Wind turbines spin during a winter storm near Palm Springs, California, March 10, 2021.
Mike Blake | Reuters
The first-quarter decline in clean technology stocks is a “normal, healthy pullback” and presents an opportunity for investors, said Raymond James in a research note.
“If you missed the boat in 2020, a chance to get in,” wrote analyst Pavel Molchanov in the note to clients.
After gaining more than 200% during 2020 the WilderHill Clean Energy Index, which tracks the space, dipped nearly 5% during the first quarter. The S&P 500, on the other hand, gained 6%.
“To state the obvious, nothing goes up in a straight line. More to the point, plenty of the names had been in overbought territory…and some profit-taking was emphatically to be expected,” the Raymond James note said.
The firm pointed to several reasons behind the declines, including a rotation away from growth-oriented areas of the market.
Looking forward, while Raymond James does see upside for the industry, the firm reiterated that clean tech is a stock picker’s market. In other words, the sector shouldn’t be bought as a whole. Rather, investors should evaluate companies on an individual basis.
Key factors to consider include product mix, margin structure and geographic footprint. The firm noted that for some names across the industry, the recently unveiled $2 trillion infrastructure plan could be the “icing on the cake” for already robust growth stories.
With that in mind, here are some of Raymond James’ picks: