BlackRock New Energy's grand plan for a turnaround

Stellar absolute performance has been hard to come by within the green energy sector and it's little secret BlackRock's New Energy has capitulated to this trend.

But the seeds of recovery have been sown, argues the £84 million trust's manager Poppy Allonby, who along with her co-manager Robin Batchelor is looking to natural gas and energy efficiency names to power the vehicle's returns.

Speaking to Wealth Manager, Allonby explained the sector is no longer a premium-rated one, with this shift being recognised by two company buy outs within her portfolio.  The move towards natural gas and away from dirtier forms of fuel is also being picked up on by investors, and this is a trend Allonby is keen to capture.

'We think natural gas will continue to displace coal in power generation and to an extend diesel as a transport fuel in North America.  This year, the US Energy Information Agency expect demand for natural gas in the electric power industry to increase by 20% this year due to improved economics versus coal. 

'Meanwhile in transportation, Honda is offering $3,000 of fuel to buyers of their natural gas powered Civic,' the manager explained, adding that Shell is also installing LNG pumps in the US, signifying the potential for growth in this market.

Performance

While investors will no doubt be pleased with BlackRock New Energy's 10-year 72.4% growth in its net asset value (NAV) per ordinary share, its five-year and three-year numbers are more disappointing, at -43% and -30%, respectively.

But on a one-year view BlackRock New Energy's numbers are starting to look brighter, with the vehicle narrowing its NAV decline to 1.3% and swinging into positive territory during the last rolling quarter by delivering 2.7% growth in its portfolio.

While this is still down relative to sone comparator indices, with the FTSE World, for example, adding 4.2% between August and October, there are sources of significant upside in the pipeline.  The vehicle has also outstripped the WilderHill New Energy  Global Innovators Index by 21%, comparing the two on a three-year view.

Activists

Perhaps in response to the pressure that BlackRock New Energy has been under, US deep value investor Weiss has built up a stake of around 13% in the investment trust.

This can sometimes be an ominous sign, but BlackRock's board has taken steps to reduce its discount to NAV, such as offering shareholders the opportunity to exit for cash at NAV, less costs.

This is a move that is till awaiting the approval of investors, but if passed shareholders will be able to take the board up on its offer in 2014, giving the vehicle's current portfolio time to mature.