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In today’s Digest, we’re doing something a bit different. We’re featuring an essay from Chris Skokna, who works closely with Eric Fry, editor of The Speculator and Fry’s Investment Report. In his essay, Chris discusses a sector of the market that’s recently been producing big gains for Eric’s subscribers — solar energy. Hundreds of percent gains in short periods. Best of all, the future for solar (and related investment gains) is just getting stronger. Quoting Eric from the essay “the solar industry is gaining momentum, and that momentum is building at the exact same moment that global demand for solar power is about to go parabolic.” It’s a great read with exciting investment implications. Enjoy. Jeff Remsburg |
Solar’s Profitable Present Is Getting Even Brighter
The story of solar power has captivated investors ever since Bell Labs developed the first modern solar photovoltaic cell in the mid-1950s.
It was “the beginning of a new era, leading eventually to the realization of harnessing the almost limitless energy of the sun for the uses of civilization,” according to one report in The New York Times.
But as innovative and revolutionary as solar energy has been over the past 65 years or so, you never hear of a John F. Rockefeller or J. Paul Getty of solar.
Hardly anyone has made any real money with it.
In fact, many have lost plenty. Thousands of investors have been struck by the “Right … but Early Curse” when it comes to solar.
Just think of all those poor mid-2010s investors in SunEdison Inc. They watched their shares soar 2,000% on hype and hope, only to plummet to nearly zero and get delisted from the New York Stock Exchange once the reality of falling prices and no profits kicked in.
On the other hand, Eric Fry, the resident expert on global investment trends here at InvestorPlace, has been “Right … and On Time” when it comes to solar.
In late October 2018 in The Speculator, Eric recommended buying some call options on a solar-focused exchange-traded fund. By late January, that ETF had soared more than 30%. (Over the same time frame, the S&P 500 Index advanced just 3%.)
The way Eric played it, subscribes who followed his advice ended up making 203% on their entire position — in just a smidgeon over three months.
But that’s just the start of all the gains his Speculator members have been making with solar over the past half year or so.
In early October 2018, Eric suggested they get in on a certain solar stock’s call options. Since then, the stock has skyrocketed more than 75%.
They’ve closed out the first third of that option trade for 168% gains … and the second third for gains of 282%. And last time I checked, they’re still sitting on gains of 292% with the final third of that trade. (To find out how to join Eric and his Speculator members, click here.)
In 2016, Eric won the Portfolios With Purpose stock-picking contest — Wall Street’s most prestigious investment competition — beating 650 of the biggest names in finance with a 12-month return of 153%. That made him “America’s Top Trader.”
And plays like the ones I just showed you — and the 145% gains (so far) they’ve made betting against Teva Pharmaceuticals which Jeff told you about recently in the Digest — prove he hasn’t lost his touch.
That said, I was a bit surprised by Eric’s big solar wins, as I think that industry still leaves a sour taste in a lot of investors’ mouths.
So, recently, I asked him why the past few months has been such a great environment for solar investing — and whether the current profitable situation has legs.
Here’s what he had to say …
The Famine Ends
Despite the spectacular worldwide growth of solar power, Eric says, many of the companies operating in the industry have struggled to turn a profit.
But the long years of famine are coming to an end, he says. Within the last few months, several companies in the solar industry have reported record revenue, along with rising earnings and growing order backlogs.
JinkoSolar Holding Co. Ltd. (JKS), for example, reported record photovoltaic (PV) module shipments in the fourth quarter of 2018, and annual earnings growth of 140%. Canadian Solar Inc. (CSIQ) reported a 129% jump in annual earnings, while Enphase Energy Inc. (ENPH) and SolarEdge Technologies Inc. (SEDG) produced annual earnings gains of 77% and 45%, respectively.
“Clearly, the solar industry is gaining momentum,” Eric says. “And that momentum is building at the exact same moment that global demand for solar power is about to go parabolic.”
Eric says two primary factors are fueling the solar boom are falling costs and the desire for clean air.
The cost of solar-power installations has been plummeting — in both the residential and utility-scale markets — he notes. In many parts of the world, solar power is still more expensive than conventional power-generation technologies, but the gap is closing very rapidly.
