I’ve been focused on energy a lot lately. To be fair, so has all of Wall Street.

Earlier this month, the big oil giants reported blowout earnings as a result of those skyrocketing oil prices.

And now that we’re heading into summer, I expect the crude oil prices to go up even higher. We’re rolling into deep summer driving demand — I can tell you myself, having recently driven from Arizona to Nevada, that those prices are still sky high.

The energy sector has been an oasis in a time when stocks have been struggling against rising inflation. Just take a look at the chart below to see the year-to-date performance of the Energy Select Sector SPDR ETF (NYSEARCA:XLE) versus the S&P 500:

As you can see, while the S&P has dropped over 18% year-to-date (YTD), the energy sector has shot up 58%.

Now, since we’re on the topic of energy, I’d be remiss if I didn’t discuss what’s happening in the solar energy space right now. The Invesco Solar ETF (NYSEARCA:TAN), which tracks solar energy stocks, popped early in the week in the wake of an announcement by the Biden administration on Monday.

Specifically, the administration revealed that it will suspend tariffs on solar panels from southeast Asia. Here’s why that’s big news for solar stocks…

Huge News for Solar Stocks

In 2012, the Obama administration slapped major tariffs on Chinese solar panels. This was an effort to bring more business to United States solar panel makers, as it had been previously determined that the cost of making solar panels in China was well below the cost to make solar panels in the U.S.

Rather than building their solar panels in the U.S., however, renewable energy companies turned to southeast Asia for their panels. And for the last decade this has been considered the norm.

But earlier this year, the United States Department of Commerce launched an investigation, citing the potential of “tariff circumvention.”

Basically, accusations were made alleging that Chinese solar panel makers have been shipping their supply to southeast Asia and then shipping it to the United States to get around the tariffs.

If the Department of Commerce found sufficient evidence of circumvention, bigger tariffs would be slapped on panels from southeast Asia. The threat of these higher costs has halted many projects. And coupled with the fact that renewable energy projects are hyper-sensitive to rising interest rates, this spelled trouble for the solar power industry.

But things are now looking up. The White House announced earlier this week that, while the investigation will be completed, no tariffs will be placed upon southeast Asian solar panels for at least the next two years, regardless of the findings.

This means that projects that have been halted due to concerns over high taxes can get underway in 2022 and 2023.

My Favorite Solar Energy Play

One of my favorite stocks in the solar industry is Enphase Energy (NASDAQ:ENPH). It’s why I recommended it in Breakthrough Stocks back in November 2019, when the company was still flying under Wall Street’s radar despite its triple-digit earnings and revenue growth.

You see, Enphase Energy develops microinverter systems, which sit underneath solar panels, converting all the sunshine to electricity for homes and businesses. The systems are clearly a vital component of the solar energy industry, and the company has shipped more than one million microinverters.

At the end of May, Enphase revealed that its IQ8 Microinverter system received the very first certification by UL, which is a leading safety science standard. The certification notes that Enphase Energy’s microinverter system achieves safety and grid interconnection standards for connecting solar inverters, energy storage systems and distributed energy resources to the grid in North America.

Enphase Energy played a role in developing UL and IEEE standards to ensure that safety standards are met when it comes to solar and battery systems.

The senior VP of Industrial Testing, Inspection and Certification at UL commented, “Enphase has taken a significant step in helping advance the safety and security of reliable, clean and smart energy available in the home or on the grid.”

And just this week, Enphase Energy revealed that increased demand for solar power and back-up batteries has driven more and more customers to its doorstep. The company has deployed an increased number of its solar systems with IQ8 microinverters and IQ Batteries in Southern California. The reality is California has boosted its solar deployments in recent years, and deployments are anticipated to exceed 1,500 megawatts this year. Battery capacity is expected to more than double by the end of 2026.

Considering that Enphase Energy is well-known for offering reliable solar systems that are backed by IQ8 microinverters and battery backup power, it’s no wonder the company is anticipated to account for the majority of deployments in California. Given the strong demand for its products, it’s also no surprise that analysts continue to increase quarterly estimates.

For the current quarter, Enphase Energy is expected to achieve earnings of $0.82 per share on $503.97 million in revenue. That represents 54.7% year-over-year earnings growth and 59.5% year-over-year revenue growth. Earnings estimates have increased 17% in the past two months, which bodes well for another quarterly earnings surprise.

Following the exciting solar energy news, ENPH popped 8%, and by Thursday it had gained 10%. So, I recommended my Breakthrough Stocks subscribers lock in a 1,035% gain in one-half of their ENPH position. Those who had invested $7,500 when I first recommended ENPH in November 2019 would’ve made about a $41,000 return on their initial investment!

The fact of the matter is fundamentally superior companies that can continue to grow their earnings and sales should climb higher over time. Enphase Energy is a great example, but it’s not the only company that’s outperformed the market this year. My Breakthrough Stocks Buy List is chock-full of fundamentally superior companies that are poised to prosper in the current environment. My Breakthrough Stocks remain characterized by 44.7% average annual forecasted sales growth and 151.7% average annual forecasted earnings growth. So, as institutional investors aim to make their portfolios “pretty” before the end of the quarter, it will create forced buying pressure under many of my Buy List positions.

I should also add that my smaller, more domestic Breakthrough Stocks now have a big edge over their multinational peers, especially since the FAANG bubble has been “pricked.” As an example, the folks at Bespoke documented that between May 11 and May 27, the best-performing stocks in the Russell 1000 were the 10% of stocks with the lowest share price (up 16%), lowest market cap (up 15%), lowest institutional holdings (up 12.5%) and worst year-to-date performance through May 11 (up 19.7%). In other words, a big short squeeze in low-priced, small-cap stocks with low institutional ownership have led the overall market since May 11.

My Breakthrough Stocks have certainly benefited from institutional buying pressure, as money fled FAANG stocks and looked for new places to invest. Between May 6 and June 3, my Buy List rose an average 4.6%, versus the S&P 500’s 0.4% loss. My quality, fundamentally superior Breakthrough Stocks have thoroughly demonstrated that good stocks bounce like fresh tennis balls.

If you want to outperform the market, join me at Breakthrough Stocks and become a member today.

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

Enphase Energy Inc (ENPH)