Vestas / hedge funds: only ESG skeptics have a headwind in the short term

Two years ago, the shorting of environmentally sustainable companies seemed the opposite and rude. These days it seems reasonable. Hedge funds target green energy companies such as Germany and Vestas wind turbine manufacturers Nordex. The Danish group contributed to the decline by warning in preliminary results for the whole year on Wednesday that problems in the supply chain will continue until 2022.

Rising investment costs mean that the group has set its target for a profit margin of 4 percent by 100 basis points. Although Vestas promises to get worse, stocks are still bouncing as short sellers cut their exposure. They have benefited from a 35% drop in stock prices since the end of October, when their positions were higher.

Lex charts showing the percentage of short interest rates on shares between Nordex and Vestas.  The second chart, showing operating margins between Nordex and Vesta, Nordex struggled to make a profit, and the latest chart, European green energy stocks, performed poorly

At least Vestas stays black. The smaller German rival Nordex has not made much money at all in the last eight quarters until September. This bad record attracted even more short sales. They have used more than a tenth of free navigation, according to Bloomberg. This is a multiple of the percentages for regional competitors Vestas and Siemens Gamesa. All three are easily twice as expensive as profits than three years ago.

The short-term impulse is on the side of the bears, judging by the performance of renewable energy indicators. The Global Renewable Energy Index (FTSE) has lost 16% in the last year. European alternative energy funds are also going through a difficult time. They grew by only 4.8% on average in 2021, according to Morningstar. Compare this to a 26% return on the European Stoxx 600.

All equipment manufacturers are at the mercy of wind manufacturers such as Orsted, which themselves are vulnerable to low wind speeds. Huge oil companies like BP create their own projects, but they are difficult customers. Oil service providers from Schlumberger to Wood Group know very well how they can clear cheese at supplier prices.

Good luck to the hedges. Unlike wind producers, they have short-term headwinds. In the medium and long term, the carbon transition will remain a relentless force. High scores do not offer a strong enough catalyst to sell on which the patient’s capital can act.

The Lex team is interested in hearing more from readers. Please tell us what you think about the short sales of wind turbine manufacturers in the comments section below.

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