Forget Big Oil: Fund manager names 4 stocks to trade the energy transition

Published Sun, Mar 21 20217:25 PM EDT

Sam Meredith @in/samuelmeredith @smeredith19

Lansdowne Partners fund manager Per Lekander has named a number of stocks to buy to trade the world's energy transition in the coming years – and they're not Big Oil. Although Lekander said oil and gas companies were currently experiencing an "unbelievable" market environment — supported by robust commodity prices and improving margins — he warned that this would likely be temporary, and said they had a "terrible future." Instead, Lekander, whose Lansdowne Energy Dynamics Fund won "best sector specialist" at this year's Investors Choice Award, argued that investors should be looking elsewhere for longer-term trades. Here are the stocks backed by Lekander: General Electric : The Boston-based company has reaffirmed its 2021 outlook and announced a deal to sell its jet-leasing business to rival AerCap. Shares of the company are up 26% year-to-date. Goldman Sachs and Bank of America both have a buy rating on the stock. Equinor : Norway's state-controlled oil company said last month that after the market turmoil of 2020, it is now "well-positioned" for value creation and robust cash flow in the coming years. Shares of the company are up around 18% year-to-date. RWE : The German multinational energy company reported Tuesday that earnings before interest, taxes, depreciation and amortization for its offshore wind business rose by 11% in 2020 compared to 2019. It cited "very" favorable wind conditions in the first quarter of the year. Shares of RWE are down nearly 10% since the start of 2021. Vestas : The wind turbine maker expects revenue for full-year 2021 of between 16 billion euros ($19 billion) and 17 billion euros. Last month, the company said it had developed a new 15 megawatt offshore wind turbine, its biggest yet. The new turbine will have the capacity to power approximately 20,000 households in Europe. Speaking to CNBC's "Squawk Box Europe" last week, Lekander described GE, Equinor and RWE as "proactively leading" their sectors, along with Volkswagen , which he singled out as an automaker he was particularly bullish on. "That is where you should park your money right now until the macro environment has stabilized. Then you might go back and go all-in on Vestas, etcetera," Lekander said. He described Vestas as "the real poster child of the energy transition" and expects the turbine manufacturer to retain its world-leading position in the wind sector for years to come. Lekander, who thinks world oil production is on track to peak in 2024 — six years ahead of other forecasters — said he was "much, much more positive" on wind compared to solar. He also argued that it was important to understand that so-called clean energy did not mean there was going to be a low-energy future. "We are going to consume an enormous amount of power. The amount of power to clean up the steel sector is gigantic, just to take one example. So, this power needs to be produced (and) it is going to be produced by wind power," he said. "I believe that by 2050, the amount of wind and solar in the world is going to go up 25 times relative to where we are now. If Vestas manages to keep its number one position, and I don't see any indication that they don't, this company is going to go higher." Shares of the Aarhus-headquartered company skyrocketed 118% in 2020, supported by a flurry of wind turbine orders. The company has since pared some of its gains, dipping around 23% year-to-date. "So, yes, it might be a bit frothy," Lekander continued. "It might not be exactly the bottom but if I buy on a five-year perspective, I have zero doubt that this has got to be good." Lekander said he wasn't so sure about some of the more speculative energy transition stocks, citing those closely linked to hydrogen demand and fuel cell technology. "Some of them might be good stocks. But I would say if you have made a lot of money here on being long these, I definitely think you should take a pause here and focus on those areas where the risk-reward is better," he said.

The wind energy park "Odervorland" in the district of Oder-Spree in Brandenburg, Germany.

Patrick Pleul | picture alliance | Getty Images

Lansdowne Partners fund manager Per Lekander has named a number of stocks to buy to trade the world's energy transition in the coming years – and they're not Big Oil.

Although Lekander said oil and gas companies were currently experiencing an "unbelievable" market environment — supported by robust commodity prices and improving margins — he warned that this would likely be temporary, and said they had a "terrible future."

Instead, Lekander, whose Lansdowne Energy Dynamics Fund won "best sector specialist" at this year's Investors Choice Award, argued that investors should be looking elsewhere for longer-term trades.

Here are the stocks backed by Lekander: