Alternative energy has been a hot play in 2020 and bound to continue growing under the incoming Biden White House. This up and coming area is also rife with companies unfit for many portfolios. But for investors wanting exposure to this growth market with security almost suitable for widows and orphans, it may be time to look at NextEra Energy (NYSE:NEE) and a modified spread in NEE stock.
Tesla (NASDAQ:TSLA). Bloom Energy (NYSE:BE). Switchback Energy (NYSE:SBE). Plug Power (NASDAQ:PLUG). First Solar (NASDAQ:FSLR). These are jut a few names among the who’s who of alternative energy plays. It’s also just the tip of the iceberg for publicly traded offerings, which have ballooned this year vis-à-vis IPOs and special-purpose acquisitions Wall Street has happily made available to investors.
And amid this universe of alternative energy plays lies NEE stock.
Understandably in this diverse and growing market, where each company seems to hold a compelling business proposition of how to help achieve a greener future for our planet, it can be tough to separate a small bit of wheat from a good deal of undesirable chaff. And it would be a mistake to overlook shares of NEE during this due diligence.
NextEra Energy has made a name for itself as a Florida-based utility company at the forefront of renewables-driven electricity generation using solar and wind. In fact, it’s the world’s largest. Moreover, NEE’s model is working. The company is profitable and has seen quarterly earnings growth of nearly 40%. There’s more too.
For the first time this year, NEE’s valuation even surpassed oil and gas giants Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM). And today at roughly $145 billion, while NEE has relinquished that achievement, the shares still obviously demand respect as a market leader.
Now the outfit’s forward-thinking management has plans to further diversify its alternative energy portfolio. This past quarter NEE announced a $65 million pilot project, which will use solar energy to produce clean or “green hydrogen” and replace some of the company’s natural gas, hydrocarbon feedstock at its electrical power plants.
NEE Stock Weekly Price Chart
Source: Charts by TradingView
Profits, a dividend of 1.85% and a business well-positioned for continued success within the alternative energy market. NEE isn’t bringing the next Tesla to the table, but does boast qualities many investors should be interested in as a stock to buy for the portfolio.
Technically speaking, conditions are also shaping up for a purchase of NextEra shares. In bucking the broader market’s November bid, NEE stock is now setting up as a pullback candidate. The near four-week decline has put shares near trendline support and shows stochastics flirting with an oversold weekly condition.
Without trying to call an exact bottom, NEE’s history with this sort of stock action bodes well for buyers, albeit again, not with the same qualities associated with an alt energy name like TSLA. That said though and to NextEra shareholder’s benefit, using a modified collar is a more attractive-looking strategy to consider. One favored vehicle of this kind involves selling the Jan $80 call while purchasing the Jan $72.50 / $65 put spread against long stock.
On the date of publication, Chris Tyler holds, directly or indirectly, positions in Plug Power (PLUG), Bloom Energy (BE) and their derivatives, but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.