Recent events in Japan and the Middle East could create a pivotal moment for alternative energy, BlackRock's Robin Batchelor and Poppy Allonby have claimed
The pair, who run the group's New Energy investment trust, said there is a real and significant opportunity for renewable energy and energy efficiency to help offset any slowdown or reversal in nuclear power's renaissance.
"Recent events, both in Japan and the Middle East North Africa (Mena) region, have put energy policy and energy security back on the political agenda," they said in a joint market update.
"There now appears scope for renewed regulatory momentum in the sector and the trust is poised to benefit from this new reality with over 75 per cent of its investments exposed to energy efficiency and renewables."
With the sector out of favour for so long, they highlight many holdings trading on historically low earnings multiples, a fact emphasised by a recent spate of M&A.
EDF recently bid for EDF Energies Nouvelles for example, a subsidiary principally engaged in the development of renewable energy.
Meanwhile, Iberdrola Renovables, a top 10 holding for the trust, was also subject to a bid by its parent company Iberdrola in March.
A pick up in sector M&A underpins share prices and highlights the attractiveness of company valuations, according to the managers.
Mr Batchelor said the impact of the recent Japanese disaster has contributed to uncertainty over the future of nuclear power globally.
"Many countries that were about to commence their second phase of building nuclear power generators have now expressed concern over the safety of plants and stalled these plans," he added.
"This has most recently occurred in Italy, where they have decided to place their nuclear program on hold."
Several of the trust's holdings announced results in April, with Novozymes a key performer as it demonstrated strong growth of around 9 per cent (on a like-for-like basis).
Mr Batchelor said a key headwind in the short term has been the relative weakening of sterling, as the dollar strengthened 3.9 per cent over April.
"As the market began to stabilise following the Japanese earthquake, a number of oversold stocks in the nuclear and platinum markets regained much of their lost ground," he added.
Strong recoveries also came from companies such as Johnson Matthey, Umicore and Shaw Group, which all contributed well to performance.
"Growing concerns over the sustainability of the Chinese wind market led us to take profits in American Superconductor," said the managers.
"A recent trip to China also resulted in [a new] a position in a Chinese wind farm developer, which stands to benefit from the pricing pressures currently being seen in the market."
Source: FTAdvisor.com