7 Stocks To Buy On The Fed’s Climate Change Concerns

| January 24, 2023

The big dogs are getting serious about the environment in 2023

  • With the political winds turning green, these are the stocks to buy.
  • NextEra Energy (NEE): NextEra enjoys strong support from Wall Street.
  • Enphase Energy (ENPH): Enphase may still have more legs to run.
  • Republic Services (RSG): Republic’s business is too pertinent to ignore.
  • Shell (SHEL): Shell is aggressively moving into the green space.
  • Home Depot (HD): Home Depot could benefit if eco-friendly policies fail.
  • Cameco (CCJ): Cameco’s nuclear business is a clean one.
  • Ormat Technologies (ORA): Ormat attempts to harness ‘homegrown’ energy.
Source: Shutterstock

As major political winds decisively turn green, investors may want to consider doubling down now on sector-relevant stocks to buy. Recently, CNBC published a report noting that “[t]he six largest banks in the U.S. have until the end of July to show the impact that climate change could have on their operations.”

Whether you agree or disagree with the science of climate change and the proposed mechanisms to mitigate and reverse it, if the Federal Reserve is weighing in on the matter, we all need to pay attention. Indeed, if you happen to be opposed to the politicization of climate change, this juncture offers an opportunity to practice agnostic emotion-free investing.

Basically, the major institutions have made up their mind that climate change is real and that it’s worth addressing. From that perspective, then, it is a real problem (even if it’s not). Therefore, investors will want to key in on the below stocks to buy.

NEENextEra Energy$82.67
ENPHEnphase Energy$228.44
RSGRepublic Services$123.32
HDHome Depot$315.48
ORAOrmat Technologies$90.82

NextEra Energy (NEE)

A giant in the new clean and renewable energy infrastructure space, NextEra Energy (NYSE:NEE) should be one of the clear stocks to buy as institutions like the Fed continue to push for climate-friendly initiatives. However, NEE has been slow as of late. For instance, in the trailing year, shares lost 1% of equity value. And in the year so far, it’s down over 2%.

Still, contrarians might enjoy a solid opportunity here. As one of the largest American capital investors in clean energy infrastructures, NextEra may enjoy blossoming returns. Again, the political winds move favorably in its direction.

Further, the company enjoys some solid financial metrics. Perhaps most notably, it features a strong net margin of 19.3%. As well, its return on equity of 10.4% reflects better-than-average ability of converting equity financing into profits.

Finally, analysts really dig NextEra, rating it a consensus (and unanimous) strong buy. With their average price target implying a near-19% return, NEE is one of the stocks to buy.

Enphase Energy (ENPH)

Plying its trade in the solar industry, Enphase Energy (NASDAQ:ENPH) specifically specializes in microinverters. Most importantly, in my view, Enphase provides battery storage solutions, enabling homeowners and businesses to effectively harvest their green energy. Better yet, you don’t need to understand the science of what Enphase does to understand that business has been good. In the trailing year, ENPH gained almost 77% of market value.

Still, what goes up must come down. Since the January opener, ENPH slipped over 12%. One explanation is that after such a stratospheric rise, investors no longer feel confident about further gains. Conspicuously, even after this year’s early fallout, ENPH features a trailing multiple of above 100. Heck, shares feature a forward multiple of above 47. Both stats rank well above their respective industry medians.

Nevertheless, as blackouts become a frequent recurrence for the nation’s stressed energy grid, Enphase enjoys a fundamental upside catalyst. Moreover, the company still attracts a strong buy consensus view among Wall Street analysts. Therefore, it’s one of the stocks to buy.

Republic Services (RSG)

For a holistic portfolio of stocks to buy geared toward environmental sustainability, you can’t ignore Republic Services (NYSE:RSG). While a waste disposal specialist sounds “dirty,” the reality is that no one pushes for zero environmental impact. Rather, the goal is net zero impact. Based on the laws of physics, waste material can’t just disappear.

Beyond its residential waste management business, Republic represents a direct player in climate-friendly stocks to buy with its recycling initiatives. Further, the company offers various environmental solutions for industrial needs, such as remediation, hydrovac and portal sanitation services. Plus, Republic owns the licenses, permits and acumen to handle any type of environmental material safely and properly.

