Jeremy Grantham (Trades, Portfolio), co-founder and head of GMO LLC, disclosed earlier this week his firm upped its stake in Ameresco Inc. (AMRC, Financial) by 34.03%.
The renowned economist and investor has built a reputation over the course of his long career by correctly identifying speculative market bubbles as they were happening and steering his clients’ assets clear of impending crashes.
Founded in 1977, the guru’s Boston-based firm oversees multi-asset class, fixed income and alternative investments. To produce superior risk-adjusted returns, GMO’s specialized investment teams seek to identify and exploit long-term and even contrarian opportunities by focusing on environmental, social and governance factors as well as sector-specific trends and expertise.
Having increased the stake already during the fourth quarter of 2022, GuruFocus Real-Time Picks, a Premium feature based on 13D, 13G and Form 4 filings, show the firm invested in another 972,065 shares of the industrial company on March 31, which had an impact of 0.25% on the equity portfolio. The stock traded for an average price of $49.22 per share on the day of the transaction.
Grantham’s firm now holds 3.83 million shares total, which make up 1% of the equity portfolio. GuruFocus estimates the firm has lost 12.16% on the investment, which was established in the first quarter of 2021.
About Ameresco
Founded in 2000, the Framingham, Massachusetts-based company provides clean technology for businesses in North America and Europe, including energy efficiency, infrastructure upgrades, asset sustainability and renewable energy solutions.
Its business is organized in five segments, with U.S. Regions contributing the largest portion of revenue at 61.6% in 2022.
New partnerships
Over the past several months, Ameresco has entered a number of new partnerships to keep its business growing as well as give back to the community, an important tenet of being an ESG-friendly company.
In early February, the company announced it is developing a 5-megawatt solar power facility in Alton, Illinois to help offset greenhouse gas emissions in the area as well as generate approximately $1 million in revenue for the city. With construction beginning this year, the facility is expected to begin operations in 2024.
Further, Ameresco expanded its presence in Europe by acquiring Enerqos Energy Solutions, a renewable energy and efficiency company headquartered in Milan, Italy. While the terms of the agreement were not divulged, the deal closed in March.
In March, the company was hired by Alaska Pacific University to upgrade existing infrastructure at the institution’s Thomas Training Center at Eagle Glacier, a Winter Olympic training facility, to help reduce its energy consumption.
Potentially looking to break into new areas, Ameresco is teaming up with Australia’s RedFlow Ltd. (ASX:RFX, Financial) to provide non-lithium energy storage solutions to customers.
It also extended its partnership with U.K.-based charity Yorkshire Dales Millennium Trust to plant trees and restore wildlife habitats through providing financial support as well as employee volunteers.
Financial update
On Feb. 27, Ameresco reported its fourth-quarter and full-year 2022 financial results.
For the three months ended Dec. 31, the company saw revenue decline 20% to $331.7 million and net income decrease 36% to $17.9 million. Earnings per share of 34 cents were down 36% from the prior-year quarter.
Despite the lackluster quarter, the company’s past growth efforts appear to have been fruitful overall. For the full year, it posted 35% growth in net income to $94.9 million and a 50% increase in revenue to $1.82 billion. Earnings of $1.78 per share were also up from 2021.
Looking forward, though, the company’s management team is not expecting significant growth for 2023. Revenue is projected to range from $1.45 billion to $1.55 billion, a 17.8% decline from 2022 at the midpoint. Similarly, adjusted earnings are forecasted to be $1.80 to $1.90. It booked adjusted earnings $1.87 in 2022.
Ameresco will issue its results for the first quarter of 2023 on May 1.
Valuation
The disappointing quarterly performance and guidance contributed to the stock coming under pressure, having fallen nearly 17% year to date.
Ameresco has a $2.38 billion market cap; its shares were trading around $45.74 on Wednesday with a price-earnings ratio of 25.70, a price-book ratio of 2.88 and a price-sales ratio of 1.30.
Due to the decent plunge, the GF Value Line, which is based on historical ratios, past financial performance and analysts’ future earnings projections, suggests the stock is a possible value trap currently. As such, potential investors should do thorough research before making a decision.
At 89 out of 100, the GF Score indicates the company has good outperformance potential. While Ameresco received high ratings for profitability, growth and GF Value, the financial strength and momentum ranks were more moderate.
Guru interest
Of the gurus invested in Ameresco, Grantham has the largest stake by far with 7.37% of its outstanding shares.
First Eagle Investment (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also had positions in the stock.
Portfolio composition
Grantham’s $18.77 billion 13F equity portfolio was composed of 708 stocks as of the end of the fourth quarter of 2022. The technology sector had the largest representation at 25.86%, followed by the health care and technology spaces. Industrials stocks occupied only 7.16% of the portfolio.
Other industrials companies the firm held as of Dec. 31 included Otis Worldwide Corp. (OTIS, Financial), AGCO Corp. (AGCO, Financial), GrafTech International Ltd. (EAF, Financial), Deere & Co. (DE, Financial), Carrier Global Corp. (CARR, Financial) and Raytheon Technologies Corp. (RTX, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
