A new green wave could be powered by the EU taxonomy vote

Unfortunately, my sustainable investments have been less reliable in the short term, but this year there will soon be conditions for a real stage change. I come to that, but first a little recapitulation of the current situation.

Uranium companies such as Uranium Royalty Corporation (4 CAD) and GoviEx (CAD 0.30) have fallen by about 50% in a few months, and for Azelio (SEK 17) it is even worse. The price for the energy storage company peaked at 75.40 almost a whole year ago and is now as much as 77% lower. The explanation is found in delays due to the Covid pandemic and a general decline for companies in the environmental sector. This applies in particular to those companies that are not yet making a profit, or that in Azelio's case have not even started to report any revenue.

Azelio bottomed out at SEK 6.50 per share during the initial pandemic panic in the spring of 2020. Since then, the price has thus risen by 160%. In light of this, the decline from last February seems a little less dramatic. The price peak was driven one year in advance by exaggerated hopes of a transformation of the company's MOUs (declarations of intent on potential customer orders) in accordance with the dates stated in these. One year later, orders have failed to appear and confidence in the company has waned significantly. Azelio has never explicitly promised more or larger orders than the few dozen units ordered at the end of 2021, but market expectations were much higher than that, due to the MOUs indicating volumes of several hundred TESPODs (energy storage systems) in 2021.

Most hopeful companies, ie shares valued at very high sales or profit multiples, have crashed in the past year. This applies to both software companies and companies with an environmental profile. The uranium sector is part of this. During the year, the price of uranium for soon delivery was driven up by Sprott's fund SPUT, which accumulated large amounts of physical uranium. At the same time, the EU was preparing to reclassify nuclear power as sustainable, which was expected to lead to a sharp increase in investment in the sector. The vote has been postponed time and time again, not least due to political agendas in Germany and Austria, which has led to a slump in the sector. In addition, the market's general skepticism towards hopeful companies has also affected uranium exploration stocks. Now it finally looks as if the EU vote will take place in the first week of February. One should be prepared for further delays, but probably a decision should be made before February is over.

It is thus spring for uranium from a political perspective. At the same time, SPUT continues to vacuum the market for physical uranium and soon a listing for Sprott Physical Uranium Trust is also planned on the New York Stock Exchange. It would provide additional attention to the case as well as access to more capital. Continued high inflation rate in the suites of monetary stimulus during the pandemic combined with a constant buying pressure on uranium, the inclusion of nuclear power in the EU sustainability classification (taxonomy), and a general bounce for green energy due to winter wind power problems and rushing gas and oil prices storm for environmental companies. The group has an enormous range, from the wind power giant Vestas, which has also fallen by 50% in twelve months, to shares such as Azelio, GoviEx or URC, each with only about one hundredth as much market value as Vestas.

The US Federal Reserve is currently in a period of austerity. It has been forced to do so by both high growth rates and high inflation figures. In order to regain some kind of trust, it will probably take several months, perhaps several quarters with reduced asset purchases and higher policy rates. Not even a falling stock index is likely to stop the Fed in the near future. Rather, it is about managing the downturn with well-chosen statements about flexibility and that decisions are data-driven. Overall, the focus should still always be on reducing the extreme pandemic measures in the form of zero interest rates and quantitative easing. This could likely lead to continued falling prices for high-flying software stocks and other technology companies, whose valuation multiples were driven up by both passive flows from index funds and stimulus checks to those who have been released due to Covid-19.

In that process, investors can either focus on selling off existing holdings of hopefuls and cryptocurrencies in recurring "rips" (intense price increases caused by both uninitiated bargain buyers and short selling) that usually break with an overall falling trend, or at well-chosen times buy their favorite companies to unjustifiably pressured prices. I was going to do both and, ie shiny companies like Cloudflare, Docusign, Bill, Snowflake, Beyond Meat, Peloton, AMC, Robinhood, Uber and more, while I bargain buy companies like Philip Morris, Honda, Walgreens, ConocoPhillips, Renault and Swedish Match on shut down.

I will probably actually also sell previously invulnerable companies such as the four A's, Apple, Amazon, Alphabet and Adobe, as well as MNNM, Microsoft, Nvidia, Netflix and Meta. Because if the Fed is serious, which I think they have to do a little longer than usual, then passive flows could eventually affect even the market's largest "stock generals". And it is precisely the last "vomiting" when the index accelerates downwards this autumn that I expect will cause the Fed to turn around. Then it is important to be ready to buy your favorites with both hands. MANAMANA companies will probably be well placed, but perhaps even more so environmental companies for crash assessments.

@Mikael Syding