0823WindM

Renewable energy enters theme basket universe

Equities 6 minutes to read
Picture of Peter Garnry
Peter Garnry

Chief Investment Strategist

Summary:  Today we are announcing that our theme basket universe is expanding with a new basket focusing on renewable energy. The basket is the third best performing basket year-to-date as investors are rotating into renewable energy stocks as the EU is accelerating its push to become energy independent from Russia which means massive investments into renewable energy in the coming years. We are highlighting two new changes to our defence and commodities baskets in our preparation for providing access to our theme baskets.


Renewable energy is set to get a boost from Ukraine war and energy crisis

The energy crisis was already under way before the war in Ukraine broke out due lack of investments in oil and gas, and a historically bad year for wind energy. Russia’s invasion of Ukraine has catapulted Europe into emergency mode on energy security with the EU pursuing a path towards energy independence from Russia as quickly as possible. Part of this move towards independence is based on accelerating renewable energy and using excess renewable energy production in Power-to-X (PtX) which is a conversion of excess energy into hydrogen for energy storage.

Previously we had asset owners in renewable energy and manufacturers of equipment for renewable energy in our green transformation basket, but we have decided to spin out renewable energy production (solar, wind, hydro, geothermal, and biomass) into its own separate theme basket. The constituents in the basket is in the table below. Our renewable energy basket is the third best performing basket year-to-date highlighting the investor flows seeking exposure to this theme. The key risks to this theme is accelerating commodity prices on raw materials used for renewable energy equipment (steel, silicon, copper, cement etc.).

NameMkt Cap (USD mn.)Sales growth (%)EBIT margin (%)Diff to PT (%)5yr return
China Yangtze Power Co Ltd79,4171.355.214.8103.3
LONGi Green Energy Technology Co Ltd61,76174.814.041.81,027.5
Orsted AS50,94954.920.98.2223.9
Verbund AG36,63438.526.5-12.9528.5
Vestas Wind Systems A/S29,5935.22.1-1.587.4
Enphase Energy Inc27,57678.515.67.015,860.5
EDP Renovaveis SA24,6661.663.8-3.6245.6
Brookfield Renewable Partners LP19,2787.530.0-3.2229.3
Constellation Energy Corp18,953NANA-0.4NA
SolarEdge Technologies Inc17,79334.610.55.62,037.9
Corp ACCIONA Energias Renovables SA12,257NANA10.0NA
Siemens Gamesa Renewable Energy SA11,715-0.5-9.426.1-12.6
First Solar Inc8,9337.820.1-4.4216.1
Xinjiang Goldwind Science & Technology Co Ltd8,310-10.16.824.426.0
Northland Power Inc7,5671.638.68.4108.5
Sunrun Inc6,32674.6-41.460.2503.4
ERG SpA5,08627.022.812.1221.9
Ormat Technologies Inc4,627-6.025.5-6.748.1
Drax Group PLC4,16922.83.92.5211.8
Solaria Energia y Medio Ambiente SA2,82278.576.8-2.01,902.0
Aggregate / median438,43215.320.58.2223.9
Source: Bloomberg and Saxo Group
04_PG_1

Defence and commodities baskets are updated

Due to many client request about access to our theme baskets we have decided to pursue the availability of these baskets for our clients. Part of this process is streamlining the theme baskets which means that we have decided to reduce theme baskets to 20 stocks. The two first baskets that have been reduced to 20 stocks are the defence and commodities baskets.

In the defence basket we removed the five smallest companies on market value which were Babcock International, Chemring, Invisio, Avon Protection, and Avio. See the updated defence basket below.

NameMkt Cap (USD mn.)Sales growth (%)EBIT margin (%)Diff to PT (%)5yr return
Raytheon Technologies Corp149,28013.87.78.570.1
Lockheed Martin Corp118,8692.513.61.890.6
Boeing Co/The112,6227.1-4.736.115.2
Airbus SE96,4434.510.234.063.0
Northrop Grumman Corp70,813-3.115.8-2.5108.8
General Dynamics Corp67,4511.410.86.645.5
L3Harris Technologies Inc48,877-2.111.85.4153.3
TransDigm Group Inc36,9952.937.511.1260.7
BAE Systems PLC29,5311.311.56.438.5
Thales SA26,556-4.77.412.635.9
Howmet Aerospace Inc15,215-5.515.011.172.7
Dassault Aviation SA13,23032.07.48.125.8
Rolls-Royce Holdings PLC10,915-3.94.222.6-61.2
Elbit Systems Ltd9,74312.18.11.8104.8
Rheinmetall AG9,2472.110.60.9172.0
Kongsberg Gruppen ASA7,2067.210.4-6.9269.4
Leonardo SpA5,8055.45.719.5-26.9
Saab AB4,94310.57.4-3.83.0
Ultra Electronics Holdings PLC3,117-1.112.41.884.8
QinetiQ Group PLC2,3377.27.314.823.3
Aggregate / median values839,1942.710.37.466.6
Source: Bloomberg and Saxo Group

The commodities basket has been changed in a more dramatic way. First of all, we have changed the name from commodity sector to commodities. Secondly, we have removed chemicals from the basket because it was too high up the value chain of commodities as chemicals are a value-added product and not a raw materials product such as coal, iron ore, or petroleum. By removing chemicals the commodities basket also gets a higher return correlation with the Bloomberg Commodity Total Return Index which is the leading benchmark index on commodities. The commodities basket has also been reduced to 20 stocks with a focus on agriculture, energy, mining, and forest products. The constituents in the commodities basket can be seen below and the basket is also the best performing basket year-to-date up 32.9% (see performance table above).

NameMkt Cap (USD mn.)Sales growth (%)EBIT margin (%)Diff to PT (%)5yr return
Exxon Mobil Corp351,89654.98.46.231.1
Shell PLC210,02144.88.514.931.0
BHP Group Ltd199,98647.148.4-8.6248.1
PetroChina Co Ltd150,02335.26.923.7-10.1
Rio Tinto Ltd135,75642.347.0-1.6238.9
ConocoPhillips130,357144.025.913.1135.2
Equinor ASA123,03194.037.8-10.0167.7
Petroleo Brasileiro SA95,79766.444.7-3.394.4
Glencore PLC87,75643.15.08.184.0
China Shenhua Energy Co Ltd87,52543.723.91.3135.0
Canadian Natural Resources Ltd73,43877.934.58.7124.4
Newmont Corp65,6076.310.6-14.3173.0
Southern Copper Corp60,43236.955.5-20.7164.8
Archer-Daniels-Midland Co51,28132.53.3-16.9134.0
Mosaic Co/The24,26442.320.0-1.8138.6
Wilmar International Ltd21,87230.24.125.554.5
Norsk Hydro ASA21,06630.911.14.9100.4
Bunge Ltd16,09742.93.60.470.7
Mowi ASA14,46311.813.13.0131.4
Svenska Cellulosa AB SCA13,7452.240.2-7.2247.9
Aggregate / median1,934,41542.616.51.3134.0
Source: Bloomberg and Saxo Group

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.