YWR: Killer Charts
Disclosure: These are personal views and market commentary only. Not investment recommendations. For that seek professional help!
Let’s review the market positioning and then take a look at 10 charts on Renewables; one of the big disasters of 2023.
Positioning: Long Tech/Short Commodities and Small Cap
The trend following computers are bullish (futures positioning), but the fundamental humans (long/short hedge funds) are still neutral.
CTA positioning is relatively high in US equity index futures…
but positioning is off the charts in NASDAQ futures.
CNN Fear and Greed is moderately high.
But then here’s the thing.
Hedge Funds might be long tech, but overall are not aggressively positioned (net leverage). 2023 was probably a painful year of underperformance.
These charts are 1 month old, but they suggest hedge funds are underweight small caps and energy while long big cap tech. This was also the finding from our hedge fund positioning analysis (How Consensus is your Hedge Fund?)
The hedge fund long/short ratio in the Russell 2000 is at 3 year lows.
Hedge fund positioning in US energy equities also low.
Overall commodity futures positioning is at the lows.
In the BofA fund manager survey commodities were voted one of the least favorite sectors for 2024 (alongside cash).
Overall, it’s a good set up for energy and fertilisers. We have a skeptical outlook, depressed stocks and negative investor positioning.
Flows
Fund flow data shows money hasn’t been flowing into equities. Flows have been into money market funds and bonds.
The S&P had a +24% year, but investors weren't chasing.
Risky vs Safe asset flows show the same thing. Money is going into money market funds and bonds rather than high yield and equities.
In summary CTA’s have been chasing tech. Other parts of the market remain attractive.
Top 10 Renewable Predictions
Renewable stocks were terrible in 2023. Scatec Solar, Siemens Energy (wind), Orsted (wind), Nikola (EV’s), LG Energy (batteries), and lithium prices were all notably bad. So much so that I’ve caught myself wondering if they could possibly a buy.
Which is why it caught my eye when Clarksons put out their Top 10 predictions for renewables.
Some notable calls.
In 2024 they expect Chinese EV sales to reach 40% market share and 10 million units. 40% market share in the world’s biggest car market would be a headline worthy item. On a side note, I question why overall sales don’t grow over the next 16 years.
China is tracking the same path as Norway with a 7 year lag. At this rate 50% of car sales will be EV’s in 2026. Then 70%. Does Europe follow this path too?
Aggressive switching to EV’s means Chinese road fuel demand could peak in 2025/2026.
You would’t know it from looking at the solar stocks, but solar installations are exceeding forecasts every year.
Is it time to revisit the solar installation companies like Scatec Solar, Sunpower and Enphase? And is the bear story on polysilicon capacity so well known that it’s time to fake left/go right and do work on Wacker Chemie?
If in 2024 we get a move up in energy prices (natural gas and oil) do Americans rush out to install solar on their houses? Do high energy prices put a nice tailwind behind this oversold sector?
Below is the link to the full Top 10 Renewables Presentation.