The Financial Times recently reported that “public markets are undervaluing clean energy companies,” which would suggest an opportunity for value-oriented investors. In order to profit from spotting an undervalued company, a catalyst needs to occur to rally the shares to their inherent value. One of the most immediate catalysts is a buyout or acquisition, which usually occur at a significant premium to the prevailing public market share price.
There are also recent examples of deep-pocketed energy companies making “strategic” acquisitions, with Masdar, the Emirati state-owned renewable energy company, buying Greek wind utility Terna Energy. Years of high oil prices combined with capital discipline on the part of oil companies means many are sitting on a war chest of cash that could be deployed to more acquisitions, as they seek to diversify and decarbonize their product mix and respond to growing demand for renewable energy.
It does this by applying a large language model to millions of news articles, as well as analyzing fundamental factors such as recent takeover offers, valuation, credit quality, dividends, size and recent proxy fights. The model also takes into account that economic sectors can experience waves of higher M&A activity that are likely to persist. And the energy sector is flagged as one that has seen a significant increase in takeover action that is likely to be sustained over the next year.