12 Best Environmental Stocks to Invest In

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In this article, we will take a look at the 12 best environmental stocks to invest in. You can skip our comprehensive analysis of these companies and go directly to the 5 Best Environmental Stocks to Invest In.

Apart from fighting a pandemic, the world is also facing the existential crisis of climate change. Deloitte mentioned in a report that two of the key reasons for the rapid production of greenhouse gases (GHG) in the atmosphere are the burning of fossil fuels and the unending deforestation. Businesses face various hazards due to climate change, ranging from interrupted supply chains and greater insurance costs to labor issues. As a result, many businesses are focusing on sustainability and adopting an eco-friendly business model, which helps the environment and attracts investors.

Companies worldwide are beginning to adapt greener and more sustainable business models from energy generation to semiconductor and vehicle manufacturing to technology innovation. Blue-chip stocks like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), and NIO Inc. (NYSE: NIO) are some of the environmental-friendly market leaders of today.

Since 2012, Microsoft Corporation (NASDAQ: MSFT) has been carbon neutral globally, and the tech giant aims to be carbon negative, water positive, and have zero wastes by 2030. The world's largest tech corporation encourages sustainability through using renewable energy in its factories, integrating environmentally friendly materials in the manufacture of computers and game consoles, and expanding its cloud computing capabilities to help businesses around the world reduce carbon footprints. Microsoft Corporation (NASDAQ: MSFT) released its initial Environmental Sustainability Report in January 2021, announcing a $129 million investment in funds and organizations working on carbon reduction, water management, and circular economy innovations. This investment is part of Microsoft Corporation's $1 billion Climate Innovative Fund, announced in 2020.

One of the sectors helping the betterment of the environment is the electric vehicle (EV) industry. Wall Street analysts remain bullish on major EV players such as Tesla, Inc. (NASDAQ: TSLA) and NIO Inc. (NYSE: NIO). In a CNBC interview, Wedbush analyst Daniel Ives forecasted that electric vehicle stocks could rise by 50% this year. Tesla, Inc. (NASDAQ: TSLA) is the largest electric vehicle manufacturer in the United States, delivering half of the country's EV demand. The electric vehicle giant is not only successful in inventing new technology for greener transportation, but also in generating and storing solar energy for companies and homeowners through its solar panels and Powerwall battery products. TSLA stock has gained 13.3% in the last month.

Sustainable investing options were quite popular in 2020, and they are likely to remain so for several years to come. The groundwork for solar stocks like solar module manufacturer First Solar, Inc. (NASDAQ: FSLR) and solar inverter producer SolarEdge Technologies, Inc. (NASDAQ: SEDG) appears to be in place, with climate change firmly on the Biden administration's agenda. SolarEdge Technologies, Inc. (NASDAQ: SEDG) stock has offered more than 93% returns to investors in the past twelve months. While First Solar, Inc. (NASDAQ: FSLR) shares increased 80% in the last twelve months.

With the current problems the world is facing due to climate change, many companies are re-inventing their ways to help the environment. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn't keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey's research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th, 2021, our monthly newsletter's stock picks returned 197.2%, vs 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Our Methodology

Based on data from over 800 hedge funds tracked by Insider Monkey, the companies included in this article were chosen based on their popularity among hedge funds. We've listed some eco-friendly stocks that are working on renewable energy projects, sustainability plans, and have good ESG scores. We also considered analyst ratings, growth catalysts, and recent financial data of these environmental stocks.

With this context in mind, let's now look at the 12 best environmental stocks to invest in.

Best Environmental Stocks to Invest In

12. FuelCell Energy, Inc. (NASDAQ: FCEL)

Number of Hedge Fund Holders: 13

We start our list of the 12 best environmental stocks to invest in with fuel cell power solutions provider FuelCell Energy, Inc. (NASDAQ: FCEL). The Connecticut-based fuel cell company was founded in 1969 and has since grown to become one of the leading manufacturers of innovative molten-carbonate fuel cell technology that is environmentally friendly. The company provides renewable energy products and services in the US, England, Switzerland, Germany, and South Korea. FCEL stock has offered more than 232% returns to investors in the past twelve months

The company has a market cap of $2.7 billion. The company's revenue in the second quarter of 2021 came in at $14 billion. As of July 2, FuelCell Energy, Inc. (NASDAQ: FCEL) shares traded at $8.38. On June 11, Canaccord Genuity maintained a Hold rating on FuelCell Energy, Inc., with a price target of $9 per share.

At the end of the first quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $68 million in FuelCell Energy, Inc. (NASDAQ: FCEL), down from 15 the preceding quarter worth $131 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), and NIO Inc. (NYSE: NIO), FuelCell Energy, Inc. (NASDAQ: FCEL) is one of the best environmental stocks to invest in.

11. Enbridge Inc. (NYSE: ENB)

Number of Hedge Fund Holders: 22

Enbridge Inc. (NYSE: ENB) ranks 11th on the list of 12 best environmental stocks to invest in. Enbridge Inc. operates solar, wind, and geothermal power generation and waste heat recovery facilities in Europe and North America. The company was founded in 1949 and was formerly known as IPL Energy Inc. Enbridge Inc. (NYSE: ENB) currently pays its shareholders an annual dividend of $2.77 per share with a 6.91% dividend yield. ENB stock has offered more than 35% returns to investors in the past twelve months. Shares of ENB also increased 5% in the last month.

