We’ve been planning on adding a page here on our site to discuss potential investments that any of you can make to participate in the growth of solar and battery storage systems.
But we’re hesitant to even get into it. You see, there are going to be many bodies along the road to success in this arena, and what should be a promising investment can go to zero – even under the experienced, scrutinizing eye of a long-term investment professional.
The path forward includes a combination of things. Electric Vehicles will continue to become the transportation mode of choice for urban environments and short-haul transport. But some sort of hydrogen propulsion is likely to take over long-haul transportation needs. In the near future, it is likely that natural gas will take over the long-haul tasks as hydrogen continues to develop.
As for the electricity grid, you can absolutely count on seeing a growing wave of micro-grids, both utility owned and privately owned. Micro-grids are happening now, and they will continue to evolve into the landscape all around you. As I write this, utility companies are finding it cheaper to buy electricity from a privately-owned solar farm than to use their own coal and gas-fired power plants. They are locking in 20-year streams of product from entrepreneurs that are leasing land, erecting solar panels, and selling the output into the grid. And they are building micro-grids to help deal with peak demand on their own system.
The one thing utilities are beginning to worry about – and they are starting to fight against it is something they have named, “Grid Defection.” Think of Grid Defection as the power companies version of cable cutting in the Cable TV industry. Grid Defection is YOU. It is those of us who have discovered the power of home-made power. Sun-induced, battery stored power. Grid Defection means you and I don’t need to give a damn about whether the grid is working. And it means utility companies will continue to owe a tremendous amount of money on the debt they have borrowed while their income stream dwindles. So here’s tip numero uno: Get yourself out of utility company stocks right now. Utility stocks are highly correlated to the bond market, and bonds are as high as they have been in decades. When bonds go up, utility stocks go up. When bonds go down, utility stocks go down (ceteris paribus). Utility stocks normally pay big fat dividends, and the market treats them like income streams from a bond. Inflation is ticking up, the US Dollar might get devalued by the current administration (which is terrible for bonds), and bonds pretty much have no where to go but down. Remember what I said: utility stocks are highly correlated to bonds.
Any statistician can tell you that correlation is not the same as causation. So although utility stocks and bonds are correlated, it doesn’t mean they always will be. But the bottom line is that utility companies have dreadful debt to equity ratios, and any drop in their earnings can radically shift their financial stability. So in my humble opinion, utility stocks have two things going against them right now: they are like bonds, and with interest rates near zero, bonds can’t really go up from here, and Grid Defection could mean they take a hit to their earnings stream.
Sectors that hold hidden gems: semiconductor manufactures that specialize in the chips used in BMS units, EV systems, and anything to do with the shift to micro-grids and battery storage systems. A truly beaten-down global giant that I view as a hidden gem in the semiconductor field is Renesas Electronics. Its a Japanese semiconductor giant that is growing its EV, AI, internet-of-things, and factory automation business. Just buy it. It is too cheap for what it is. Ticker: RENCY
Another semiconductor gem that is a bit pricey now, but I’m a buyer again down at $9 per share is MagnaChip Semiconductor. Ticker: MX.
There are a couple solar panel manufacturers I like, but I recently sold out of them. When I buy them again, I will write about it here.
I’m an owner of Sunworks (SUNW) a few cents higher than where it is. I’m looking to double or triple my position if it falls to $0.40. Yes, I said 40 cents. The boss of the company also steps in and buys shares around 40 cents, and we’re almost there again.
There is a company called Adomani (ADOM) I own a few shares in. I don’t feel good about their financials, but I own a few shares only because the insiders seem to be scooping it up at current prices (below 50 cents/share). I’m definitely not recommending this one. Something just doesn’t feel right about them. But I do like their idea. If any of you wants to build a company like it, that produces a conversion kit for say, Jeeps, I’m interested in hearing about it.
And there are others I will write about soon. But remember two important things: Diversify your holdings. Don’t bet the farm on one stock or one industry. My holdings in this industry are tiny compared to my overall portfolio. And do your own homework. I’ve owned probably dozens of stocks that have gone all the way to zero. Some of my current holdings might do the same thing.