Alaina Anderson is a Partner and Portfolio Manager at William Blair & Company.
Ms. Anderson joined William Blair in 2006 as a Research Analyst on the Global Equities team and has over a decade of experience covering stocks globally.
As Portfolio Manager of William Blair’s International Leaders ADR strategy, Ms. Anderson leads decision-making for a $700M portfolio.
In addition to these responsibilities, Ms. Anderson is intimately involved in creating and publishing investment insights for William Blair’s institutional clients, as well as client retention and business development activities.
Ms. Anderson is the former president of the Chicago Booth School of Business Black Alumni Association and a Leadership Greater Chicago Fellow from the class of 2014. She is also a board member and Fundraising Chair of the North Lawndale Employment Network and a member of the William Blair Investment and Audit Committees.
Ms. Anderson graduated from Wharton School at the University of Pennsylvania with a B.S. in economics and earned her MBA from Chicago Booth School of Business.
She is member of Delta Sigma Theta sorority and a member of the Chartered Financial Analyst (CFA) Society of Chicago.
In this 2,103 word interview, exclusively in the Wall Street Transcript, Ms. Anderson details her investment philosophy and gives investors her top picks.
“I cover real assets, which for us includes real estate, utilities, infrastructure and construction. The utilities sector includes independent power producers and renewables companies.
Some people may think that renewable energy generators, from an S&P GICS sector perspective, are in the energy sector. That’s not the case. Those companies are in the utilities sector…
We think the energy transition is a long-tailed phenomenon, and it’s a structural shift in how we’re going to generate power and fuel transport and activate heavy industry. So we would expect that as we emerge from the COVID crisis, we will get back on the ground for delivering capacity growth in the renewable space. Capacity growth was disrupted, but it did not stop.”
Her top utility pick is based in Florida:
“One of the big stories of 2020 was when NextEra Energy (NYSE:NEE) eclipsed ExxonMobil (NYSE: XOM) in market cap. I think there was a story in the Financial Times when that happened…
It is important to note that NextEra, as part of its holdings, holds Florida Power & Light, which is the utility in Florida for power and light.
The interesting thing about NextEra is that a third-to-40% of its EBITDA comes from its nationwide footprint in wind and solar. So they generate wind and solar through NextEra Energy Partners (NYSE:NEP).
And they have about the largest installed capacity base in the U.S. and combined in wind and solar.
So on the one hand, it’s a very well-run utility that has the benefit of having a high return on assets, and in Florida, they have a good population growth rate. So they get good volumes, because everybody wants to move to Florida.
So the utility aspect of NextEra is very stable to slightly growing. And they have a very large installed base for renewable energy that they can sell into; not only their utility in Florida, but utilities elsewhere, because they have a very broad installed base across the country. We’re very positive on NextEra as well.”
The valuations today are justified by several factors, according to the William Blair portfolio manager:
“Valuations across the global renewables space are underpinned by the fact that the energy transition is underway. And it is becoming more and more evident that the energy transition is becoming so impactful that it’s leading to a rethink of fossil.
When you look at the aggregate market cap of the energy sector over the last 10 years, the S&P fossil energy sector has gone from being 12% of the S&P to about 3% or 4% today. So the traditional legacy energy sector is becoming less relevant because the energy transition is in full swing. And that has had a result in the valuations in the renewables space re-rating dramatically.
We get comfortable, because we think that the growth algorithm for renewables is predicated on four things that you have to believe.
At this point, for valuations to make sense, you have to believe that installed capacity will surprise on the upside, or you have to believe that returns from here are going up, and that is the like returns on invested capital, or IRRs, for these businesses are going up.
Or you have to believe that the weighted average cost of capital is coming down, or that the competitive advantage period for these companies is going to be longer than we originally expected.
We lean towards the installed capacity surprises to be on the upside, and the competitive advantage period to be longer. And that helps us get comfortable with current valuations and gets us more comfortable with the belief that there’s more upside to the stocks where we’re invested.”
Ms. Anderson also details her investment in a biodiesel stock:
“Neste (OTCMKTS:NTOIF) is another company that we had invested in for quite some time, and we continue to support.
It’s a global leader in renewable diesel and biofuels. So there are quite a few areas of the economy that emit a lot of greenhouse gas, but are hard to decarbonize.
For example, air transport and heavy freight are among those areas. And Neste, because of its applications on renewable diesel and biofuels, addresses the decarbonization in those spaces.
We expect them to continue to generate double-digit CAGR in earnings.
The market is growing tremendously, particularly in Europe and Germany, and they are establishing a very strong presence in the U.S., particularly on the West Coast with their diesel franchise.
So we think this is transformative technology that has a long runway for growth.”
Read the entire this 2,103 word interview with Alaina Anderson for the complete detail on these and other portfolio picks, exclusively in the Wall Street Transcript.
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