Welcome to Green Edge Portfolios (new branding released)
When I first started this newsletter (originally titled, Clean Energy SPACs) in November of 2020, my focus was on clean energy companies going public through special purpose acquisition companies, or SPACs. Getting to the public markets through the SPAC process (versus IPO) was the biggest opportunity ever for young, innovative companies to exit the private market and become publicly traded. More than 860 SPACs were created in 2020 and 2021, 4x the volume of the past 20 years altogether.
Firms in the clean tech, clean energy, decarbonization segments were popular targets for the search teams. My first purchase was SPAQ (Spartan Energy Acquisition Company) which merged with Fisker, the electric vehicle designer and developer in June 2020. Since then, I’ve been tracking and reporting on 80+ of these clean tech/energy companies that went public during this time.
In June 2022, the newsletter changed its name to PORTFOLIOS as I wanted to expand the framework for investing to the power of portfolio investing and dollar-cost averaging. Although this was all good and the concepts solid, it felt like it moved my attention away from the industry where I’ve spent the past 30 years. In short, I needed to get back to my roots, my mission, and provide higher level of value to subscribers.
Announcing: Green Edge Portfolios. Green Edge aims to help investors reduce their carbon footprint by providing actionable insights and guidance on investing in sustainable companies. We will focus on the “E” of ESG and transition investments to provide real world impact. It will be a journey of learning, wins and challenges, but we have a two-and-a-half-year head start of lessons learned.
Here is your chance to get Green Edge Portfolios sent directly to you each month.
I look forward exploring these issues in more depth, communicating the insights, and having the conversations to help us understand the nuances to make environmentally, and financially, solid investment decisions. Let’s Go!
Performance Results
There are four Green Edge portfolios. The Green Edge Follow Account is added to the three existing portfolios. The Follow account started on March 30, 2023, so it shows only two days of activity for the Month and YTD, up 1.0% (more on this new portfolio later).
Our Top Picks portfolio and equal-weighted were both down 13% in March but was down as much as 21% in response to the regional banking crisis and collapse of Silicon Valley and Signature banks. Small companies were hit hard as investors fled to the large cap tech firms. The divergence between the small cap Russell 2000 index, down 4.9% for the month, versus the NASDAQ index up 6.7% is notable. However, in the last week of the month, as the banking crisis settled down and seemed limited in its scope, small companies bounced off those lows dramatically.
ICYMI, here is a link to my mid-month edition on how prices were reacting to the recent banking crisis. Bank Run
Green Edge Top Picks Portfolio
On a challenging note, Proterra’s (PTRA), electric bus maker, fourth quarter report was disappointing to say the least. Negative free cash flow of $117 million and only $298 million of cash, ongoing covenant violations related to convertible notes, and missed on both revenue and earnings for the quarter. The CEO announced “going concern” risk for the company and a need to restructure terms with the lenders. The stock entered March at $4.20 per share and dropped to as low as $1.07 before ending the quarter at $1.52 after indicating that they have come to terms with lenders. I’ve sold about 30% of the shares so far and looking to sell the rest, hopefully at a better price, but it is time to cut it loose. They have projected revenue increase of 40-50% for next year but will likely need to raise a lot of cash to be able to get through this crunch which will further dilute shareholders.
On the positive side, EVgo’s (EVGO) fourth quarter report was rosy as the stock moved up 45% post-report, finishing up 30% for the month. Revenues came in at $27.2 million, 36% above expectations and earnings were -$0.06 compared to -$0.158 expectations. For the full year 2022, revenues increased by 146% over 2021 and laid out expectations to at least double again in 2023.
Six of the ten holdings in the Top Picks portfolio finished the first quarter up 9.9% or better with Indie Semiconductor achieving the top spot up 81%.
The Department of Energy Loan Programs Office announced a conditional $375M loan to Li-Cycle (LICY) via the Advanced Technology Vehicles Manufacturing program. Not only does the DOE loan provide non-dilutive funding for the company, but also provides a level of credibility for the technology and the business plan since DOE performs significant due diligence before an award. We added about 25% more shares this month of LICY making it the second largest holding in the portfolio.
Another clean energy ex-SPAC being considered by DOE is Eos Energy (EOSE) whose solution for battery storage uses aqueous zinc designed to overcome the limitations of conventional lithium-ion technology. Eos is in due diligence phase with DOE with a potential of up to $250 million of funding. I will look for opportunity to add EOSE to our Top Picks portfolio.
Where is the market going?
Did you really expect an answer, because if I knew that, we’d all be rich. I learned technical analysis (TA) back in my early 20’s when I was a commodities broker with a small firm in Phoenix with two guys who had previously worked on the Chicago Mercantile Exchange. Although not an expert, I like to use TA to assist in direction of the market as well as entry and exit points of trades. Let’s review the daily chart of the S&P500 futures.
The very top of the price chart for the S&P 500 was on January 4, 2022, at 4,808. During 2022, we made five lower lows, marked by the red downward arrows, and each time it rallied, the index peaked at a lower high. This is the definition of a bearish (downward) trend. The lowest low occurred on October 13, 2022, at 3,502 (so far).
Since October, price has moved to set new higher highs and higher lows (green arrows). So, in the intermediate term, the market is in a bullish (upward) trend. For that reason, I remain bullish until this upward movement stops. As of today, “stopping” the bull would mean the index price would drop below the last higher low of 3,839 set on March 13, 2023. Two daily closes under this level and then we might look for a re-test of the October lows at 3,502. As long as the market stays in the bullish trend, the next target would be at 4,327 (indicated by the grey box). If we were fortunate enough to get through that level, 4,550 to 4,630 would be the next major price target.
Quick insight on the “buying the dips” strategy. In an upward/bullish market, it makes sense to buy the dip as it is followed by a higher high (you’re making money!). In a bearish market, you don’t know how many dips there will be, and many will run out of money before the final low. In addition, you’re psyche will want to sell at the lowest low because of all the unrealized losses in your portfolio and unknown of how far price could drop.
Although I’m bullish currently, my biggest worry is that a recession rears its ugly head in the second half of the year, company profits sink, multiples shrink (price in relation to earnings), and we see a significant drop in the market. We need to take it one month, one week, and/or one day at a time. Feeling good for April.
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Performance of Cryptocurrencies and Other Portfolios
With the new Green Edge portfolios brand, I will continue to provide the monthly results on cryptocurrencies and our three portfolio mixes but will do so at the end of the edition in case some are not interested.
Bitcoin and Ethereum had another super bullish month gaining 22.7% and 13.5% respectively. Price of crypto reacted positively to the regional banking crisis as some see it as an alternative if the U.S. banking industry goes to hell.
About year ago in May of 2022, Bitcoin’s price consolidated between $28k-$32k before dropping to the $20,000 range in June 2022. Today, price is consolidating just below that range, between $27k-$29k. It will take a lot of energy to get through $32k, so I expect price to be stuck in this range between $25k and $32k for a while. However, when/if Bitcoin gets through $32k and makes it a support level, it is clear sailing to $37k to $45k range.
In the three Portfolios, the more Aggressive the better the returns so far in the first quarter of 2023. Aggressive up 20%, the DT-Mix up 10%, and the Traditional up 5%.
Final Note. The Greed Edge Follow Account portfolio will be a diversified set of companies constructed to beat the market indexes while putting our investment dollars to good work for the environment. In a future edition, I’ll break down the strategy in more detail, but I’ve developed four categories of investments: 1) leading by example, 2) deployment at scale, 3) innovative (with some traction), and 4) a green bond fund. We’ll also keep a little cash on the side to put to work in special situations.
Until next time, Efficiently Yours,
DT