The company has a market cap of $82 billion. The company's revenue in the first quarter increased 4.4% to $9.4 billion. The Calgary-based oil and gas pipeline company recently announced the sale of $1 billion in 12-year securities with a return of 2.54%. The revenues would be used for general corporate objectives, such as retiring current debt and funding capital projects. As of July 2, Enbridge Inc. (NYSE: ENB) shares traded at $40.69 and have a P/E ratio of 16.20. There are 18 analysts that rated Buy on Enbridge Inc., with an average price target of $43.41.

At the end of the first quarter of 2021, 22 hedge funds in the database of Insider Monkey held stakes worth $145 million in Enbridge Inc. (NYSE: ENB), down from 28 the preceding quarter worth $181 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), Enbridge Inc. (NYSE: ENB) is one of the best environmental stocks to invest in.

10. Brookfield Renewable Partners L.P. (NYSE: BEP)

Number of Hedge Fund Holders: 24

Brookfield Renewable Partners L.P. (NYSE: BEP) ranks 10th on the list of the 12 best environmental stocks to invest in. The Bermuda-based renewable power generating firm through its solar, wind, and hydroelectric energy facilities in North America, Europe, Brazil, Colombia, China, and India. The company has a renewable power portfolio with a capacity of around 21,000 MW. Brookfield Renewable Partners L.P. (NYSE: BEP) currently pays its shareholders an annual dividend of $1.19 per share with a 3.17% dividend yield. BEP stock has offered more than 48% returns to investors in the past twelve months.

The company has a market cap of $10.3 billion. The company reported revenues of $1.02 billion in the first quarter of 2021, down from $1.05 billion in the same period in 2020. As of July 2, Brookfield Renewable Partners L.P. (NYSE: BEP) shares traded at $38.90.

At the end of the first quarter of 2021, 24 hedge funds in the database of Insider Monkey held stakes worth $223 million in Brookfield Renewable Partners L.P. (NYSE: BEP), up from 20 the preceding quarter worth $278 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), Brookfield Renewable Partners L.P. (NYSE: BEP) is one of the best environmental stocks to invest in.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks, and Brookfield Renewable Partners L.P. (NYSE: BEP) was one of them. Here is what the fund said:

"U.S. renewables utility Brookfield Renewable was another detractor. Brookfield Renewable is a pure-play renewables operator and developer headquartered in Canada and domiciled in the U.S., focused on international hydro, solar, wind, and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable's globally diversified, multi-technology renewables business makes it an attractive partner. Its development pipeline stands at 18,000 megawatts, providing confidence the company can meet its targeted double-digit cash flow growth through to 2025. Shares moderated amid expectations of rising bond yields, and a cool-off on the green trade."

9. First Solar, Inc. (NASDAQ: FSLR)

Number of Hedge Fund Holders: 24

First Solar, Inc. (NASDAQ: FSLR) ranks 9th on the 12 best environmental stocks to invest in. The Arizona-based solar company develops and manufactures electricity-generating film semiconductor solar modules. The company was founded in 1999 and was formerly known as First Solar Holdings, Inc. This month, the company reported that it would build a $680 million new solar panel factory in Ohio, its third solar module production facility in the United States. Shares of FSLR increased 80% in the last twelve months.

The company has a market cap of $9.3 billion. The company's revenue in the first quarter of 2021 came in at $803 million, up from $532 million in the same quarter in 2020. The company increased its net sales forecast for 2021 from $2.85 billion to $3.025 billion from the previous forecast of $2.85 billion to $3 billion. As of July 2, First Solar, Inc. (NASDAQ: FSLR) shares traded at $90.82 and have a P/E ratio of 18.76. On June 25th, Stephens & Co. initiated First Solar, Inc. with an Overweight rating and a price target of $102 per share.

At the end of the first quarter of 2021, 24 hedge funds in the database of Insider Monkey held stakes worth $304 million in First Solar, Inc. (NASDAQ: FSLR), down from 34 the preceding quarter worth $406 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), First Solar, Inc. (NASDAQ: FSLR) is one of the best environmental stocks to invest in.

In their Q4 2020 investor letter, GDS Investments mentioned First Solar, Inc. (NASDAQ: FSLR) and emphasized their views on the company. Here is what the fund said:

"First Solar recently announced blowout results for its last fiscal quarter with earnings and revenues handily beating estimates. The Biden Administration should only accelerate the inevitable shift away from fossil fuels toward renewable energy as the costs associated with solar energy production reach parity with coal and oil production. As the following chart by the International Energy Agency makes clear, demand for oil should plateau in the 2030s and, by the 2040s, would account for less than 20% of global energy consumption."

8. Sony Group Corporation (NYSE: SONY)

Number of Hedge Fund Holders: 27

Sony Group Corporation (NYSE: SONY) ranks 8th on the 12 best environmental stocks to invest in. The Tokyo-based tech firm manufactures electronics, gaming consoles, instruments, and other consumer devices. Sony Group Corporation also licenses and produces video and animated content through Sony Pictures.

