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Cleantech Investors: Thanks, Tesla!

20 May 2013 in Trading Ideas

It’s interesting how seeing a stock rise by two-thirds in just over a week tends to provide somewhat of a tweak to perception in the investment community.

Exhibit A in that regard is an early Stock-of-the-Year candidate, Tesla Motors, which surged the past week on two bits of bullish news: 1) its recent quarterly earnings surpassed Wall Street estimates, and 2) Consumer Reports magazine awarded the company’s new Model S sedan a top rating.

In the span of about eight days, Tesla saw $3 billion added to its market cap.

cleantech everywherePerhaps just as sweet for Tesla shareholders was the fact that the stock’s runup was, in part, supported by the huge number of investors betting against the stock having to cover their short interest. As Bloomberg recently reported, short-covering resulted in the buying of as much of $276 million in Tesla shares, cutting the stock’s overall short interest by 17%.1

This is also known as a “short squeeze,” and it’s what happens when negative sentiment builds against a certain company – and said company refuses to disappoint. Tesla’s short interest, according to Bloomberg, had been 40% of its available shares as recently as April 19 – more than 11 times the average of companies in the Russell 1000.

As it so happens, Tesla also happens to be the top component in the Cleantech Everywhere motif (to the tune of about 21%). Tesla’s big run this month helped the motif jump 39.1% this month. It’s now up 58.2% in 2013, and has risen 86.4% in the last 12 months.

However, Tesla isn’t the only “green” stock occupying the sweet spot right now. Fellow Cleantech Everywhere motif component, Cree Inc., is sitting near two-year highs after exciting investors earlier this spring with an increased revenue and profit forecast, in addition to announcing a new 40-watt energy-efficient light bulb below the “magic” $10 price barrier that could see consumers making a faster move away from traditional incandescent bulbs.2

And let’s not forget the recent rally in solar stocks, driven in part by an early April rumor that Warren Buffett was interested in purchasing the assets of a bankrupt Chinese solar panel maker.

For many investors, it’s been a long wait for renewed signs of life in cleantech. But, as Tesla has just shown, it may not be the time to start betting against it.

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1Nikolaj Gammeltoft, “Squeezed Tesla Bears Buying $276 Million Hand Musk 146% Gain,” Bloomberg.com, May 15, 2013, http://www.bloomberg.com/news/2013-05-15/squeezed-tesla-bears-buying-276-million-hand-musk-146-advance.html, (accessed May 16, 2013).

2Justin Doom, “Cree Surges on Higher Forecast After Announcing Sub-$10 Bulb,” Bloomberg.com, March 5, 2013, http://www.bloomberg.com/news/2013-03-05/cree-surges-on-higher-forecast-after-announcing-sub-10-led-bulb.html, (accessed May 16, 2013).

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