U.S. equities markets have delivered outstanding returns for investors in 2023. Stock pickers and market watchers were pessimistic going into the year, and in fact, most of the first quarter was characterized by macroeconomic volatility. However, the second quarter ended with markets being more resilient. The S&P 500 is nearly up 16% year-to-date, while the Nasdaq Composite has roared back from 2022 lows, largely due to the AI craze, returning investors almost 32% year-to-date. Nevertheless, even in a bull market, investors can find themselves investing in stocks that appear to have an incredible story or growth potential but have sorely underperformed year-to-date. Below is a list of ‘growth’ stocks investors should sell in July.
ORMAT Technologies (ORA)
Ormat Technologies (NYSE:ORA) is a vertically integrated company that primarily engages in the geothermal and recovered-energy power business in the United States, Indonesia, Kenya, Turkey, Chile, Guadeloupe, Guatemala, Ethiopia, and Honduras. The company’s Electricity Segment comprises the largest area of business for ORA. Representing ~86% of the CY’2022 $734 million revenue figure, the Electricity Segment represents electricity sold from the geothermal, solar photovoltaic (PV), and recovered energy-based power plants across the United States and abroad.
In 2022, not only were most countries finally loose of pandemic-era restrictions, but Russia began its invasion of Ukraine in February. The aftermath of this ongoing invasion has created a renewed buoyancy in commodities markets and caused governments in the West to seriously rethink their energy security. Ultimately, global energy prices skyrocketed due to both the loosening of pandemic-related restrictions and sanctions imposed on Russian energy companies, creating opportunities for renewable energy companies. Geopolitics, coupled with the U.S. Congress passing the Inflation Reduction Act in August 2022 made companies look at Ormat as an assured bet. The company was up nearly 10% last year. However, this year, investors have shied away from the stock after being unable to justify the company’s expensive valuation when it decided to keep its dividend. ORA’s shares have fallen more than 5% YTD.
Aspen Technology (AZPN)
Founded in 2021, Aspen Technology (NASDAQ:AZPN) is a global asset management software provider. Its software solutions include enterprise asset performance management, asset performance monitoring, and asset optimization. The company also serves a variety of industries, including bulk chemicals, consumer packaged goods, food and beverage, metals and mining, oil and gas, pharmaceuticals, specialty chemicals, transportation, wastewater, power generation, and construction industries.
Last year, Aspen Technology’s shares outperformed the broader market and returned nearly 35% to investors. The macroeconomic environment, which benefited traditional commodities players, helped Aspen significantly since these kinds of companies are included in its critical end markets. While the company has experienced substantial revenue growth since its inception, the stock plunged nearly 30% in April after reporting earnings that severely underperformed Wall Street’s revenue and adjusted EPS estimates. This was apparently due to an unanticipated lack of demand from Aspen’s bulk chemical customers. The company’s shares are down more than 18% for the year.
Ameresco (AMRC)
Ameresco (NYSE:AMRC) builds, advises on, and helps store renewable energy projects and deploys decarbonization efforts for large corporations, institutions, and other organizations. The company also designs, engineers, and installs projects that reduce energy, along with the operations and maintenance (O&M) costs of its customers’ facilities.
Last year, the company benefitted immensely from the energy crisis, with revenue growth reaching 50% year-over-year. Rising energy prices that characterized much of last year caused companies to not only rethink their exposure to non-renewable sources of energy but also forced them to make their assets energy efficient. The energy situation in Europe, a key market for Ameresco, as well as unresolved climate action in the U.S., provided key catalysts for growth in the business.
Despite impressive revenue growth and a compelling story, Ameresco’s financial performance as of late has been inconsistent. In the company’s Q4’2022 earnings report, Ameresco missed revenue estimates due to longer implementation cycles for their ‘renewable natural gas projects, and they expect these elongated implementation cycles to continue into 2023.
However, in their most recent earnings report, Ameresco beat Wall Street’s revenue estimates but underperformed on adjusted EPS. Investors thought positively of the results, and the company popped more than 10%. Still, AMRC’s shares are down nearly 13% YTD, and with energy prices moderating, investors should think seriously if Ameresco will continue to underwhelm.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
