We recently published a list of 10 Best Alternative Energy Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Sunrun Inc. (NASDAQ:RUN) stands against other best alternative energy stocks to buy according to hedge funds.
Tyler Rosenlicht, Head of Natural Resource Equities at Cohen & Steers, in an interview with Bloomberg on July 31, shared his insights on the global energy landscape, emphasizing that the conversation around energy has shifted beyond just oil. While oil remains a significant driver of production and energy supply, natural gas, nuclear, and alternative energy sources are growing rapidly.
Rosenlicht noted that the growing demand for energy from data centers requires significant amounts of power to operate, however, energy consumption is also surging to satisfy the needs of technological advances, a rising middle class globally, urbanization, and traveling. Rosenlicht believes that the demand for energy will continue to grow, driven by population growth, economic expansion, and the increasing energy intensity of the global economy. He noted that his firm Cohen & Steers forecasts energy demand in 2040, taking into account factors such as population growth, economic growth, and energy intensity.
Rosenlicht expressed concerns that the assumption of increasing energy efficiency may be overstated, as new technologies may lead to higher energy usage. He emphasized that the world is in an “energy addition” phase, where new supply is needed to meet growing demand.
In terms of investment opportunities, Rosenlicht favors the U.S. natural gas sector, particularly liquefied natural gas (LNG) exports. He also favors energy companies that are pursuing emissions reductions using their existing infrastructure. On the alternative side, Rosenlicht’s company is bullish on companies building electrification assets and infrastructure, such as transmission wires and lines. Rosenlicht is also bullish on nuclear energy, which he believes will play a crucial role in meeting the demand for low-carbon energy.
Clean energy ETFs have also been a popular investment choice, especially between 2020 and 2022, when the industry experienced rapid growth. One major driver was the declining costs of solar and wind energy, which became increasingly competitive with fossil fuels. The Clean Energy ETFs also benefited from broader techno-optimism between 2020 and 2022. However, the interest rate hikes beginning in mid-2022 have significantly impacted the sector. For example, the iShares Global Clean Energy ETF (NASDAQ:ICLN) has declined by 20% year to date, as of November 11. The SPDR Kensho Clean Power ETF (NYSEARCA:CNRG), which invests in companies innovating and manufacturing renewable energy technology rather than generating power directly is down 13.3% year to date, as of November 11. The clean energy sector is expected to regain momentum driven by decreasing costs, technological advancements, and global carbon reduction targets, the industry has a solid long-term outlook. According to Straits Research, the clean energy market is expected to grow at a 9.47% annual growth rate from 2024 to 2032.
The alternative energy sector is set for significant growth, fueled by rising environmental awareness, favorable regulations, and advancements in technologies such as wind, solar, and hydropower. While the industry encounters challenges, including high upfront costs and technological barriers, the overall outlook remains positive.
Our Methodology
For this article, we scanned alternative energy ETFs plus online rankings to compile an initial list of 30 alternative energy stocks. From that list, we narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A field of solar panels glistening in the afternoon sun, symbolizing the company's renewable energy ambitions.
Sunrun Inc. (NASDAQ:RUN) is one of the largest residential solar energy companies in the US, offering a solar-as-a-service solution that enables homeowners to adopt solar power with little to no upfront cost.
On October 23, Sunrun Inc. (NASDAQ:RUN) announced the activation of New York’s largest residential power plant in partnership with Orange and Rockland Utilities, Inc., a subsidiary of Consolidated Edison, Inc. (NYSE:ED). This innovative virtual power plant leverages over 300 solar-plus-storage systems, with home batteries supplying stored solar energy to stabilize the grid during peak demand events throughout the summer. Initiated by Orange and Rockland Utilities, Inc. and approved by the New York State Public Service Commission as a demonstration project, this year-round program aims to support the state’s clean energy goals and promote a resilient power grid.
Sunrun Inc.’s (NASDAQ:RUN) synchronized batteries will discharge to relieve grid stress while providing backup power to participating customers’ homes. Through the program, the company aims to provide customers with free or discounted home batteries in exchange for a 10-year commitment to support grid reliability, facilitated by upfront payments from O&R based on installed battery capacity. Customers also benefit from bill credits for excess energy shared with the grid and retain a minimum of 20% battery power for their own backup use. Sunrun Inc. (NASDAQ:RUN) is also involved in discussions with data center developers to supply solar power for their facilities.
Sunrun Inc.’s (NASDAQ:RUN) multi-channel strategy, which includes direct-to-consumer sales and strategic partnerships, enables the company to efficiently attract a broad customer base. This diversified approach not only drives customer acquisition but also strengthens Sunrun Inc.’s (NASDAQ:RUN) market presence.
Sunrun Inc. (NASDAQ:RUN) near-term prospects are enhanced by the growing adoption of storage solutions, as more homeowners seek to pair solar energy with battery storage, supporting the company in generating significant recurring annual revenue. Additionally, Sunrun Inc. (NASDAQ:RUN) has been investing in infrastructure and technology to improve its margins and profitability, helping the company optimize its business model as it scales its operations.
Overall, RUN ranks 8th on our list of best alternative energy stocks to buy according to hedge funds. While we acknowledge the potential of RUN, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RUN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
