Clean Energy Investment Insights

Investing.com – Clean Energy has disappointed investors since easy money was tightened, according to Citi Research. However, a potential Fed pivot and reduced rates could boost the broader Green theme.

“We still are not broad buyers of ‘Green’ per se,” stated Citi Research analysts in a note dated Aug. 30. “But we see opportunities within the wider theme where profitable businesses can benefit from ongoing secular investment trends.”

Corporate focus on green initiatives is becoming more integrated into normal business practices, which could expand opportunities.

A Fed pivot and lower rates could act as tailwinds for relative performance and might have political implications.

Recent returns suggest a Democratic president may favor ‘Green’ initiatives, although there are nuances. While Democratic policies directly support clean technology, further deficit spending may only occur with a complete sweep. For Republicans, the Inflation Reduction Act (IRA) is likely to remain intact, with deregulation and tax-friendly policies possibly making projects more attractive.

Still, Citi warns that rate and political factors alone may not sustain ‘Green’ stocks in the medium term.

“Therefore, we focus on three key fundamental characteristics: positive cash flow, visible profitability, and sales/EBITDA growth acceleration. Clean Water, Energy Efficiency, and Nuclear Energy stand out as most attractive, while Electric Vehicles and Energy Storage may face the most challenges.”

Citi has added buy-rated companies Ecolab (NYSE:ECL) and IDEX Corporation (NYSE:IEX) to their Thematic 30 recommended list for Clean Water exposure, highlighting their reasonable implied growth setups and moderate sensitivity to rates and politics.