The greentech sector continues to fight choppy waters. Just when it seems we’re gaining momentum to speed ahead, sentiment slips and we’re fighting through waves again. Greentech seemed like it was going to hold above the 200-day moving average last week, but then posted a series of down days. Essentially the sector is being pushed around by bulls and bears, neither of which have the conviction to move the market decidedly one way or the other. The positive news is that support levels below the 200-day continue to hold. In short – we’re range-bound. Sentiment-wise, it seems the market got ahead of itself at the start of the year, in anticipation of a large infrastructure bill – proposals indicating well more than $350 billion of direct greentech programs got investors excited. The period of 2017 through 2020 proved federal spending isn’t a necessity for greentech to thrive, but once easy money gets into the market’s head, it’s hard to forget about it. So greentech could continue to face headwinds from lack of an infrastructure bill. Also, as a technical analysis matter, the fact that the 200-day moving average for greentech is going to continue to rise through the summer will provide some upside resistance. The rise is just a function of the average dropping off lower-priced days from last October, which will last about a month. The 200-day isn’t a magic number, but it usually ends up being a nicely predictive level where various selling and buying pressures converge, for good and bad. Greentech’s long-term outlook continues to look great, however. Corporate commitments to slash their own greenhouse gas emissions are ahead of 2020’s record level already, with nearly half a year to go. One of the latest is General Electric (GE), which has pledged to offset the carbon emitted from its products by 2050. Year 2050 targets deserve a lot of skepticism – it’s long enough away that reductions will always seem attainable without much needed to be done right now. In GE’s case, the company has a massive flow of carbon from its products – fossil fuel plant turbines and jet engines primarily – while their growth is heavily reliant on renewable energy industries – wind turbines, smart grids and potentially hydrogen. If they’re serious, they need to show concrete steps soon. We’re also seeing a healthy flow of new entrants into the public markets from the cleantech and sustainable world. Just this week, SES, a lithium-battery maker for EVs, announced it will go public by a merger with a SPAC, as will Altus Power America, a commercial rooftop solar business. Put simply: Seeing a steady stream of new entrants into the public markets is a sign greentech is healthy. In our next SX Greentech Advisor, published next Wednesday, July 21, we’ll take a look at a few high-quality businesses that are looking like long-term growth names at value prices. The benefit of the choppy market is that it should offer good entry points into some strong names. For now, here is the update on our current portfolios: Real Money Portfolio Aptiv plc (APTV) The company will release its second-quarter earnings before the market opens August 5. We placed Aptiv on our watch list last week as the auto components supplier is expected to be a major player in EV wiring and design. Shares bounced off support of the 40-day average last Thursday and are testing the 160 price ceiling again. APTV has hit that 160 level seven times this year and it has become significant resistance. A break over that could unleash a move 50 points higher. It’s best not to anticipate a breakout, especially in these market conditions, but to act on it when it happens. For that reason, we’ll stay on the sidelines and wait for shares to break out of what has become range trading between 145 and 160. WATCH KraneShares Global Carbon ETF (KRBN) The carbon future ETF closed below our recommend sell-stop of around 35.07 Monday, so we recommended selling in a Special Alert before the market open Tuesday. KRBN has had two large-volume down days in the past seven sessions and is testing the 40-day moving average, which is important near-term support. Shares now look like they are bound to break the 40-day and test the 34 level, as completion of another move through its recent trading range. The portfolio sold at 35.39, the mid-point of the high and low for Tuesday. That leaves us with a modest 3.4% profit on the position, having bought at 34.23. SOLD Steel Dynamics (STLD) The company will report earnings after the close of trading on July 19. Consensus is that earnings per share will come in at $3.43, a consensus level that has been trending a bit higher of late. We’re up a smidgen on the price, and about half a percent total return including the 26 cents per-share dividend to holders as of June 30. It’s very likely earnings will be the catalyst to push shares one way or the other, with shares trading within the range of the volatile June 17 week, when STLD lost $7 a share. Let’s maintain our sell-stop around 56.97. HOLD Trex Inc. (TREX) Trex is maintaining its long-term uptrend. The company will report earnings after the close of trading on Monday, August 2. Shares seem stuck in a range between 94 and 106. We’re maintaining our sell-stop near 93. Given market conditions, we’re shifting our recommendation from buy to hold. HOLD Excelsior Portfolio Our special opportunities portfolio is now in the warrants of six SPACs. Our strategy is buying this basket of six in equal dollar amounts (and separately from the Real Money Portfolio) with the expectation the winners will more than offset the losers in the long run. There is no sell-stop set and for now our recommendation on the basket, and each of the businesses within it, is BUY. Li-Cycle / Peridot SPAC (PDAC warrant) Warrants have lost 25 cents a share since last week, while Peridot SPAC shares have shed about a dollar. Neither is significant technically. We’re up about 3% on our position. Navitas Semiconductor / Live Oak II SPAC (LOKB) Warrants and shares are unchanged in the past week. There’s been no news. We’re down 26 cents a warrant entering Wednesday. Origin Materials (ORGN) A quiet news week, and little change in the price of the warrants or the shares. We’re down about 19% on the position, but technically, nothing is a concern. Ree / 10X Capital SPAC (VCVC) Ree signed a deal with JB Poindexter, a privately held holding company consisting primarily of U.S. truck manufacturer Morgan Olson. That company makes vans for UPS, WB Mason and other companies that use similarly sized delivery vehicles. Ree and Poindexter will collaborate to manufacture EV trucks using the Ree chassis and Morgan Olson’s truck bodies. It’s potentially a nice move, though warrants and shares are little changed on the week. We’re nicely profitable on our warrants. ReNew Power / RMG II SPAC (RMGB) No news this week for the India renewable energy provider or its SPAC partner. Trading has been unremarkable in warrants and shares. We’re in the black by a penny. Volta Charging / Tortoise 2 SPAC (SNPR) The town of Westfield, Connecticut will install six Volta Charging stations. It’s insignificant news, really, but it continues a nice stream of incremental business news in a segment – EV charging – that will be hotly competitive and, eventually, prone to consolidation. SPAC shareholders will vote on the merger soon. Action is little changed the past week, and although we’re in the red on the position, it’s essentially just a function of the way the wind has blown this week. The next issue of SX Greentech Advisor is out next week, Wednesday, July 21. Contact me anytime at brendan@cabot.net with questions, comments or suggestions. Please also consider joining me and the other Cabot Wealth analysts for our 9th Annual Smarter Investing, Greater Profits Online Conference, August 17-19. We have an incredible line-up of Cabot experts ready to share their best picks.
