Weekly ESG portfolio update

ESG PORTFOLIO UPDATE

Performance last week : 2021-03-08– 2021-03-14

ESGFIREAT40 Portfolio: +25,76 % 
Dow Jones: +4,1 %
Nasdaq +3,09 %
OMXSPI:+ 3,12 %

Performance YTD:

ESGFIREAT40 Portfolio: +171 % 
Dow Jones: +7,1%
Nasdaq: +3,35%
OMSXPI: +12,47 %

Top performers:
Environmental Waste Internation $YEWTF / $EWS + 26 %
Grande West Transportation $BUS/$BUSXF + 24 %
Cielo Waste Solutions $CMC.CN / $CWSFF + 23 %

Underachievers:
Blue Bird Corp $BLBD -7 %
Absolicon $ABSL -2 %


Portfolio update comment:

The past week was a great comeback for the ESG portfolio and growth stocks. After losing almost 15 % the week before the portfolio soared back 26 %. An exception last week was that the performance was evenly split between several stocks and not just credited to Cielo Waste Solutions. Environmental Waste International had a great performance alongside Grande West Transportation. Personally I think all mentioned stocks remain attractively valued. As you can see in the picture above the portfolio is now at an ATH with both total value and performance higher than before the 10 year yield “crisis” which spooked many investors the past few weeks. For those of you who read my post about the market turbulence you will recall that I did not sell or reallocate my positions since I was pretty sure the yield curve turbulence was a temporary fluke.

The 10 year yield “ghost”

I still believe the yield curv “ghost” might come back to haunt growth stocks when and if the US 10 year yield continues to climb but this should hardly be a cause for concern and unless you’re a trader or have very low risk/volatility tolerance I don’t see any cause for preemptive action. Some believe there wont be peace in the markets until the 10 year yield hits 2 %. This turbulence makes it even more important to “know what you own” . The more you know what you own the higher conviction you can have during market turbulence which is exactly what helped me remain calm during the latest yield turbulence.

Graphic of the US 10 year yield below



Conclusions

Was this market turbulence stressfull for me ? Yes! Did it test my conviction ? Most certainly YES! But knowing what you own and making your own mind about what your portfolio company’s potential and value is will help you remain calm. As a friend of mine who is the author of the book “stock market psychology”usually says “ Activate system 2 ! This means using your reflective thinking”. Most people will only act with primal instincts during crisis which means the brain tells you to “survive at any cost”. This survival instinct often materialises as an action to sell all your stocks in panic so you can “save what can be saved”. As a disclaimer and exception however it must also be said that every situation is unique and there is no general rule that can be applied to all market conditions.

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This is not to be considered financial advise, always do your own research!

Massive opportunity in the School Bus EV sector



Company: Blue Bird Corp
Business: School bus manufacturing
Ticker symbol: BLBD
Listing: Nasdaq USA
Market cap: 720 Million USD
Share price: 26,55 USD
Turnover: 879 Million USD in 2020
Website: https://www.blue-bird.com/

Company introduction:


Blue Bird Corp (BLBD) is the leading school bus manufacturer in the US that has developed an electric vehicle solution already available for large scale commercialization. With schools about to open up again, BLBD will face an explosion of pent-up demand for electric school buses. BLBD is significantly undervalued relative to EV peers and even more so as a reopening play.Biden’s 500,000 electric school buses in five years plan is a great opportunity for BLBD’s school bus niche. A narrative shift comparable to the contract that moved Workhorse’s valuation to $4B+ will most likely move BLBD multiples a lot higher.

Peer evaluation comparison:

As you can see above Blue Bird Corp is massively undervalued to comparable peers at least when it comes to using EV/revenue as an evaluation multiple which is something that the EV market in general looks to as a meaningfull comparison.

The three noted electric school bus peers above are valued on future revenue and largely unproven business models. Unlike its peers, Blue Bird Corp has a proven fleet of reliable vehicles, along-side electric buses already being commercialized. As opposed to speculating on growth in future years, investing in Blue Bird Corp, which is not only profitable, but already controls a majority stake of the EV market for school buses could be a wise choice.