Further, he notes, the true cost comparison between solar power and other technologies involves more than just dollars and cents. “Clearly, the toxic emissions that spew from coal-fired plants impose a cost on the planet that solar panels do not,” Eric says.
Eric says that’s why India and China — the two most populous, and polluted, countries on the planet — are ramping up their solar-power capacity.
Both of these countries have devoted themselves to solar power, he says, “like teenagers to tattoos.” Combined they account for 40% of the world’s solar capacity, and both countries have laid out ambitious plans to expand their solar footprints.
But the burgeoning demand for solar power from China and India is not the only reason to expect global demand to soar over the next several years, Eric says.
First Comes Solar, Then Comes …
“You see, Chris, a powerful new ‘X factor’ has entered the solar energy market,” Eric told me. “And it has the potential to supercharge demand. That X factor is energy storage — also known as batteries.”
Until recently, solar-power installations lacked the ability to store energy. “They were simply use-it-or-lose-it power generators,” he says. Energy storage technologies were too expensive to be viable additions to solar-power facilities.
But this old story is changing rapidly. Energy storage has arrived — and its arrival could be a very big deal for the solar industry.
Utilities are also embracing energy storage, Eric says. Increasingly, they are opting to add new generating capacity by building energy-plus-storage facilities, rather than gas- or coal-fired power plants.
Last year, for example, the Arizona Public Service Co. (APS) committed to deploying 850 megawatts (MW) of energy storage over the next six years. Along the same lines, NextEra Energy Inc. (NEE) announced plans to deploy a 409 MW solar-plus-storage solution at Florida Power & Light Co., replacing two gas-fired power plants.
Looking globally, he says, the deployment of battery-based energy storage solutions (BESS) is ramping up quickly. According to JPMorgan, the cumulative installed base of BESS will soar 100-fold between now and 2030.
“Here’s the bottom line,” Eric told me. “Solar power is big … and getting much bigger.”
At the end of 2018, the world’s installed capacity of solar-power generation totaled nearly half a billion megawatts — accounting for more than 7% of the globe’s power capacity.
But new capacity installations are on track to soar 25% this year, according to Bloomberg New Energy Finance, and to nearly double by 2021.
After laying all that out, Eric showed me a long-range forecast — from the International Energy Agency — that anticipates what he calls a “truly spectacular growth trajectory.”
According to the IEA’s “Sustainable Development Scenario,” solar-power capacity will soar fivefold between now and 2025, accounting for a whopping 38% of global power generation. Looking further out in the unknowable future, the IEA’s forecast anticipates a 13-fold increase in solar-power capacity by 2040.
“At that point, this renewable power source would be providing two-thirds of the world’s power needs,” Eric notes.
And here’s a kicker … if you need one. The EIA anticipates global spending on solar power to total $4 trillion over the next two decades — or about $180 billion per year.
“For perspective, $180 billion is slightly less than the GDP of New Zealand and slightly more than the GDP of Hungary,” he says. “If investment of this magnitude were to occur, solar power would become the world’s primary electricity source by 2040.”
If you need any more convincing, just look this study up; it’s easily Google-able.
But you don’t have to wait till 2040 to profit on this trend. By then, it will be too late — far too late.
That’s why Eric has just released a special “all solar” edition of his newsletter — Fry’s Investment Report.
In it, he shares with his members two recommendations to get in on this technology’s profit ground floor.
One’s a solar “pick and shovel” play — one that sells its product at a low cost to solar’s big boys … but still makes big profits for itself. (And that Eric believes has the potential to triple in 12 months.)
Here’s what Eric has to say about the other one:
If you were to throw a dart at almost any stock in the solar energy sector, you’d likely hit a winner. But if you were aiming that dart, you’d want to hit this company. It designs, manufactures, and markets the industry’s most highly efficient solar systems. It’s the only major solar company that addresses all three end segments: power plant, commercial rooftop, and residential. And it’s a classic “turnaround story.”
To find out how to join Fry’s Investment Report — and get both of the recommendations … and a lot more each and every month — click here.
Good investing,
Chris Skokna
