The last two months have not been kind to clean energy stocks.  Most commentators attribute the weakness to declining oil prices and the Republicans' strong showing in the midterm elections.  Whatever the cause, my 10 Clean Energy Stocks for 2014 model portfolio was dragged into a loss for the year where it had previously looked to return a small gain.  A large part of the decline was in the dollar's strength.  Measured in local currency, the average stock was flat, but the 8% decline in the Canadian dollar, 12% decline in the Euro, and 11% decline in the South African rand combined to pull the portfolio down 4.5% in dollar terms.

My benchmark Powershares Wilderhill Clean Energy Index (PBW) also suffered, ending the year down 14.5%, even though the the broader market of small cap stocks gained 5.4% for the year (as measured by the Russell 2000 index ETF, IWM.) 

Long Term Track Record

Clean energy stocks are notoriously volatile.  While the broad market long ago recovered from its late 2008/early 2009 lows, my benchmark Clean Energy ETF never has, mainly due to a terrible decline in 2011, while the broad market fell only a little, followed by a further decline in 2012 while the broad market advanced.  Two or three blow-out years like 2013 would be needed to erase these huge losses.

Because of these risks, I have become increasingly conservative picking the ten clean energy stocks in my list.  I focus on stocks with positive earnings, and often dividend paying companies which appear undervalued.  While this caution kept the model portfolio from fully participating in the 60% upside achieved by my benchmark in 2013, it served readers well in 2010, 2012, and 2014, when the model portfolio produced an average gain of 3% to the average loss of 12% of the benchmark.  I would say I was not cautious enough with my picks in 2009 or 2011, although the model portfolio did beat its benchmark in both of of those years.