Thanks to its countless relevancies, Wall Street analysts rate RSG as a consensus moderate buy. As well, their average price target of $148.36 implies upside potential of more than 20%. Finally, the company offers a small but reliable forward yield of 1.61%.

Shell (SHEL)

Before the pitchforks come out, let me just explain my inclusion of Shell (NYSE:SHEL) as one of the stocks to buy amid the climate change debate. While the company represents one of the biggest players in the global oil and gas arena, it also recognizes the changing tides. Last year, Shell made headlines when it announced that it will build Europe’s largest renewable hydrogen plant.

To be clear, hydrogen attracts criticisms regarding its role toward positively impacting climate change, particularly its cost structure. Still, it’s possible that with an enterprise the size of Shell, it could one day spark favorable economies of scale.

Setting the cost debate aside for a moment, what’s really attractive about hydrogen fuel is its “waste” product. Rather than carbon emissions, burning hydrogen yields water.

In the meantime, SHEL offers a viable case for stocks to buy. Frankly, the core hydrocarbon business won’t fade out anytime soon. Plus, SHEL enjoys a moderate buy consensus view with an average price target implying 26% upside potential.

Home Depot (HD)

While many enterprises sought to offer stocks to buy as an ally of climate justice initiatives, Home Depot (NYSE:HD) cynically and fortuitously stands as a possible beneficiary if climate change worsens. Let me be clear: I’m not suggesting that Home Depot’s operations deliberately and negatively impact the environment. Rather, it will “accidentally” become a beneficiary if the planet’s health deteriorates.

Interestingly, several publications noted that Home Depot and its ilk enjoy increased sales prior to significant inclement weather events. Naturally, people need something to batten down the hatches with – and that’s where Home Depot enters the picture. As well, once the storm fades, people need to rebuild what Mother Nature destroyed. Again, you have companies in the home improvement sector ready to serve (and ring up their sales).

Plus, Home Depot enjoys solid support from Wall Street analysts. Presently, experts rate HD as a consensus moderate buy. Though their average price target only implies a 9.9% upside potential, the retailer also carries a forward dividend yield of 2.41%. Holistically, then, HD makes a very good case for stocks to buy.

Cameco (CCJ)

Understandably, nuclear energy carries a controversial reputation. While things rarely go wrong in this sector, when they do, the consequences can be utterly catastrophic. Therefore, people might hesitate in identifying uranium specialist Cameco (NYSE:CCJ) as one of the stocks to buy for climate-friendly policy. Nevertheless, it’s vital to bring up one point: nuclear energy is clean energy.

That’s right, you can’t have an effective clean energy policy without including nuclear. According to the Office of Nuclear Energy, the sector represents a “…zero-emission clean energy source.” Further, data from the Nuclear Energy Institute revealed that the U.S. avoided more than 471 million metric tons of carbon dioxide emissions in 2020 thanks to the nuclear industry.

What’s more, CCJ has been a top performer in 2022. In the trailing year, shares gained over 30% of equity value. Even better for prospective investors, Wall Street believes CCJ can much higher. Currently, shares enjoy a unanimous view of strong buy. And the average price target implies upside of over 26%.

Ormat Technologies (ORA)

For the final idea for stocks to buy, investors may want to consider Ormat Technologies (NYSE:ORA). Specializing in renewable geothermal technology, Ormat harnesses the power of the Earth’s core.

According to the Office of Energy Efficiency and Renewable Energy, “[g]eothermal resources are reservoirs of hot water that exist or are human made at varying temperatures and depths below the Earth’s surface. Wells, ranging from a few feet to several miles deep, can be drilled into underground reservoirs to tap steam and very hot water that can be brought to the surface for use in a variety of applications…”

One of the most important attributes of this energy source is that it’s renewable. Per the aforementioned government agency, “[t]he heat flowing from Earth’s interior is continually replenished by the decay of naturally occurring radioactive elements and will remain available for billions of years.”

At the present juncture, a main criticism of Ormat is that it’s overvalued against both trailing and forward multiples. However, with nations and institutions pushing for climate-friendly initiatives, Ormat may be one of the long-term stocks to buy.

This post originally appeared at InvestorPlace.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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