BofA Securities analyst Dimple Gosai has detailed the incredible success of the U.S. Inflation Reduction Act (IRA) in generating investment in clean energy and identified 40 investment opportunities, including Canadian companies, that will benefit most as the transition gains steam.
In a research note this week, Ms. Gosai credits the IRA with motivating 270 new clean energy products and US$130-billion in new investment. Planned additions to renewable energy generation amounts to 25 gigawatts of capacity, enough to power 22 million homes.
Despite the surge in activity, clean energy investment portfolios like ETFs have underperformed. The analyst attributes this to the dominance of newly formed companies that are not yet generating profits. In an effort to successfully invest in IRA-related spending, BofA provided a list of established and newer companies that are set to benefit in the near term.
There are two Canadian companies on the list of 40 – uranium producer Cameco Corp. CCO-T and fertilizer giant Nutrien Ltd. NTR-T U.S. industrial stocks make up the bulk of the list - familiar names include General Electric GE-N (wind power, hydroelectric equipment), Honeywell International HON-Q (hydrogen power, solar power equipment, carbon capture, batteries), Cummins Inc. CMI-N (solar panels, hydrogen fuel cells, electric vehicle charging) and Eaton Corp PLC ETN-N (solar power equipment, energy storage). Sunrun RUN-Q, a younger company, provides solar power generation.
Bloom Energy Corp. BE-N, producer of hydrogen power and carbon capture technology, is another notable name on the list. Teledyne Technologies Inc. TDY-N, a maker of electronic equipment used for hydrogen power, is another pick. I posted the full table of 40 selections on social media here.
There is a lot of financial muscle, incentivized by government policy, aligning behind the U.S. attempt to cut carbon emissions by 40 per cent of 2005 levels by 2030. Ms. Gosai believes that the trend is about to show up in corporate profits and successful investments. She writes, “The IRA is expected to have the biggest impact in 2024 and 2025 as evidenced by consensus earnings [forecasts], but stock prices are yet to fully reflect it in our view.”
-- Scott Barlow, Globe and Mail market strategist
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The Rundown
Even with regulators sniffing around, HISA ETFs are a great way to exploit high rates
The federal Office of the Superintendent of Financial Institutions has been looking into high interest savings account exchange-traded funds to see if they present a risk to the banking system. This week, OSFI said it would defer a decision until October. All the more reason, says Rob Carrick, for investors and savers to still consider these products for the time being.
How to invest in AI, intelligently
Sure, hype over artificial intelligence helped drive global tech stocks’ 38.8-per-cent gains so far this year. Semiconductors – crucial for AI development – led the rise, soaring 67 per cent. But tech’s 2023 rally is mostly about quality large-cap growth rebounding from 2022′s outsized slide, says billionaire investor Ken Fisher, who provides some advice on how smart investors should approach the explosive trend.
Chinese stocks are dirt cheap, but for good reason
Chinese stocks have traded at a discount to global peers for over a decade but have rarely been cheaper than they are now. Bearing in mind the myriad risk premiums investors must consider when investing in China - regulatory, economic, exchange rate and political, to name a few - there’s every chance they could get cheaper still, says Reuters’ Jamie McGeever.
Also see:
China’s sagging economy looms over quarterly results around the world
Foreign investors stream into Taiwan as AI stocks beckon
Greece’s stock market is on a tear - and this ETF tracking it is poised for even more gains
Greece was once the poster child of the Eurozone debt crisis of a decade ago. But the country has got its finances now in order, and an exchange-traded fund tracking Greece’s stock market is on a tear. Philip MacKellar of The Contra Guys newsletter argues there could still be more big gains ahead.
Others (for subscribers)
The highest-yielding stocks on the TSX, plus risk data
Number Cruncher: Seven attractive dividend-paying stocks benefiting from the travel boom
Number Cruncher: Are concentrated portfolios really better? This fund ranking offers some clues
The 25 most popular ETFs with Globe readers last quarter
Friday’s analyst upgrades and downgrades
Thursday’s analyst upgrades and downgrades
Trump-linked SPAC surges as fraud settlement lifts hopes for deal completion
Globe Advisor
Why this money manager isn’t waiting for a possible recession to buy more stocks
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Ask Globe Investor
Question: My daughter will be starting her fourth year of university in September. After she finished her third year in April, I asked my bank to withdraw my $58,500 of my RESP contributions from the account. At the time, the RESP also held $5,188.13 of Canada Education Savings Grants (CESG) and $39,880.42 of accumulated investment income. To my surprise, the bank said it was required to return the CESG to the federal government. As a bank employee explained in an e-mail: “Depending on the amount you have contributed to an RESP, the government gives you grants as an incentive to continue to save for a child’s education. As you are now withdrawing your contribution, the government takes back the grants they had given you.” Adding to my frustration, I have so far received less than $51,000 of the $58,500 of contributions that I requested. Did the bank act correctly?
Answer: Based on the information you provided, this looks like a case of incompetence by the bank. Let’s make one thing clear: If the RESP beneficiary is enrolled in a qualifying post-secondary program, as your daughter is, you as the plan subscriber are entitled to withdraw all or part of your contributions with no tax consequences and without having to repay any CESG to which the beneficiary is entitled.
There are circumstances in which a withdrawal of RESP contributions does trigger a repayment of CESG, such as when more than six months have passed since the beneficiary ceased being enrolled in school. However, this situation does not apply to your daughter, and the bank employee offered no other reason for repaying the CESG.
As for why you did not receive the full $58,500, this is also a mystery. You are entitled to withdraw your RESP contributions tax-free at any time, and you should have received the full amount regardless of whether you have to repay CESG or not.
My advice is to file a written complaint with the bank branch manager and ask that the CESG be restored and the balance owing on your $58,500 withdrawal be transferred to you immediately. You should also obtain a proof of enrollment from your daughter’s university – this should be available through your daughter’s online student portal – and attach it to your e-mail, explaining that no CESG should have been repaid to the government given her status as a full-time student. Be polite, but firm, and get everything in writing.
If your problem is not resolved promptly, escalate your complaint through the proper channels. All banks have a complaints process that you can read about by googling the bank’s name and “how to make a complaint”. It’s possible that there is more to this story, but it looks like a case of incompetence. Please keep me posted on your progress, and let your bank know you will be doing so.
--John Heinzl (E-mail your questions to jheinzl@globeandmail.com.)
What’s up in the days ahead
West Fraser Timber has been one of the TSX’s best performers of the past month thanks to stronger lumber prices and a better economic outlook. Can the winning streak continue? David Berman will weigh in.
World market themes for the week ahead
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Compiled by Globe Investor Staff