Clean energy stocks expected to rebound soon

Jupiter’s Charlie Thomas expects clean energy stocks to rebound as government stimulus boosts investor sentiment towards the sector.

The manager of the £339m Ecology fund says these stocks took a hit following the UN Climate Change summit in December, but he thinks positive earnings growth and the effect of government stimulus packages will see prices rise.

“We have been suffering a sort of Copenhagen hangover. People got very excited ahead of the conference and then it did not quite deliver,” he says.

“Some positive results mean investors are realising it is not all doom and gloom and from what we can see in our portfolio, the signs are the stimulus package is starting to come through.”

One example is wind energy company Vestas, which he bought earlier this month at $2.80 (£1.80) and has risen to around $3.70. Investors responded positively to news of a big contract win for the company.

However, Thomas says concerns remain over Spanish stocks because of the changing regulatory environment.

“There are murmurs the Spanish government could retrospectively reduce the pricing structures on Feed-in Tariffs [Government-subsidised clean energy], which is having a negative impact,” he says.

Thomas also believes there will be increased investment in transport stocks so holds East Japan Railway and First Group.

“Transport stocks are cheap at the moment, but there are signs public transport is seeing a pick-up in volumes,” Thomas says.