The Japanese consumer electronics and entertainment giant aims to achieve a zero-carbon footprint by 2050 through its Road to Zero environmental plan. In 1997, there were only 30 ISO 14001 certified in Sony Group Corporation. Today, all of Sony's key facilities are ISO 14001 certified, and the company is committed to meeting its Green Management goals. Through its Take Back Program, which recycles any Sony product at no cost to the consumer, the company gathered nearly 50 million pounds of electronic garbage in 2014. In 2020, Sony Pictures Entertainment announced that it will eradicate single-use plastic from production sets and all corporate processes by 2025.

The company has a market cap of $122 billion. The company's operating income for the fiscal year 2020 was 972 billion yen (approximately $8.7 billion), largely due to high sales revenue from its Game & Network Services division, which contributed 343.3 billion yen (approximately $3.1 billion) to the total operating income. As of July 2, Sony Group Corporation (NYSE: SONY) shares traded at $101.65. Sony Group Corporation has currently rated a Buy by 16 analysts, with an average price target of $130.41.

At the end of the first quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth $542 million in Sony Group Corporation (NYSE: SONY), down from 28 the preceding quarter worth $594 million. Mario Gabelli's GAMCO Investors is a leading shareholder in Sony Group Corporation (NYSE: SONY), with 1.9 million shares worth more than $209 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), Sony Group Corporation (NYSE: SONY) is one of the best environmental stocks to invest in.

7. NIO Inc. (NYSE: NIO)

Number of Hedge Fund Holders: 28

NIO Inc. (NYSE: NIO) ranks 7th on the 12 best environmental stocks to invest in. Chinese smart electric vehicle-maker NIO Inc. is one of the fastest-growing companies riding the increasing EV demand globally. Dubbed as China's Tesla, Inc. (NASDAQ: TSLA), the company founded its sustainable car business in 2014 and was formerly known as NextEV Inc. NIO stock has offered more than 553% returns to investors in the past twelve months.

NIO Inc. had an initial public offering (IPO) in the United States in September of 2018, raising $1 billion by selling IPO shares at $6.26 each. Today, the company has a market cap of $74 billion. The company's revenue in the first quarter of 2021 came in at $1.22 billion, up 481% year over year. The company delivered 6,711 electric vehicles in May 2021. In the second quarter of 2021, NIO Inc. (NYSE: NIO) is set to deliver 21,000 to 22,000 electric vehicles. As of July 2, NIO Inc. (NYSE: NIO) shares traded at $50.40. On June 8th, BOCOM International initiated coverage on NIO Inc. with a Buy rating and $57 per share price target.

At the end of the first quarter of 2021, 28 hedge funds in the database of Insider Monkey held stakes worth $1.32 billion in NIO Inc. (NYSE: NIO), down from 34 the preceding quarter worth $2.63 billion.

6. SolarEdge Technologies, Inc. (NASDAQ: SEDG)

Number of Hedge Fund Holders: 32

SolarEdge Technologies, Inc. (NASDAQ: SEDG) ranks 6th on the list of 12 best environmental stocks to invest in. The Israel-based company manufactures and distributes solar power harvesting equipment and solar power inverters around the world. Since 2010, SolarEdge Technologies, Inc. (NASDAQ: SEDG) has delivered more than 2.7 million smart solar inverters and over 65.3 million power optimizers in 133 countries worldwide. The solar company also provides cloud-based management of smart solar tools used in residential and commercial sites. SEDG stock has offered more than 93% returns to investors in the past twelve months.

The company has a market cap of $14.4 billion. The company's revenue in the first quarter of 2021 was $405.5 million. As of July 2, SolarEdge Technologies, Inc. (NASDAQ: SEDG) shares traded at $276.23 and have a P/E ratio of 115.29. On July 2, Goldman Sachs maintained a Buy rating on SolarEdge Technologies, Inc., with a price target of $322 per share.

At the end of the first quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $421 million in SolarEdge Technologies, Inc. (NASDAQ: SEDG), down from 28 the preceding quarter worth $459 million.

Just like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), NIO Inc. (NYSE: NIO), SolarEdge Technologies, Inc. (NASDAQ: SEDG) is one of the best environmental stocks to invest in.

Investment firm Richie Capital Group in their Q1 2021 investor letter, mentioned SolarEdge Technologies, Inc. (NASDAQ: SEDG) and emphasized their views on the company. Here is what the fund said:

“Our biggest detractors for the quarter included SolarEdge Technologies (SEDG – down 11.2%) – The Smart Energy solar company declined during the quarter along with most other solar energy stocks due to concerns over higher interest rates. Higher interest rates will make it more expensive for businesses and consumers to borrow money for residential and commercial solar projects. We expect interest rates to be somewhat of a headwind for years to come. However, the stronger underlying trends are in their favor. We expect SEDG to be a net winner from the Biden Administration’s infrastructure plan which focuses on Clean Energy.”

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Disclosure: None. 12 Best Environmental Stocks to Invest In is originally published on Insider Monkey.

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