New Trade for October 22nd, 2020

Futures are trailing lower this morning after another losing day for all three benchmarks.  However, all three are up for the month of October.  

Congratulations to our readers who acted on our September 19th SNAP recommendation, included in our mid-cap tech watchlist “Beyond the Blue Chips” .  SNAP share price is up more than 50% since we issued the alert, after a big boost on better than expected earnings earlier this week.  The other two mid-cap tech stocks on our watchlist, DBX and PLAN are also up, but only slightly.  We still consider DBX and PLAN to be in buying range for long-term gains.  

Renewable energy has been on a tare as of late.  Despite recent volatility for some of the big names in the group, overall momentum seems to be holding strong.  Today we are featuring an outlier in the industry — a company with an excellent track record and a unique business model that will likely propel future growth.

NextEra Energy (NEE) is the world’s largest producer of solar and wind energy.  They’re owner of Florida Power & Light along with some other utilities and businesses that do wholesale energy.  They’re also the sponsor of NextEra Energy Partners, which is primarily renewable energy focused.  Renewables is a big part of NextEra’s business.  NextEra has emerged as the world’s most valuable utility, largely by betting on utilities, especially wind.  

NextEra had about 18 gigawatts of wind and solar farms at the end of last year, enough to power 13.5million homes.  And it’s expanding significantly, with contracts to add another 12 gigawatts of renewables. 

For decades, NextEra Energy has been reducing emissions through the development of renewable energy and modernization of its generation fleet.  The company’s goal is to reduce CO2 emissions rate 67% by 2025, from a 2005 baseline.  This equates to a nearly 40% reduction in absolute CO2 emissions, despite the company’s total expected electricity production almost doubling from 2005 to 2025.  Working toward this goal, as of year-end 2019, NextEra has reduced its CO2 rate by 52.2%  and the absolute CO2 tons by 20% while their generation increased by 67.5%.  That’s pretty impressive.  

Investors have endorsed NextEra’s clean-energy strategy, with renewable energy becoming both mainstream and desirable.  At least a dozen U.S. states have policies that will eventually mandate completely clean power grids.  Plus, Democratic presidential nominee Joe Biden has proposed a green electrical system in the U.S. within 15 years.  

“Renewable Energy is not a niche investment anymore,” said Kit Konolige, a utilities analyst with Bloomberg Intelligence.  “It’s a big industry.”  And NextEra Energy seems to be poised for a lion’s share in the future.  

NextEra has a very strong track record of success.  Between 2004 and 2019, their adjusted earnings per share grew at a compound annual growth rate of 8.4%, while dividends grew at a compound annual growth rate of 9.4%, that’s incredible growth over a 15-year period.  Over the past five years, the stock is up 231% on a total return basis.  That type of performance is not typical for a utility company which indicates that NextEra truly  is an outlier in the industry.