Manager: Craigmillar, LLC
Model: Global Clean Energy, Clean Tech
The Craigmillar Clean Energy portfolio was up 3.31% for the month of April, while Covestor’s new benchmark for the model – the S&P Global Clean Energy Index – was down 2.28%. The broad market, as represented by the S&P 500 Index, was up 2.85%.
The portfolio also performed well against our chosen benchmark, the WilderHill Clean Energy Index. Both that index and our model have heavy sector weightings in Industrials and Technology. The WilderHill Clean Energy Index has a number of stocks that brought the index down for the month: MEMC Electronic Materials (NYSE: WFR) was down significantly, and Ener1, Inc. (NASDAQ: HEV) was down very hard. Unfortunately, we had these two stocks in our portfolios as well.
What we avoided were a few other big losers during the month that are in the WilderHill Index: First Solar (NASDAQ: FSLR), China Ming Solar and American Superconductor (NASDAQ: AMSC).
We also had a few winners: General Cable (NYSE: BGC), Shaw Group (NYSE: SHAW), Carbo Ceramics (NYSE: CRR), and our largest gain was in SunPower (NASDAQ: SPWRA) – up sharply due to a buy-out by the French company Total SA.
I will not go into speculative detail on why the French are invested in SunPower. As we know, the French are heavily invested in nuclear power plants, which supply almost 80% of the electrical demand, more than any other country. The Fukushima Daiichi event in Japan may have pushed this deal through. I have not seen any articles connecting these two events and it may have just been a coincidence.
This week we sponsored an energy investor lunch with Christina Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change. Her message to us was to speed up our actions on decarbonization. Even though the decarbonization trend has been moving favorably over time on a relative basis, the absolute amount of carbon is rising globally. Of course, I said that investing in the Craigmillar portfolio would help this cause. Investing in lower carbon based technologies will reduce the amount of carbon released, which she firmly agreed with, but our reason for investing in this approach has been the historical track record of returns. There was a mutual understanding that promoting decarbonization was both political and economic.
The path to decarbonization includes numerous sectors of this global economy. Probably the most important today is the transition to natural gas. There are emerging efforts to build this new energy structure, as was the case with American DG Energy Inc. (NYSE: ADGE) I recently attended a presentation on their approach to using natural gas to provide both heat and power (electricity) to large consumers with the assistance of heat pumps. The economics are appealing with current natural gas prices, due to the abundance of shale gas.
The economics of this structure will continue. It is just a matter of time and education of the consumer. Of course this time will be long, as new energy technologies adopted by the public are quite slow to emerge. I hope to hear more presentations around new efficient energy concepts, because this is where we are invested.
So far this year we are in line with the broad markets and ahead of the energy-tech benchmarks. I expect energy technology to become more important as we ponder the next steps to supply an expanding economy. The emergence of abundant natural gas and a wider acceptance of solar will help support the performance of the Craigmillar Energy portfolio.
Best regards,
Clark Gates
Robert Preston
Portfolio Managers
