A market sector with potential is also one of the most overlooked
The biggest jobs increase ever.
This morning, reports showed that nonfarm payrolls rose by 2.5 million in May, pushing the unemployment rate down to 13.3%.
This was nothing less than a jaw-dropper since Wall Street had been looking for a job decline of 8.3 million, which would have pushed the unemployment rate up to 19.5%.
Leisure and hospitality — two sectors crushed by lockdowns — represented almost half of the jobs gained.
As I write mid-morning, stocks are soaring on the news, with the Dow up 3.5%.
At least for now, the market is fully back in “buy” mode, so let’s talk about making money.
***Most investors miss out on the market’s biggest gains simply because they aren’t paying attention to the right sectors
Let’s fix that.
Today, let’s put a massive growth-sector in your crosshairs.
But let’s also be very candid about what to expect …
Looking forward, this sector will be volatile. There will be big rallies and steep selloffs as our world adopts its technology. And not all companies operating in this space will deserve your investment dollars.
That said, this sector is going to create fortunes for investors in the right companies who stay the course.
I’m confident that five, maybe 10 years down the road, we’ll look back at this period and say that’s when investors “flipped the switch …” that’s when, with little fanfare, a massive wave of wealth creation began to form … when people started making fortunes from one of the biggest energy revolutions in human history.
I’m talking about solar.
This is going to be a major investment-growth story. People will lament missing out on it just like they missed out on Amazon, Netflix, and bitcoin.
But you and I are here at the right time … on the ground floor … or at least close to the ground floor.
So, in today’s Digest, let’s talk about solar’s ascendency, and how it could transform your portfolio this decade.
***A sector whose time has come
For years, solar frustrated investors. While holding the promise of big gains, most solar investments fizzled. That’s because broad demand for solar as a consumer product simply wasn’t there.
This is finally changing …
Of all the renewable energy sources, solar is expected to grow the fastest from now through 2050.
Below you can see a steep solar-generation growth projection continuing for decades.
Of course, as investors, we’re looking for nearer-term growth projections as well.
On that note, here’s PV Magazine from March:
2020 is projected to be the first to blow past 2016’s 15 GW of solar power installed. If the EIA’s projections are hit, a 60% increase in capacity will be deployed over the record year. Next year is projected to grow a bit over 2020 potential record values.
It’s reasonable to assume that pandemic-related lockdowns will impact these projections, but as the global economy re-opens, solar’s path toward record-setting growth should resume.
***Driving this growth is California — is it a glimpse of what’s to come?
Back in May 2018, California’s Energy Commission voted to require that most new single-family homes, as well as multifamily residential buildings up to three stories, be built with solar panels.
From Bloomberg:
The move underscores how rooftop solar, once a luxury reserved for wealthy, green-leaning homeowners, is becoming a mainstream energy source, with California — the nation’s largest solar market — paving the way.
“This is massive,” said Morten Lund, chair of an energy storage initiative at law firm Stoel Rives LLP. “Essentially, this could turn residential solar into an appliance, like a water heater. There has always been a certain inevitability about that outcome, but this is moving faster than most of us thought likely.”
Since the 2018 decision, there’s been some political jostling as installing a solar system adds about $9,500 to the cost of a new home, and California is already struggling with affordable housing. Given this, the Energy Commission’s decision also gave home builders the option of supplying solar power from an off-site facility.
While this alternative option hurts home solar installers, it doesn’t impact California’s overall focus on solar.
Meanwhile, California isn’t the only state eyeing solar as a key energy source looking forward.
Last summer, the Energy News Network reported that Massachusetts is looking to follow California with solar mandate for new homes.
From ENN:
A pair of bills moving through the Massachusetts Legislature would require solar panels on most new construction in the state …
One of the bills (SB 1957) working its way through the Legislature calls for rooftop solar panels on new residential and commercial construction. The second bill (SB 1995) would require panels be put on new or renovated state-owned buildings.
As I write, both bills are still alive and have been referred to the committee on Telecommunications, Utilities and Energy.
***Whether Massachusetts or other states follow California, private citizens are already pursuing these installations on their own
Last year, Pew Research reported that more than four out of 10 U.S. homeowners are considering residential solar panels.
The reason behind this interest?
Savings.
Below is a list of the average savings that are likely to be achieved by a typical U.S. homeowner if they installed a 6kW solar system in their home. I’m showing just the first five listings.
Source: SolarReviews
There are many savings-calculators online if you’d like to get an idea of what you might save through going solar.
***Investing in solar with your eyes wide open
As we turn to investing in solar, let’s be clear about one thing …
It’s volatile.
But if you can handle the swings, and you’re in the right company, then you can make a literal fortune.
To illustrate, let’s look at Enphase Energy (ENPH).
To help contextualize the ENPH gains we’ll discuss in a moment, let’s start with gains we’re more familiar with — FAANGMs.
Everyone knows how well the FAANGM stocks have done in recent years.
Specifically, over the last three years, while the S&P has tacked on 31%, Apple has climbed 122%, Amazon has tacked on 144%, and Microsoft has surged 169%.
So, what’s your guess as to how this solar-high-flier, Enphase, has done? Maybe 200%? 400% Possibly 1,000%?
Over the past three years, ENPH has climbed a staggering 6,991%. And this is after the bear-market selloff. Gains coming into that crash topped 8,500%.
Had you sunk $10,000 into Enphase three years ago, you’d be sitting on nearly $700,000 today.
By the way, Louis Navellier recommended ENPH to his Breakthrough Stocks subscribers last November. Since then, this solar juggernaut has soared 191%.
***But before you get too starry-eyed, let’s look at the potential crashes too
One of the biggest beneficiaries of California’s decision on new-home solar installation was a San Francisco-based residential-solar installer named Sunrun — it’s the largest solar-installer in the U.S.
From early May 2018, when the Energy Commission made its decision, through Sunrun’s February 2020 high, the stock pushed 150% higher …
But then, over just one month, it fell 64% …
Since then, it’s soared 131% …
I’ll say it again — solar is volatile.
But you can see just how massive the potential gains are.
***Keep your eyes on China
An important note for investors considering an investment in solar …
From Forbes, back in February:
One challenge currently facing the U.S. solar industry are the import tariffs placed on solar panels by the Trump administration. By some estimates, the tariffs have cost 62,000 jobs and lost almost $20 billion in private investment.
It turns out, China is a huge manufacturer of solar PV supply. In fact, according to the International Energy Agency (IEA), more than 60% of the world’s solar panels are made in China.
If brewing tensions between Beijing and Washington result in another tariff-ridden trade war, it would be a significant headwind for the solar sector in the nearer-term.
***The one-click way to play solar
If you’re considering solar and are looking for one of the simplest ways to play it, consider the Invesco Solar ETF, TAN. It holds many of the solar sector’s top names, including Enphase, SolarEdge, First Solar, and SunPower.
Below, you can see TAN handily outperforming the S&P since the market’s late-March-lows, up 62% compared to the S&P’s 42% growth.
As noted earlier in this Digest, Louis Navellier has been recommending solar stocks in his Breakthrough Stocks service. In addition to ENPH, there’s a second solar play he’s incredibly bullish on — it’s already up double digits since his recommendation in March. You can learn more as a subscriber by clicking here.
Bottom-line, we’re in the early stages of a multi-decade growth story. If you look at Enphase’s past, you get an idea about solar’s future. Select, elite solar stocks stand to transform portfolios in the coming years. If you haven’t considered this sector before, it’s time to take a look.
Have a good evening,
Jeff Remsburg
