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Investment Ideas

Due to raised awareness of climate change and global warming, there have been increased consumer, government, and industrial interest in the human impact on our planet. In the past, governments have supported the green movement through subsides, and they continue to look for ways to help the environment through investment in the Clean Technology space.

Investors have been thinking green for the better part of a decade and some are now reaping the rewards of a Cleantech sector. Whether it is recycling, renewable energy, transportation or lighting, Cleantech companies are looking for different ways to help the environment, while sustaining a profitable business.

As of late, we have seen a swell of technology that has pushed the green movement forward. Companies like Tesla (TSLA - Analyst Report) and First Solar (FSLR - Analyst Report) are finding ways to make their products more economical and affordable to the average person.

Below I take a look at five top ranked companies that are making the push to change the world. These companies are a Zacks Rank #1 (Strong Buy) or a Zacks Rank # 2(Buy) and are part of the Cleantech space that is trying to change how we impact our planet.  

Ormat Technologies (ORA - Snapshot Report) is arenewable energy company that is a Zacks # 2 (Buy). The company engages in the geothermal and recovered energy power business globally and operates in two segments, Electricity and Product. The Electricity segment develops, builds, owns, and operates geothermal and recovered energy-based power plants; and sells electricity. The Product segment designs, manufactures, and sells equipment for geothermal and recovered energy-based electricity generation, including fossil fuel powered turbo-generators and heavy duty direct-current generators.

The Reno, Nevada company has over 1000 employees and is ranked 70 out of 265 (top 26%) in the Zacks industry rank. Ormat is valued at 2.1Billion, has a Forward PE of 25 and a dividend of 0.66%. In addition, the stock sports Zacks Style Scores of “A” in Momentum and “B” in both Value and growth. The stock also sports a VGM score a “A”

The company is seeing revisions to earnings estimates head higher for both fiscal year 2016 and 2017. Over the last 60 days the current year has seen revisions higher of 2.3%, while next year has seen a rise of 3.2%.

Earnings will be out August 1st where the company will go for its fourth straight EPS surprise to the upside. Looking at the chart below you can see the historical surprises and the upwards trend that recent positive EPS momentum has created.

Hanwha Q Cells (HQCL - Snapshot Report) is a solar energy company, develops, manufactures, and sells solar cells and photovoltaic (PV) modules in the United States, Europe, South Korea, Japan, the Peoples Republic of China, India, Turkey, and internationally. The company is headquartered in Seoul, South Korea and is a Zacks Rank #1 (Strong Buy).

Hanwha has a market cap of 1.1 Billion and a Forward PE of 8. This low PE gives the stock a Zacks Style Score of “A” in Value. The stock also sports a VGM score of “A” and a Zacks Style Score of “B” in Momentum.

Estimates are being revised higher across all time frames, with fiscal year 2016 looking very impressive. Over the last month, estimates for the year have gone from $1.34 to $1.68 a rise of 25%. Earnings are expected on August 25th where the company will go for its second straight beat after a 37.50% EPS surprise to the upside last quarter.

EnerNOC (ENOC - Snapshot Report) is a Zacks Rank #2 (Buy) that is a leading developer and provider of clean and intelligent energy solutions to commercial, institutional, and industrial customers, as well as electric power grid operators and utilities. This smart grid company is based in Boston, Ma and has over 1100 employees.

EnerNOC is a small cap company that has a market cap of $200 Million. The company has yet to turn a profit, but estimate revisions for the current quarter show that the company is getting close. Over the last 60 days, numbers have been revised from -$0.85 to -$0.18. Earnings are August 4th when the company will go for it seventh straight EPS beat.

Badger Meter (BMI - Analyst Report) is a Zacks Rank #1 (Strong Buy) that manufactures and sells flow measurement and control technologies related products. It offers mechanical and electronic water meters, and related technologies and services to municipal water utilities; and meters and valves to measure and control materials flowing through a pipe or pipeline, such as water, air, steam, oil, and other liquids and gases, as well as for use in water/wastewater, heating, ventilating and air conditioning, oil and gas, chemical and petrochemical, test and measurement, automotive aftermarket, and the concrete construction process.

The company has a $1 Billion market cap and a Forward PE of 30. While its valuation is lofty, the stock sports Zacks Style Scores of “A” in both Growth and Momentum. The company also pays a dividend of 1.13%.

Earnings estimates for both fiscal year 2016 and 2017 are rising. For the current year estimates have been revised 6.7% higher, while next year has seen a 6.3% jump in estimates.

Esco Tech (ESE - Snapshot Report) is a Zacks Rank #2 (Buy) that produces and supplies engineered products and systems for utility, industrial, aerospace, and commercial applications worldwide. The St. Louis based company has over 2100 employees and operates in three different segments: Filtration/Fluid Flow (Filtration); RF Shielding and Test (Test); and Utility Solutions Group (USG).

The company has a $1 Billion market cap and a Forward PE of 20. The stock sports a Zacks Style Score of “B” in Value and pays dividend yield of 0.79%.

Earnings are due out August 8th where the company will go for its third straight EPS beat. While estimate revisions aren’t as impressive as the previous stocks mentioned, the last two quarters have seen double digit EPS surprises to the upside. More importantly, the stock has followed the earnings momentum and now looks to break 2013 highs with another EPS beat.

In Summary

The movement towards greener cities, homes, industries and transportation is helping Cleantech blossom into the next big sector. As the political climate change debate continues, there is no argument that society wants a healthier environment, and smart money is ahead of the curve.

While the space might be risky, the reward is massive when a winner is found. Stick to the stocks that have a fundamentally sound track record and a solid track to profitability. These companies tend to already have a foot in the door to customers and clients, who will help sustain a viable business.

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