The long-awaited infrastructure bill is putting more wind in our sails and, after eight months of working through a bear market turned range-bound slog, we’re enjoying a bull market in Greentech once more.
The Greentech Timer is bullish, with the index over its upwardly trending 20- and 40-day moving averages (and over its 200-day moving average too). Tuesday was the biggest down day in Greentech in five weeks, letting off some steam from an overbought condition. Anything can happen, of course—the sector is at the top of what could be a trading range stretching back to April, in which case we’ll see a move back here. But the majority of signals say Greentech can make good advances from here.
In the infrastructure bill, which will be signed by President Biden soon, the tally for Greentech in the bill is $73 billion toward clean energy, plus some $21 billion for remediation efforts. Our readthrough suggests the bill is good for nuclear, carbon capture efforts, EVs (including buses and ferries), hydrogen development and the infrastructure-focused companies that will build out new transmission lines needed to improve energy efficiency. More will likely become clearer as rules for the use of billions of dollars for roads, bridges, railroads and water infrastructure are clarified. Would we prefer to see more? Of course, but by comparison, Hillary Clinton’s 2016 campaign proposed $60 billion for clean energy, a mark that was notably large at the time. Also possible soon is a budget reconciliation bill that could direct more funding over the next decade to Greentech.
Real Money Portfolio
Aemetis (AMTX)
Aemetis will announce its third-quarter results tomorrow before the market opens. Consensus is for a loss of 39 cents a share on revenue of $56.5 million. Shares will likely be volatile depending on management’s indications of the progress on its dairy farm methane capture project and the outlook for its renewable jet fuel project, which has a $1 billion off-take agreement with Delta Air Lines (DAL). We’re also interested in hearing what management believes the infrastructure bill holds for Aemetis in carbon sequestration—the company’s property sits atop what a Stanford study says is the best geologic formation for sequestration in California. We’re going to raise our stop loss to “around 17.50” to take about a 20% profit if shares tumble. Our stop has been “around 15.76.” Right now, with earnings to come, we’ll ease our rating from Buy. HOLD
Aptiv (APTV)
Earnings reported this week generated mixed reaction in the market. Earnings matched expectations that management had guided down during the quarter. More significantly, their outlook has uncertainty due to supply chain issues, customer order uncertainty and the pandemic. The long-term bull case for Aptiv remains in effect—the shift to EVs and the company’s strong history with the auto industry helps. Our question right now is if, in a broadly bullish Greentech, we want to muddle along with a stock we may be able to acquire at a better price and better momentum later on. WATCH
Aspen Aerogels (ASPN)
Shares made new all-time highs this week on good volume. Management is presenting at brokerage “fireside chats” this month, which should generate more investor interest. On the weekly and monthly charts, we’re seeing diverging volume with the price rise, which is of some concern as it hints of weakness, but most technicals remain positive. We’re raising our sell-stop to “under 48” from “around 45.” BUY
Centrus Energy (LEU)
Centrus reports earnings tomorrow before the market opens—one Wall Street analyst says the firm will report 42 cents per share net income. The spot price of uranium has been quite strong and, while Centrus doesn’t sell uranium in the spot market, it has contracts linked to the cash price. Revenue can also vary widely because Centrus recognizes sales when utility customers elect to take delivery of uranium, which can be at any point of the year under annual contracts. Last year, for instance, no one took delivery in this same quarter and Centrus reported a deep loss. We remain bullish, however. The infrastructure bill provides continued support for the Advanced Reactor Demonstration Program—where nine of the 10 finalists are designed to utilize high-assay low-enriched uranium, of which Centrus is the only licensed producer in the U.S. The bill specifies use of nuclear to provide power for isolated communities and scenarios of under 50 megawatts, as well as encouraging nuclear to produce green hydrogen (the term for separating the hydrogen molecule using non-carbon producing sources). The funding is significant: $3.21 billion through 2027. That’s all positive for Centrus, whose chart reflects a lot of bullishness. We’re up more than 100% on the uranium refiner with our main concern right now that shares could be overextended—we’re raising our sell-stop to “around 48.50” from “near 42.” That level would break some moving average support and the recent base the current move is building from. BUY
Enphase Energy (ENPH)
ENPH hasn’t dipped into our buy range of under 230 since we put it on our watch list last week. Price technicals suggest we should see a little bit of easing here so we will have some more patience to get a better entry point. BUY under 230
KraneShares China Green Energy (KGRN)
The ETF, comprising mostly China-traded Greentech firms, looks rangebound, plying the top end right now. Chinese stocks don’t benefit from U.S. federal spending in any significant form, and we wouldn’t bet that proposed EV tax credits would apply to non-U.S. producers. Near-term price technicals suggest prices will ease from here, so we will continue to monitor. WATCH
