Shares of NextEra Energy Partners (NYSE:NEP) are trading down over 10% after reaching a 52-week high post earnings. The question is why? On January 25, the company reported revenue that fell short of analysts’ expectations but posted a significant beat in earnings. And after the earnings report dropped, NEP shares soared to their all-time high.
However someone, or a lot of someone’s, are in a selling mood. The technical indicators suggest that perhaps investors felt the stock was overbought above $80 per share. The relative strength indicator (RSI) would seem to back that up. When NEP stock hit that level, the RSI surged above 70 suggesting that a momentum trade was at work.
But I’m a little more skeptical than that. There’s a new administration that is signaling in words and actions a renewed focus on climate change. That’s a narrative that plays right into NextEra Energy’s wheelhouse.
Investors Don’t Want to Sell; They Have To
There’s a tug-of-war going on between retail investors and institutional investors. This is being played out in stocks such as GameStop (NYSE:GME). Retail investors are trying to short the stock but as more buyers try to enter the trade, shares keep rising and short positions have to be covered.
And this is leading to equities and other assets such as gold and bitcoin to drop. Simply put, investors are covering their positions. At some point this will end in a very ugly way. But in the meantime, it may create a buying opportunity for NEP stock.
All In On Climate Change
Patience may be a virtue, but it seems in short supply among the political class. The Biden administration is proving that it is going all in to address the issue of climate change. That will bode well for NextEra Energy and by extension NEP stock.
However it’s important to note that the renewable energy sector was enjoying significant growth even with the “benign neglect” of the prior administration.
But don’t take my word for it. On the company’s earnings call, Jim Robo, NEP’s Chairman and Chief Executive Officer referenced how NextEra “deployed more than 14 billion in 2020.” The company’s revenue was $917 million in 2020, up from 853 million in 2019.
This continues a pattern of increasing year-over-year revenue for the company since they began trading publicly in 2014. And adjusted earnings per share was up 10.5% to $2.31 compared to the prior year.
The point that I’m making is that NextEra was already navigating its way towards a cleaner energy future. And now that the company has an advocate in the White House and Congress, there’s no reason to believe the company won’t experience increasing revenue. Whether that leads to higher earnings may be the bigger question.
Use This Dip As a Buying Opportunity
Even as I write this article, NEP shares are attempting to turn positive for the day. And if they succeed in recapturing the $80 price level, investors could quickly see the stock charge to a new all-time high. That would be my guess. So if you’re interested in getting in on this renewable energy stock, there may be no time like the present.
The long-term narrative for NEP stock looks too strong to get concerned about this short-term price movement. Plus, NEP stock pays investors a growing dividend. The company just announced the quarterly distribution will increase to 61 cents per share which will result in an annual distribution of $2.46 which was at the high end of its forecast.
The trend for renewable energy stocks looks to be very strong. However, the market is likely to remain volatile for quite some time. Exchange-traded funds (ETFs) remain a good way to help manage your speculative risk. With that in mind, the First Trust North American Energy Infrastructure Fund (NYSEARCA:EMLP) is an exchange-traded fund with significant exposure to NEP stock.
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7 Stocks to Buy For the Current Housing Boom
It’s been an uneven economic recovery to date. However, one area that is unquestionably booming is the housing market. But the interesting thing is that it took more than low mortgage rates to convince home buyers to take the plunge.
What it took was a pandemic. Think I’m kidding? Look at the Housing Market Index (HMI). In September, the HMI posted a preliminary rating of 83. That’s a historical high. And this marks the fifth consecutive month the HMI has increased.
Simply put, Americans have a renewed interest in spreading out. For some urban apartment dwellers, this means a flight to a place of their own. Some that own homes in more densely populated areas are looking for more wide-open spaces.
And regardless of the outcome of the presidential election, the Federal Reserve has indicated it is in no hurry to raise interest rates. This means that mortgage rates should remain favorable no matter which party occupies the White House.
There are many ways for investors to profit from this housing boom. Homebuilder stocks are a logical choice. But other companies will benefit from the rise in homeownership.
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