Goldman tells RBC to see EU green stocks revival

LONDON: European renewable-energy stocks, battered for much of this year, present a buying opportunity because their growth story remains intact. That pitch from Goldman Sachs is luring some investors -those not in a hurry, that is.

The way Goldman tells it, with governments promising to phase out fossil fuels and the environmental, social and governance mantra still resonating, the sector is bound to eventually provide rich rewards for the longterm investor. RBC Wealth Management concurs.

"For us, the recent correction represents a good opportunity to build strategic positions in these stocks which should benefit from strong secular growth," said Frederique Carrier, head of investment strategy at the firm. But "patience may be required," she said.

After a stellar rise last year, renewables have fallen out of favor. The European Renewable Energy index is down 27% from its January peak, and three of the 10 worst-performing Stoxx 600 constituents in 2021 are renewable-energy plays -- tumbling an average of 35%. Last year, they were among the best performers in the index, with Norwegian electrolyzer company Nel ASA more than tripling and solar power firm Scatec ASA more than doubling.

Many factors have coalesced to pull the sector down, leaving renewable-energy equities trading at a discount to other growth stocks. As the economy rebounds after the pandemic, cheaper value stocks are outperforming pricier growth shares. Also, prominent clean-energy exchange-traded funds are rebalancing holdings, putting technical pressure on some high-flying renewable names. Added to that are rising bond yields, inflation jitters and increasing competition in a sector where, as Carrier says, valuations got "a bit stretched."