decade, companies gave clean energy investors fits with overly optimistic business pronouncements and with a bad habit of stealing intellectual property from western businesses. Nowadays, the country’s zero-COVID policy keeps upsetting the supply chain and consumer behavior there. Undoubtedly, in the future, there will be new uncertainties for investors to navigate, which now appears to be a move in the communist country to even more centralized planning. In our view, no Chinese stock, or stock highly reliant on China, should be a buy-and-hold. SELzl

Onsemi (ON)
ON has rallied and now sits at a price that gives us a slight profit. You can either sell here and take a modest profit; raise your sell-stop from our recent “around 59” to closer support levels at 60.50 and 65.50 or hold and see how shares deal with resistance in the 72-76 zone. Price internals suggest there is still room for shares to rise from here, so we’ll be holding and have a quick trigger to sell if a test of the resistance zone fails. HOLD

Shoals Technologies (SHLS)
SHLS is close to an inflection point with today’s prices. If it can close over 24, then purely from a chart formation reading, it should rally to 29 as it breaks out of a recent 5-point range. If you trade that formation, then aim to sell at 29. Sell if it breaks below 19, the bottom of the recent range and where other support levels converge. WATCH

Trex Inc. (TREX)
Last issue’s featured stock, Trex looks bearish and we cannot recommend buying without further guidance on entering and exiting a trade, given it is well below its 200-day average. DROP

Excelsior Portfolio

ADS-Tec Energy (ADSEW)
ADS-Tech remains one of our favorite businesses right now. However, derivatives like warrants will take longer to rebound than shares, even with our belief the market has bottomed. We’re selling our ADSEW holdings to book the tax loss benefit for 2022 and we will buy them again in 31 days, presumably around the same price or lower. We’re not tax experts, but generally, you must wait 30 days to buy a security you sold at a loss before buying it in some form, in any account to be able to claim the loss on U.S. taxes. SELL

Constellation Energy (CEG)
Earnings are released November 8. CEG looks to be seeing resistance at its all-time high at 90, and price internals suggest shares may not have to push to break through ahead of earnings. We’re raising our sell-stop to “under 84” – representing a profit of 31% including the dividends we have collected. If you’re inclined to hold for longer, then consider the 69-70 zone very important support you don’t want to see broken.

ESS Technology (GWH.WS)
Warrants are around 67 cents, a profit of 26% for us. This is a complex trade, in that the goal is to hold the warrants until the GWH shares are trading regularly over 10 and therefore would almost certainly be called by the company. The profit comes from the expectation that the warrants will then trade close to their conversion value to shares, very roughly at 2 to 3 a piece if that happens in the next year. Because the conversion value declines over time, and the warrants themselves have a limited life, sell here and take the profits, unless you feel very comfortable seeing this trade through on your own. SELL

FuelCell Energy (FCEL)
We’re selling FCEL to book the tax loss and will aim to re-enter this in 31 days to avoid it being a wash transaction, tax-wise. Once Greentech is firmly bullish, FCEL will rally strongly. If you re-enter, don’t get greedy once its rally happens. Sell half near 12 and be quick to take profits if it rallies beyond. SELL

LiveWire (LVWR.WS)
Like ESS Tech, the warrants trade for the EV motorcycle maker is based on an expectation we’ve acquired the warrants far cheaper than they will trade as LiveWire shares gain their footing. They will expire five years from the merger of LiveWire and its SPAC, in September 2027. There are two redemption levels at which management can call warrants to be converted to shares. One is if shares trade at 18 for 20 of any 30-day period and can require cash of $11.50 plus the warrant to convert to a share. The other is if shares trade at 10 for any 20 of 30 days, provided the company provides a cashless conversion of warrants to shares. We’re underwater on the warrants right now; they have been trading recently at 39 cents. Shares are holding between 7 and 8. There is enough indication that shares and warrants have market support that we suggest you can hold until warrants are profitable, and then sell. We’ll be seeing through the trade, expecting LiveWire shares will eventually trade at 10 and bring warrants prices up with them. HOLD

Origin Materials (ORGNW)
Origin will start producing carbon-negative plastics late this year and we expect the market will start to embrace alternative materials companies as they get product rolling off the production lines. Origin’s warrants are holding over 1, and need shares (now in the 5 area) to strengthen to also see price improvement. Origin warrants are callable when the shares trade for 20 of 30 days at or above 10 (cashless) and 18 (you must deliver $11.50 cash per share to convert). Refer to the prospectus of the SPAC that brought it public, Artius Acquisition, for details. The warrants expire in July 2025. HOLD

Ree Automotive (REE)
We’re selling REE, a 1/6th position that originated with a June 2021 basket trade of warrants. We won’t be reentering the position, given that we feel Ree’s prospects aren’t the best use of our trading capital in the foreseeable future. SELL

ReNew Energy Global (RNWWW)
We like ReNew, India’s largest renewable energy owner-operator. That said, we also feel the warrants are a good opportunity to book a tax loss and reenter in 31 days. These warrants will expire August 2026. They are callable at 10 (cashless) and at 18 (you must bring $11.50 cash for each share) if the shares trade at or above those prices for any 20 of 30 days. See the prospectus of the SPAC that brought ReNew public for details – RMG Acquisition II. SELL

Volta Inc (VLTA.WS)
Volta has fired 54% of its workforce in a gambit to slash costs and survive until the EV charger market brings expected growth. We’re selling Volta warrants to gather the tax loss, but in all likelihood won’t re-enter the company until the business shows traction – it is doubtful warrants will run away from us. These warrants will expire August 2026. They are callable at 10 (cashless) and at 18 (you must bring $11.50 cash for each share) if the shares trade at or above those prices for any 20 of 30 days. The prospectus of the SPAC that took Volta public, Tortoise Acquisition II, is in the history of Volta’s SEC filings and will provide more details. SELL

Thank you for subscribing and remember, in the long run, the stock market trends higher.

Brendan Coffey has been immersed in investing for more than 25 years, including as an investment advisory editor, investor, markets reporter and writer about and for a wealth of Wall Street’s most influential minds. He’s discussed investing strategy with the likes of Carl Icahn, Mark Cuban and Leon Cooperman and collaborated with hedge fund managers and entrepreneurs on books and essays. He’s written about investments and markets for Forbes, Bloomberg, Fortune, The Wall Street Journal and numerous other outlets.