Written by Victoria Harris, Senior Investment Analyst
London: Clean Energy Conference
Last month, I was fortunate to attend a Clean Energy & Industrials conference in London. Around 50 small companies presented, all of which were exposed to some form of the clean energy space for example wind, solar, electric vehicles etc. Clean energy has received a significant amount of investor interest of late and hence, the conference had double the number of attendees and was spread across two full days.
Many have seen the light
On the surface, solar looks like an attractive growth sector. Renewable energy is becoming an increased focus for many countries, governments and companies who are pushing for more sustainable practices. However, the solar industry specifically is experiencing a period of oversupply. This has led to increased price pressure and high levels of capital expenditure in order for companies to remain competitive.
Main Drivers
There are three main drivers of this current capex cycle that is causing this oversupply:
- China is running a substantial program that is continually increasing the requirements for module conversion efficiency. This has encouraged significant advancements in technology which are aiding ongoing cost reduction.
- High valuations of solar companies in Chinese capital markets enable these companies to easily raise capital for capacity expansion. As a result, a number of companies are flush with cash and the rest of the world must continue their capex and technology upgrades in order to keep up and not get left behind.
- And lastly, technology. This cycle, there are more technology upgrades to higher efficiency products available through the entire ecosystem.
Bright prospects
In the longer term, the industry could potentially be a great investment as this current oversupply will lead to much improved industry efficiency. On the demand side, the price of solar will continue to fall until it is at similar levels to other energy sources. From a sustainability stand point, this is very exciting and much needed.
So while investing directly in solar companies right now may not be an attractive investment, we did find a number of opportunities at the conference that have a ‘clean energy’ exposure, and that could potentially be attractive investments for the Global Fund.
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Written by Daniel Sims, Investment Analyst
Two reasons for a slight dip
It was a tough month for the Growth UK & Europe Fund as we posted our first down month since inception. The reason for the fall is two-fold.
Firstly, over the course of the month, the British Pound weakened against most currencies after the Tories failed to secure a majority government in the election on 8 June. The portfolio has a 60% gross exposure to the Pound and in months of heightened currency volatility it will be noticed in the unit price. We continue to have a relatively low portion of this exposure hedged given our view that the UK Pound relative to the Kiwi dollar continues to trade in the upper range of its long-term average.
The other reason for the decline in unit price was a general pull-back in UK and European small caps across the board. The UK benchmark that we use declined 2.71% over the month in local currency terms on very low volumes. This is to be expected given the terrific run UK stocks have had over the last 12 months and the low trading volume highlights to us that it’s not institutional money fleeing the space.
The top performers over the month were Tracsis and IMI Mobile. The bottom performers were Tecnoinvestimenti, ESI Group and dotDigital.
This article is for information purposes only. It is not intended to be financial advice and has been prepared without taking into account any particular persons financial situation or investment objectives. Past performance is not a guarantee of future returns. Material or views expressed on specific companies are not recommendations to buy, sell or hold financial products.