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by Andreas H, Euro am Sonntag
D.he portfolio of a small fund boutique from Frth in Bavaria, which focuses exclusively on sustainability, achieved more returns than any other co-fund in the past twelve months. The fund manager of Green Benefit Global Impact, Manfred Wiegel, explains the risk-taking success strategy and why he threw Tesla and BYD out of his fund.
Euro on Sunday: Mr. Wiegel, you run a co-fund that invests in global stocks. In the past twelve months you have made over 250 percent profit. Which positions played the largest part in this?
Manfred Wiegel: Two areas, which are also the most heavily weighted in the fund, were responsible for the high profit: hydrogen and renewable energies. Hydrogen stocks currently make up around 40 percent of the portfolio, solar companies around 30 percent. Both areas are essential for a clean future without fossil fuels such as oil and gas. Nevertheless, for a long time no one wanted the shares of the companies that make this possible. We bought SolarEdge stock for $ 30 about four or five years ago. Today it stands at 300.
Before 2020, however, there was no flower pot to be won with these papers.
That’s right. In the solar sector, many subsidized Chinese companies pushed their way onto the market a few years ago, causing excess capacity, especially among module manufacturers. That put pressure on profit margins and thus also on share prices in solar companies, and some even went bankrupt. But the shares of suppliers such as Solaredge, the world market leader in inverters, were also dragged down – although the company was always financially healthy. Now the excess capacities have been reduced and the market has been adjusted. Firms are making good profits and prices are picking up again across the board.
Was the slack in renewable energies also the reason why your fund did not generate any profits between 2015 and 2019?
We are a small boutique that focuses on certain topics with great conviction and perseverance that we consider promising. It can be that you have to endure a long dry spell. The weakness of the solar industry was a key reason why our fund made no profits between 2015 and 2019. There was also a political phenomenon: Als Donald Trump In 2016, when we became President of the United States and announced that the United States would withdraw from the Paris Agreement, our fund lost 15 percent in value. With the new US President Joe Biden, who cares about the environment and who has rejoined the climate agreement, environmental stocks and our fund experienced the opposite effect.
Can investors expect a three-digit return this year?
We are long-term investors; as a matter of principle, we do not issue annual forecasts. But from my point of view, the conversion to more environmental protection and renewable energies is a marathon in which we have only just completed the first few kilometers. A year with such massive profits as 2020 will remain the exception.
There is a real hype about hydrogen. Many stocks have multiplied. Let’s be honest: it can’t go on like this forever?
After the massive price increases in 2020, we had already warned in January of a correction in hydrogen and solar stocks, which then actually came. However, we used the price decline to expand our positions. Because we are convinced that there is still a lot to be gained here. Billions are already flowing into hydrogen projects, according to a study by management consultancy McKinsey, around 300 billion dollars will be invested there by 2030, and the federal government alone wants to pump nine billion euros into expanding hydrogen production in the next few years.
But it is still unclear who will benefit from it.
Nobody knows who will one day become the giant in the hydrogen sector. That’s why you have to be broad-based. We do not rely on a lucky hit, but invest in various technologies and approaches. We have eleven pure hydrogen stocks in the fund, including the fuel cell producers Plug Power and Nel Asa, which are world market leaders in electrolysis and hydrogen filling stations. However, it is important to us that we only invest in so-called pure players, i.e. those companies that earn their money exclusively with solar, hydrogen or electric mobility. The pure players make the greatest contribution to the transformation towards a green economy, and they also make the greatest profits.
That’s why they’re the riskiest. Plug Power is one of the largest positions in your fund. The company is worth $ 18 billion on the stock exchange, although sales were a measly $ 230 million a year ago. Isn’t the stock completely overpriced?
Plug Power is a good example that the hydrogen hype is not exaggerated. In 2000, the stock cost $ 1,200 – that was a complete blow and the price collapsed completely afterwards. It now costs around $ 50 again. Despite the sharp price increases in the past year, it is miles away from its highest price.
Other co-funds are often much more broadly based. Isn’t your strong focus on hydrogen and solar dangerous?
Our fund has a relatively high level of volatility, i.e. susceptibility to fluctuations – that cannot be ignored. We currently have a clear focus on hydrogen and solar because that’s where there is the most movement. Our customers know that and want it too. But: We are not committed to these topics. You should always be open to new trends.
But you let one trend pass you by: Last year, Tesla shares made around 500 percent profit. You weren’t invested in it. Do you regret that?
No. Because we have certain exclusion criteria to sort out companies that we do not consider sustainable enough. This includes so-called governance, i.e. good corporate management. Tesla boss Elon Musk keeps having problems with the US Securities and Exchange Commission because of his Twitter, and that’s just one of the governance problems we think Tesla has. We don’t want to invest in a company with such leadership.
That means you don’t have Tesla in the fund for sustainability reasons?
Exactly, even if that hurt a bit in terms of Tesla stock earnings. But we don’t want a return at any cost. In December last year, we also threw the electric car manufacturer and battery producer BYD out of the fund, in which we had been invested since 2015. Not because we no longer believed in the stock. The reason was simply that the new Electric car from BYD looks almost exactly like the VW ID3. Because of this possible plagiarism affair, BYD no longer fits into our fund. But I think that we achieved a very decent performance even without Tesla and BYD.
Focused on trends: Around 70 percent of the portfolio are divided between hydrogen and solar stocks. That cares for strong fluctuations but also – as recently – potential for high returns.
Image sources: Green Benefit