The market is bearish and nearly every subsector within it is too – only real estate is above its primary moving averages among the S&P 500 sectors. There are a lot of warning signs around, with weakness broad among all stocks – only about a quarter of equities are trading over their 50-day moving average and less than 30% are over their 200-day. It’s time to be cautious and be prepared to cut losses and preserve capital.
The swift degradation in sentiment we saw starting the end of last week has pushed Greentech back to a two-month low that also is a level of some important support on the chart we want to see held. The major subsectors – solar, wind, water – are all similarly bearish, too, on the charts. Nuclear and utilities are in better shape, but still show steep moves back in recent days, below some initial levels of support.
We have one new sell recommendation today – KraneShares China Green Energy (KGRN) – based on violation of chart support and our sell-stop.
Real Money Portfolio
Advanced Drainage Systems (WMS)
Shares are still in a trading range but testing the support level around 100 we want to see held. No news, and earnings are out mid-May. Our sell-stop is “under 100.” HOLD
Aecom (ACM)
Aecom was one of four stocks we recommended selling in a special bulletin Monday morning after it broke our sell-stop on the close Friday. The portfolio booked the sale at 74.29, the midpoint of the high and low of Monday, providing a 2% profit including an 11-cents a share dividend collected in April. SOLD
Archaea Energy (LFG)
The landfill gas business shares are holding up well, but there are still signals their move lower is likely to continue. We’re above the major trendline supports here and we believe the business is well-insulated against the broader fears in the market. However, should a larger selloff come, few stocks are immune and for that reason we’re going to hike our sell-stop to lock in a profit. Our prior stop was our buy price of 18.27. We’re going to shift that to “below 20,” given the 50-day average is at 20.08 today, a spot where support should come in. HOLD
Clean Earth Acquisitions Corp. (CLINU)
We see SPACs as a defensive play with a growth upside thrown in. All the market turmoil isn’t affecting the fact that we have claim to a 9-cents profit on the shares – the difference between our unit buy price of 10.01 and the share trust value of 10.10 (or possibly 10.20 (if the SPAC exercise its right to extend its acquisition window to August 2023 in exchange for another dime per share trust money). Our warrants and rights, which are split now from the units, at 23 cents and 20 cents each this morning, are also pure profit. If you haven’t split your units yet, you need to request the split from your broker. Some will do it free of charge, others charge a fee. HOLD
Clearway Energy (CWEN/A)
We’re underwater now on Clearway but remain over our sell-stop of “around 28.” Shares fell under their 200-day average Friday on a big down day but have shown encouraging rebound action since. On Monday, trading action gave us a dragonfly doji – a daily candlestick with a large range but narrow open-close difference near the top of that range – that signals a reversal. It may not be long-lived, but follow-through shows some positives. HOLD
Darling Ingredients (DAR)
A featured “buy half’ from our issue last week, the portfolio entered the biodiesel maker at 84.94, the midpoint of the high and low of trading Thursday. It was not fortuitous timing; shares are down about 11 dollars since, coming into today. Still, shares are holding over what should be a zone of good support down into the low 60s. Earnings come mid-May, and we’ll seek to hold at least until then without a firm sell-stop, watching action instead. HOLD
Daseke (DSKE)
The specialty trucking firm (transporting wind turbine arms, etc.) has held over long-term support where we have our sell-stop set, “under 7.19.” The business reports earnings Tuesday May 3, with consensus calling for $372 million in revenue and 13 cents a share earnings. A fund named Alta Fox that owns 4% of shares sent a letter beseeching management to launch a share buyback, noting Daseke has fallen more than trucking peers while seeming more insulated from weaker pricing trends than the Street believes. Alta has little heft, believing it is more influential than it is, but the idea is sound. HOLD
Energy Vault (NRGV)
The kinetic energy storage business is showing good resiliency in volatile action, moving back over its moving averages the past week on fine volume. The company signed a memorandum of understanding with India’s largest power generator, NTPC Limited, to explore deploying the EVx gravity storage system there. This guarantees nothing, but is a positive sign. This is a half-sized position. HOLD
Good for Growth Shares, Warrants, Rights (GFGD, GFGDW, GFGDR)
