Dealmaker’s Diary: The Stock Financing Our Energy Future

Alpesh Patel|August 8, 2024

Whether you agree with it or not…

There’s a ton of money to be made in the climate space.

And the stock I have for you this week stands to benefit more than most companies in the space.

It’s a climate infrastructure firm that provides assets to help with our energy transition.

This sophisticated company has equity investments, commercial and government receivables, real estate, and debt securities to help finance the massive changes happening.

The $3.5 billion company rates a 7 on my proprietary GVI score (an algorithm my clients pay thousands to access)… is cheap on a forward P/E basis… and is undervalued.

Get all the details on the company – including its ticker – in my latest video.

Click on the image below to watch it.

TRANSCRIPT

Hi, friends. Welcome to the Dealmaker’s Diary and my Stock of the Week.

You know how this works. My hedge fund team puts a lot of stocks across my desk. They narrow those down. I then select the ones which are worthy of mention, which might be going places.

So what do we have?

HA Sustainable Infrastructure Capital (HASI).

You wouldn’t expect me to pick a tech company in this environment, would you?

No.

There’ll be time again for those, but this is actually quite a good time to look at stocks outside of conventional AI plays.

HA Sustainable Infrastructure is a climate investment firm. It focuses on deploying real assets to facilitate the energy transition.

Well, we know there’s a lot of money going in that space. Whether you agree with climate change or not, it doesn’t matter. There’s money that’s being made from that space.

The company has equity investments, commercial and government receivables, real estate, and debt securities.

It’s a sophisticated company, and a company linked with the financing of these changes. The market cap is over $3.5 billion, which is significant in terms of the size of the company.

But I focus on the financials. So let us look at that.

On my Alpesh GVI rating – my Growth-Value-Income rating – it’s a 7. That’s my proprietary score based upon the valuation of a company, its profitability to its share price, its revenue growth, its profit growth, the dividend yields increasing, and so on.

The minimum score I need out of 10 is 7. This is a 7.

That doesn’t mean a 10 is necessarily better than a 7. It’s just because the stock market is not physics. But 7, 8, 9, or 10, and HASI is in the sweet spot for me.

It doesn’t have a cash return on capital invested number. For some companies, the data just can’t be collected.

That doesn’t matter because the forecast P/E ratio is an austere 12.7. In other words, it’s relatively cheap. You’re paying 12.7 dollars for every future dollar of forecasted profits.

That’s not expensive. I’m talking in absolute terms, in relative terms to other companies, in relative terms to companies in this industry and sector. I can live with that. It’s a good number.

I would have liked the Sortino ratio to have been higher. For those of you who are follow my GVI Investor research service, you will know that I’m looking higher numbers there.

I’m looking for a lower volatility number as well.

Nevertheless, the thing which caught my eye with the stock is that we’ve got this upward trend. If you project that forward, that’s your potential reward.

You look at that over the next 12 months. You come to a percentage, and you ask yourself, is that reward sufficient for you? You also determine your risk, you look at the upward trends and you ask, are those drawdowns from peak to trough along the way, are they drawdowns you are comfortable with? Is the duration for it to go back to where it was a period you’re comfortable with?

That’s how you work out your reward and your risk.

Then stock looks relatively attractive on both of those basis. It’s a $31 stock, so it could be more volatile as we’ve seen it on the numbers because it’s essentially a penny stock in many ways.

On a discount cash flow basis, the stock is considered to be somewhat undervalued. That gives you some additional degree of comfort there as well.

So I hope you like this analysis. I hope you enjoyed it, and I hope it was educational as well as informative.

I was going to say and entertaining. I’m not sure it was entertaining, but at least it was informative.

Thank you all very much indeed.