Undervalued and Underappreciated

Blue Bird Corp (BLBD) is an undiscovered powerhouse in the electric vehicle (EV) space. Its most likely the best EV value for money in the market today and is set to dominate the upcoming EV school bus manufacturing explosion.

BLBD is the leading independent designer and manufacturer of school buses in the United States, with over 150,000 buses in operation today. BLBD is also the market leader in alternative fuel applications with its propane powered, electric, and compressed natural gas-powered school buses. BLBD is most likely the immediate front runner to capitalize on the school bus electrification plans of the Biden Administration. With child safety of the utmost importance, we believe BLBD’s decades of experience in manufacturing buses and its extensive relationships with school boards, give it a powerful edge against competitors.

To date, BLBD is and remains the #1 electric school bus manufacturer in the US. On 12/9/20, BLBD announced it had delivered its 300th electric school bus, more than every other company combined. As noted on page 8 of BLBD’s 7/21/20 investor presentation, an electric school bus currently costs $350K vs. $100K for its diesel fueled one. Although the 3.5x premium appears pricey, the operational and maintenance costs are lower compared to diesel. With federal mandates now enacted, subsidies will cover the lion’s share of the cost.

BLBD has a 20-year history of profitability, and a reputation for safety. With children’s safety playing the most critical role in the decision-making process, we think BLBD will be the obvious choice for schools and districts. An example of bus safety gone bad, BLBD’s competitor Proterra’s entire fleet was taken off the road in February 2020 in Philadelphia due to mechanical issues – the third fleet issue identified within a year.

Biden’s election victory over Trump was a big victory for BLBD. Immediately after inauguration, Biden instituted his “Back to School” reopening pledge. We believe this provides a near-term margin of safety for getting school buses back on the road, and for BLBD’s business to accelerate forward again. Horlock stated on 2/10/21 in the fiscal Q121 earnings call:

When schools are closed, buses aren’t being ordered. The good news is that when schools are open, it’s business as usual, with school bus orders being placed. That’s great for us to know as we move forward. Following the recent holiday break, however, we have been seeing more schools resuming in-classroom teaching, and that’s led to increased quarter activity for our new buses.

As stated in this article, Biden wants to open most schools within his first 100 days in office. Biden called on Congress to direct at least $130B to schools, and $350B to state and local governments to help prevent school layoffs. Teachers remain on track as the next in line to receive a COVID vaccine after essential workers. We think the clear path forward will make for an aggressive buying season for EV school buses as early as the fall.

Evaluation and business case Summary

At its current valuation, BLBD provides ample margin of safety on the legacy school bus business, with multi-bagger upside on the inevitable conversion to electric.
If the Biden administration is serious about replacing the 500,000 school buses to electric within 5 years, BLBD will need a lot more capacity. For example, if BLBD reaches a production capacity of 10K school buses per year, that would give the company $3.5B in annual revenues for its electric school buses. If we apply an EV/Revenue evaluation of 5 for BLBD ( which is 50 % below Proterra’s current multiple) we get a market cap of 17,5 billion USD. Compared to todays market cap of 720 million USD. This example equals an upside of staggering 24 times todays share price = 645 USD and that based on relatively conservative multiples for the EV sector.

Remember the US market for switching 500 000 school buses to electric propulsion is worth 100 billion USD and the evaluation example above only assumes a market share of 3,5 % of this, and thats for the market leader in the alternative fuels sector of school buses namely Blue Bird Corp.

Credit in this post is given to White Diamond Research which created the original report on this great company.

As always do your own research and this is not to be considered financial advice in any way.

Portfolio introduction 21-02-23

Hard lessons in the past have thaught me to diversy my risks. In my portfolio summary below you will perhaps be surprised by the big size of my biggest position however don’t let this fool you because when the position was initiated it constitued less than 10 % of the portfolio. Below you will find a summary of all my current positions . You will have to excuse the poor resolution in the image below , I blame excel for this inconvenience 😉 . I will go through the companies of my biggest sector holdings today. In the coming posts I will go through the remaining sector holdings in further detail.

Holdings per sector :

Writing this entry I realize that my portfolio is leaning heavily towards the recycling and renewable energy industry, however there is a good reason for this. This specific sector in my portfolio constist companies that solve REAL issues with pollution, landfill waste and the worlds need of clean energy. Reducing carbon emissions through green and clean energy is a global goal which is hardly debated anywhere in the world.