Onsemi (ON)
The semiconductor maker blew past expectations in its Q3 earnings reports issued Monday morning, reporting 87 cents per share earnings and $1.74 billion sales, compared to consensus for earnings per share of 74 cents on sales of $1.7 billion. Shares gapped higher 14% Monday to 55 on huge volume, the best in a year. The bottom end of the gap, 48, would be a level where support has been eaten away. We’re going to move our sell-stop to there (around 48), from “below 39,” to lock in a modest profit if things unexpectedly go pear-shaped for us. However, the outlook for strong automotive/EV demand, among other tailwinds for Onsemi, lays the groundwork for shares moving still higher after a likely period of some consolidation here. We’re also shifting our recommendation from Hold back to Buy, though it’s likely better to wait for a step back here as shares blow off steam. BUY
Wolfspeed (WOLF)
Our featured stock in our latest issue hasn’t dipped into our buy range (under 130). Shares look to be consolidating and we’ll continue waiting to buy on some easing here. BUY under 130
Excelsior Portfolio
European Sustainable Growth SPAC / ADS-Tec Energy (EUSGW)
The SPAC merging with fast-charging ADST isn’t seeing a lot of daily volume—about 40,000 in the shares and 12,000 in the warrants, depending on which data source you look at and what exchanges they draw information from. Getting noticed by the market is the key here, and we believe it will come in time. The company inked a deal with Spain’s Wenea providing the equipment for the initial installation of 11 charge points. Financial details weren’t disclosed. BUY
Li-Cycle (LICY.WS)
The lithium recycler stuck a recycling deal with Arizona startup Atlis, which is designing EVs with their own proprietary battery packs. There’s no indication of what volumes Atlis may generate—it’s one of a gaggle of EV companies that have yet to put a vehicle into production. Typically, as much as one-third of lithium is rejected by battery makers for various reasons during manufacture, which will provide work for Li-Cycle. The area around 4 is showing some resistance, a price that implies a 15.50 price for the underlying shares which are trading in the 12s now. As noted previously, the warrants became exercisable on October 23—one year from the SPAC IPO. Given the company has the option to initiate a cashless redemption if shares trade at 10 or greater for 20 of 30 days. For that reason, we don’t recommend buying the warrants any longer. We likely are sellers when the redemption is announced. HOLD
Navitas Semiconductor (NVTSW)
The gallium nitride (GaN) semiconductor maker announced thirds-quarter earnings yesterday evening, after the market closed. Sales rose 61% to $5.6 million, with a GAAP loss of 57 cents per share, with outlook for Q4 revenue at $7.4 million. Management says its minimum expectation is doubling revenue annually going forward. Despite the fact GaN replaces silicon, GaN chargers often use silicon in them, which led to Navitas saying they were unable to ship one million units in the quarter due to silicon supply problems. Warrants are performing very well, in the 4.5 region this week, putting us up more than 70%. Shares are over 15 lately. At the risk of getting ahead of ourselves, we do recommend selling if warrants hit 6.50, which is their ceiling because management can force redemption warrants at 18 or higher. There also is an early redemption clause for warrants when shares are trading over the price of 10 for 20 of 30 days, which makes the company eligible to issue a redemption notice. For that reason, we don’t recommend initiating a position now. HOLD
Origin Materials (ORGNW)
Kolon Industries, a Korean industrial conglomerate with $2.5 billion in annual sales, signed a deal with Origin to develop carbon-negative products for the automotive industry. There is an undisclosed capacity reservation agreement, which means production from Origin’s plants, under construction now, will be directed to Kolon. HOLD
Ree Automotive (REEAW)
American Axle & Manufacturing (AAM) will be the supplier of the propulsion technology for Ree’s EV chassis, which locates the mechanics of the vehicle in the wheel wells. No financial terms were disclosed. Ree is allowing investors to submit questions for its earnings call scheduled for next Tuesday, before the market opens. Revenue is expected to be very small with business still ramping up. Outlook from management is important. Warrants are well under being exercisable, with shares at 4. HOLD
ReNew Energy Global (RNWWW)
India’s largest renewable energy operator has little news this week. Warrants are down about 10 cents, leaving us up about 46% on the position. HOLD
Volta Inc (VLTA.WS)
The infrastructure bill has rallied EV charging stocks across the board. Our Volta warrants are up 20% in the past week, giving us a 60% profit on the position. The company reports third-quarter earnings after the close of trading today. Consensus estimates are for sales of $10.1 million and a loss between 10 cents and 24 cents per share. Shares are now trading over 10, which means if shares can sustain themselves over 10 for most of the next three weeks, Volta management has the right to redeem warrants. HOLD.
Thank you for being a subscriber. Our next SX Greentech Advisor issue is published Wednesday, November 17. We will send a special bulletin with any interim recommendations.
Contact me anytime with questions or comments at brendan@cabot.net