We’re kicking off the first full week of the Biden administration.
The fanfare is over. The parties are finished. And now it’s time for the newly elected officials to get down to work!
Since one of Biden’s first actions as president was to rejoin the Paris Climate Agreement, it’s clear that the environment will be a high priority for this administration.
That means as investors, it’ll serve us well to focus on companies that will benefit from new environmental initiatives.
So today, I want to introduce you to three stocks that are gaining momentum ahead of a new “green wave” sweeping through Washington.
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Green Wave Stock #1: NextEra Energy Partners LP (NEP)
One of the biggest ways to help our country reduce emissions is by developing new renewable energy projects.
Over the next two years, I expect the Democrat-controlled Congress to pass initiatives to incentivize energy companies to build solar and wind farms across the country to generate more green power.
These incentives will naturally benefit NextEra Energy Partners LP (NEP), a renewable energy utility headquartered in Juno Beach, Fla.
The company owns a portfolio of renewable energy assets including wind turbines and solar panels.
NEP also owns natural gas pipelines, which will prove to be important in the new environment-friendly season ahead.
After all, natural gas is clean burning and continues to be a popular way to generate electricity without creating pollution.
One of the reasons I love shares of NEP is because the company is organized as a limited partnership. That means NEP isn’t required to pay corporate taxes, but the company is required to distribute the vast majority of its cash flow to investors.
If you buy shares today, you’ll tap into a great stream of dividends that currently add up to a 2.8% annual yield.
While that’s certainly a respectable yield in today’s market, I expect distributions to grow in the years ahead as policies in Washington make NEP’s existing assets more valuable.
Since the election, shares have gained momentum. Investors are already starting to anticipate the advantages that the company will enjoy under the new political environment.
If you’re interested in adding NEP to a retirement account like a 401(k) or an IRA, I would recommend checking with a tax professional first.
Because of the limited partnership structure, the shares may not always be appropriate for tax-free or tax-deferred accounts.
But in a regular taxable brokerage account, NEP makes a great play for generating income and profiting from the green wave in Washington.
Green Wave Stock #2: Plug Power Inc. (PLUG)
Hydrogen fuel cell technology is viewed as the new frontier for powering vehicles.
While there are still plenty of questions about the viability of this technology, there’s a lot of excitement and capital surrounding the idea.
Not only could hydrogen fuel cells be used for vehicles on the road, but there are also a lot of opportunities for industrial vehicles like warehouse forklifts and similar equipment.
The company at the forefront of hydrogen fuel cells is Plug Power Inc. (PLUG). Shares have rocketed higher in the last few months, gaining momentum as the climate changes in Washington.
While the company has yet to turn a profit, shares are a great play for speculators.
Not only is PLUG a long-term profit opportunity if the technology becomes more widely adopted, it could also be a buyout candidate.
A larger equipment company like Caterpillar could potentially buy out PLUG to gain exclusive access to the company’s technology.
The thing to remember is that this is a speculative play. So don’t invest too much of your retirement capital into this one particular stock.
Green Wave Stock #3: Magna International Inc. (MGA)
On top of renewable power generation, growth in electric vehicles will be another major priority for the Biden administration.
This means Washington will be supportive of tens of thousands of new electric vehicles rolling off production lines.
This is great news for Magna International Inc. (MGA). The company is an original equipment manufacturer for the auto industry, making many of the parts that go into new vehicles.
MGA has been misunderstood by some investors who worry that the company won’t be as profitable as electric vehicles gain market share.
But while MGAs drivetrain products may not be needed in new electric vehicles, these products only make up a small portion of the company’s overall business.
Shares have been trading higher already as investors anticipate more demand for new vehicles as the global economy reopens.
A surge in demand for electric vehicles in the next two years can help drive bigger profits for MGA.
Meanwhile, MGA also qualifies as a value stock, since you can buy shares for just over 11 times earnings. That means you’re paying about $11 for every dollar the company generates each year in profit — a big discount to the overall market.
Shares currently yield 2.1%, giving you some extra income while you wait for the stock price to continue higher.
So there you have it! Three great ways to play the green wave sweeping through Washington.
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