Similar to our Clean Earth SPAC, we are breakeven on the shares alone for Good for Growth (the trust equals our buy price of 10). Warrants at 22 cents and rights at 16 cents this morning are our profit. No news, as the SPAC is on the hunt for a target. HOLD
Infrastructure & Energy Alternatives (IEA)
IEA was another holding we recommended selling in Monday’s bulletin, having broken our sell-stop Friday. The portfolio booked the sale at 10.15, the midpoint of the high-low Monday, a loss of 23% – that’s less than 2% of our Real Money Portfolio capital given we enter on equal sized positions to reduce risk on any one holding. SOLD
KraneShares China Green Energy (KGRN)
The draconian pandemic lockdown measures in China continue to hurt sentiment and sent the fund to consecutive closes below our stop-loss of “under 32” to open this week. We didn’t send a bulletin out, but stops should be honored and we should sell. The next level of chart support is the 22-27 area, still enough of a drawdown to recommend stepping out and planning to reenter later, hopefully at a lower price after securing the tax benefit of the loss. SELL
Lithium Americas (LAC)
We recommended selling Lithium Americas in Monday’s bulletin after it closed last week below our stop-loss, which was our buy price of 27.60. The portfolio booked the sale at 26.14, a loss of 5%. There remain risks to the stock, primarily that the final sign-off hasn’t been given to open the mine, which means we may find ourselves able to reenter the trade later at a better price if market weakness continues. Shares have weakened since we sold. SOLD
MP Materials (MP)
MP was another stock that sliced through support and triggered our sell-stop. We recommended selling in Monday’s pre-market bulletin. The portfolio booked the sale at 40.86, the midpoint of the high and low trading that day, a loss of 9%. In retrospect, with both LAC and MP we could have applied some internal timing signals that would have gotten us out at modest profits earlier. The trade-off to using such signals is exiting stocks too early if they continue to rise, and our estimation was metals demand would be insulated from market turmoil better than it has been. SOLD
Excelsior Portfolio
ADS-Tec Energy (ADSEW)
A quiet time for the German manufacturer of super-fast EV chargers. Warrants are stable, around 1.09. HOLD
Constellation Energy (CEG)
A recent spin-off that was a featured buy last week for our special opportunities portfolio, we entered the nuclear energy provider at 64.23, the midpoint of trading Thursday. We’re down about 6%, but shares are finding support around that level, with sturdier support below us, in the 54-56 zone. The company declared a dividend of $0.141 a share, to owners as of May 13, payable on June 10. We let Excelsior positions have a looser leash, usually, and so we’re maintaining our buy rating. We’re seeing not very convincing selling pressure and, while shares technically suggest they may slip further, overall action is unconcerning and nuclear stocks as a group are holding up. BUY
FuelCell Energy (FCEL)
Fuel cell stocks as a group (there are about half a dozen) are volatile, typically really selling off in bear periods and really rallying in bullish times. So, it’s no surprise FuelCell Energy is down into the low-4 area today. This is a half-sized position, with the end of 2022 as our intended horizon for the trade paying off. HOLD
Origin Materials (ORGNW)
LVMH, the giant French conglomerate of luxury brands, inked a deal with Origin to buy the company’s zero-net-carbon plastics to create low-carbon packaging for its products. Origin’s plants, in Canada and Louisiana, have yet to begin operation, but the LVMH deal is another in a multi-billion-dollar slate of non-binding off-take agreements once production begins at the end of this year. Warrants are basically unchanged over the week, at 1.57. HOLD
Ree Automotive (REEAW)
Ree warrants are basically unchanged at 31 cents apiece. EVs are among the weakest stocks in Greentech, meaning this EV chassis maker with no real revenue will need to wait for a sea change in sentiment, which will eventually come. HOLD
ReNew Energy Global (RNWWW)
No news, and the warrants are weaker this week, around 1.53 on very light trading. HOLD
Volta Inc (VLTA.WS)
Sentiment on Volta is weakening, with the latest blow a downgrade by Goldman Sachs of the stock. The world will need EV chargers and we feel Volta has a unique strategy that will benefit it in gaining market share and, eventually, in the consolidation the sector will see. Warrants are at 65 cents recently, about a quarter of their price in February. HOLD
Thank you for being a subscriber. Our next SX Greentech Advisor issue is published Wednesday, May 4. Get in touch with comments, suggestions and questions any time! Reach me at brendan@cabotwealth.com.