Recycling and Renewable Energy Sector holdings

Cielo Waste Solutions
Ticker: CMC.CN / CWSFF
Listings: Canadian Securitites Exchange / US OTC
Website:https://www.cielows.com/


Cielo’s plan is to construct 40 refineries within 7 years for renewable diesel using alternate waste feedstock. The techonology is proprietary , patented and has been developed for 16 years. Cielo can also produce naphta (jet fuel) and renewable diesel for the marine sector. Renewable diesel has shown to be 90 % lower in carbon emissions than regular diesel at least according to Cielo’s competitor Neste : https://www.greencarreports.com/news/1103998_renewable-diesel-90-percent-lower-carbon-emissions-than-regular-diesel-neste-claims
My opinion is that compared to Cielo’s north american competitor GEVO ,which uses farmland to grow fuel crops, Cielo’s solution has a far better impact on the environment using waste to create renewable energy and getting rid of harmful landfills and dumps.

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Environmental Waste International
Ticker: YEWTF / EWS
Listing: TSX Venture
Website: https://www.ewi.ca/


EWI uses a patented technology called reverse polymerization to convert used tires into precious commodities such as Carbon, oil and metal. Reverse Polymerization technology is far superior to regular polymerizaton in which there are plenty of competitors. EWI’s recycling system reduces greenhouse gas emissions by nearly 90%. Every day 4,1 million tires are scrapped and mostly put into landfills that constitute a massive negative impact on the environment. EWI has recently signed a deal with the danish environmental investment company Windspace that gives them exlusive rights to construct tire recycling facilities in Europe. This deal alone is estimated to be worth well over 100 million dollars in revenues in the coming years for EWI.


EWI technology can also be used for:

  • Liquid Biological Waste
  • Medical Waste
  • Food Sterilization System


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Char Technologies Ltd
Ticker: YES.V
Listing: TSX Venture
Website: https://www.chartechnologies.com/


Char has a patented and unique product that can now replace regular coal in coal power plants with Biocoal and also produce RNG which has a tremendously positive impact for the environment. The company says ” Char is Converting challenging organic streams into a greenhouse gas neutral biocoal and second generation Renewable Natural Gas (RNG)”. CHAR’s pyrolysis technology is recognized as a future solution by NYC DEP to process biosolids into value-add products. Char also has a solution to contamination of PFAS in landfills and water reserves.

Xebec & Greenlane renewables both participate in first-
generation anaerobic digestion (biogas) technology

• Pyrolysis is a second-generation technology
• Recent study shows 82% of RNG in Québec will need
to come from Second Generation RNG (Énergir)
• Char’s pyrolysis technology can convert woody material into RNG
• Pyrolys is also an identified pathway to generate green
hydrogen



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HydrogenPro
Ticker: HYPRO
Listing: Norwegian Merkur Market
Website: https://hydrogen-pro.com/

Hydrogenpro has a proprietary technology to produce cost competitive green Hydrogen using alkaline. Hydrogenpro announced on 2021-02-22 that they will be able to produce Green Hydrogen at a cost below 1.2 USD per kilogram already in 2022. This is an extreme breakthrough if the company can deliver on these promises especially since one of their competitors NEL has a target of 1.5 USD per kilograms for Green Hydrogen in 2023. HydrogenPro technology, if it delivers as promised, will be ready to compete in terms of price with gray hydrogen already next year in 2022.


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Fusion Fuel Green PLC
Ticker: HTOO
Listing: Nasdaq USA
Website: https://www.fusion-fuel.eu/

Fusion fuel has a proprietary patented technology to create Green Hydrogen using sun and water. Using years of experience in concentrated solar energy and renewables, the Fusion Fuel team has developed a ground breaking method to create Green Hydrogen at a cost far below any commercially available methods in the market today and can openly compete against traditional methods that produce brown and blue Hydrogen. Fusion Fuel has developed its own proprietary electrolysis solution using solar energy to create Hydrogen with zero carbon emissions. In fact, Fusion Fuel’s technology only creates Oxygen as a by-product .