Climate Change presents us with the greatest investment opportunity of all time! Climate Change must be addressed, and by far the fastest and cheapest way to address it is with existing renewable technologies — solar, wind and biomass working together connected to distributed energy networks. Check out part one of this article in which I discussed why renewables will be a great and transformative investment.
Why Investing is Different When a ‘Paradigm Shift’ Is Occurring
One of the “old” contrary adages in stock market investing is: “this time it is different” — it is generally associated with novice investors who most of the time, lose money.
It is a true that most of the time — things are the same, but during a paradigm shift — the old rules do not apply and a unique and dramatically different playing field presents itself to investors.
It happened before when personal computers (distributed computing) supplanted main frame computers (centralized computing), and it is happening now with distributed renewable energy technologies overtaking antiquated, inefficient and costly centralized energy generation.
The risk of investing in huge power plants that have 30+ year lives when there is the distinct possibility that they could become negative cash flow nightmares quickly is simply gigantic. With efficiency improvements and solar and wind growth the electricity demand worldwide has been decreasing for the first time ever. This decrease in demand will certainly lead to dramatic decreases in revenues and almost certainly long-term negative cash flows for central plants.
Likewise investing in assets (oil, coal, gas) that are in the ground also presents an unacceptable level of risk to any investor. These assets could become stranded as a result of climate change or simply because they will cost too much compared to renewables to extract. In the U.S. there has recently been significant pressure for colleges and state pension funds to divest their portfolios from investments in coal and other fossil fuels.
With all due respect to pension fund analysts, over the past four years, the S&P 500 index (SPX) has been UP approximately 160 percent while Coal ETFs have been down between 80 and 90 percent — their performance could not be worse. I do not know what investment strategy these analysts were utilizing; just let me just say that I am not familiar with that particular investment strategy and would not recommend using it. It is like a weather forecaster on a rainy day denying it is raining!
The end of the fossil-fuel era is approaching and the trend is irreversible. It is simply another example of the capitalist process of creative destruction that has taken place in many industries over the last 100 years and has always resulted in a huge investment opportunity.
“We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature’s inexhaustible sources of energy — sun, wind and tide…. I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that”. — Thomas Edison
Renewable Energy Related Stocks
Below are a number of my favorite stocks at this time to take advantage of the transition to renewables. Note: ** these stocks are not recommendations they are simply the highest rated stocks in the renewables area based upon my proprietary stock evaluation system.
Solar Electric (Photovoltaic) Related Stocks
First Solar — symbol FSLR, trades on NASDAQ
- First Solar is the largest solar company in the area of Photovoltaics (sunlight to electricity)
- It has excellent management that has been exceptional in making or exceeding their projections regarding revenues and technical progress.
- They have, by far, the strongest balance sheet in the industry and a strong backlog
- They utilize a proprietary thin film technology that performs better in warm and hot climates than the industry standard solar panel made of crystalline silicon. This would be an advantage in many of the countries where there is substantial sunlight
8Point3 Energy Partners LP — symbol CAFD, trades on NASDAQ
8Point3 Energy Partners is a Yield Co. this is a company that is created as a public vehicle in which to place large solar projects as assets which generate cash flow. It gives investors a nice way to play the solar sector plus a competitive yield (5.6 percent) while providing a source of financing for the yield company’s solar company partners. CAFD is in my top category.
8Point3 Energy Partners solar company partners are First Solar and Sunpower Corporation two of the top solar companies. First Solar is in my top category and Sunpower is in the next category below category. This is a good category and usually suitable for a purchase and may attain top status, but for now is a good company just not in my top investment category.
Gamesa Corporation (GAM — Spain) and Vestas Wind (VWDRY — NASDAQ)
- Gamesa (Spain) and Vestas (Denmark) are two of the largest Wind companies in the world. Both are in my highest category and both have had very strong business and very large backlogs.
- Both will likely participate in the worldwide boom in onshore and off shore wind parks a market which is expected to grow at an accelerating rate over the next 5 to 10 years.
- Both are well positioned and have quality products with long histories in the industry and also active development programs to keep ahead of the curve.
- Another very large wind player is General Electric, but wind if not a dominate part of their business so it would not qualify as a “pure play” on wind. Also note that GE is a large shareholder in First Solar and shares some intellectual property – as a result I would not be surprised (pure speculation on my part) that at some unknown time in the future FSLR may be acquired by GE.
Renewable Energy Infrastructure Investment
Hannon Armstrong (HASI)
Hannon Armstrong Sustainable Infrastructure Capital, Inc. is the leader and first to market in the sustainable investment area. It provides debt and equity financing to the energy efficiency and renewable energy markets. The company focuses its investment activities primarily on energy efficiency projects, renewable energy projects and other sustainable infrastructure projects.
The company has a large backlog and has a healthy dividend (6.8 percent) for shareholder to enjoy as the company continues its growth.
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