5 renewable energy stocks to buy

Rupert Hargreaves outlines why he would buy these renewable energy stocks for his portfolio to take part in the green revolution.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The global renewable energy market broke records in 2020, and over the next few years, analysts expect tens of billions of dollars of new capital to flow into the market. As such, I have recently been looking for renewable energy stocks to buy for my portfolio. 

Here are five companies I would buy that all look set to benefit from the flood of cash. 

Renewable energy stocks

The first two companies I would buy are BHP and XP Power. These two enterprises are not traditional renewable energy stocks, but they do fulfil a critical part of the green energy supply chain. 

BHP is the world’s largest mining group, and copper is one of its key commodities. As the world moves away from hydrocarbons, the demand for copper should grow as the electricity grid expands. Earlier this year, the CEO of commodity trading powerhouse Glencore speculated that the price of copper would need to increase by 50% to meet this higher demand. 

Rising electricity consumption will also boost demand for XP’s power control devices. Management is expanding its presence in renewable energy markets to capitalise on this trend. 

As well as BHP and XP, I would also buy Glencore as a speculative investment in my portfolio of renewable energy stocks. This company is probably not going to appeal to many investors because it has a large coal mining operation.

However, it is a major copper producer and trader. It also has exposure to rare earth metal production. Rare earth metals such as lithium are required for battery production. 

The one challenge all of these firms will have to deal with is competition. Increased competition in the mining sector will push up copper supply and could send prices lower. Meanwhile, XP will have to compete for market share in the electricity transmission market. 

Storing energy

One of the significant challenges the world faces as part of its transition towards being more green is storing energy. Wind energy is a booming market, but wind generation is unpredictable. Storing energy to cover periods of low wind is a challenge the industry is spending heavily on overcoming. 

I would buy two renewable energy stocks to play this theme: the Gresham House Energy Storage Fund and the Gore Street Energy Storage Fund

Both of these companies have relatively similar strategies, although Gore Street is more established than its peer.

Both have substantial pipelines of energy storage assets under development or in the process of being acquired. These pipelines should help them grow over the next few years. The two firms are returning profits from their energy storage businesses to investors through dividends. Gresham offers a yield of 6.1% at the time of writing, and Gore Street yields 6.2%. 

While they have significant growth plans, both companies could face challenges if competitors start to edge into the market. This could push down returns on investment, potentially making capital spending less appealing and reducing probability. In the worst-case scenario, falling profits may force both firms to reduce their dividends. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended XP Power. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 75% in 5 years, I reckon this FTSE 250 still has lots to give!

Our writer explains why this FTSE 250 stock could still continue to provide growth and returns despite already being on…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 high-quality FTSE 250 stocks to consider buying

The FTSE 250 is home to some of the best investment opportunities out there. This Fool highlights two stocks for…

Read more »

Investing Articles

The Marks and Spencer share price dips! Is this my chance to buy?

Marks and Spencer was one of the hottest stocks on the market last year. With its share price falling in…

Read more »

Growth Shares

How low could the boohoo share price go?

Jon Smith explains why the enterprise value and the low risk of bankruptcy should help to prevent the boohoo share…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Down 23% in a year! Can the Diageo share price regain £30 in 2024?

This Fool UK writer is checking the charts to see if the Diageo share price can recover from the recent…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

I wouldn’t touch this FTSE 100 stalwart with a bargepole

Despite looking like a bargain on paper, this Fool is avoiding FTSE 100 constituent Vodafone at all costs. Here he…

Read more »

Investing Articles

I’m waiting for the Rolls-Royce share price to pull back before I buy

The Rolls-Royce share price has been the Footsie's best performer in the last year. But this Fool has no intention…

Read more »

Front view photo of a woman using digital tablet in London
Dividend Shares

2 dividend stocks to take me from £0 to £9.5k in second income

Jon Smith talks through some ideas with second income potential, including one stock that has a dividend yield above 10%…

Read more »