The topic interests me because divesting is a stellar way for individuals to support the environment without needing to change their lifestyles. For example, due to convenience, people may opt to drive instead of bike. However, sustainable investment is intriguing because it does not require individuals to experience time as an opportunity cost. I also value the way knowledge about clean energy stock management can increase a person’s willingness to pay for the initial investment because it increases the likelihood of a lucrative outcome. Further, the article’s author Tim Lemke depicted a key to impact investment is financial return and outlined specific factors that separate certain publicly-traded clean energy companies from one another. I appreciate how Lemke did not just advocate for general investment in the entire clean energy sector, but instead illustrated there is variance between the corporations within it. From there, Lemke recommended the reader looks into five strong clean energy stocks.
The article began by recognizing the reliability of energy stocks based upon historical success. Then, Lemke explained how a growing population has led to increased demand and therefore industry growth. While Lemke acknowledged petroleum and coal companies are not completely wiped out, he explained clean energy is going to eventually supply a larger amount of the nation’s electricity. Still, Lemke addressed the current administration’s opposition of tax credits and the implementation of high tariffs bring added costs to renewable energy firms.
Next, Lemke listed principles to keep in mind before investing. For instance, there is a wide array of renewable energy sources that differ in terms of production cost. Moreover, only some sources have the ability to make up a significant portion of overall energy production. Also, perhaps a company is waiting for technological advancements before increasing its production or there is a law interfering with its progress. For example, Lemke refers to the barrier the natural gas source suffered when fracking was not yet permitted in many places across the United States (U.S.). Lemke goes on to value a corporation’s available capital as a renewable energy company’s research and development can be expensive and requires robust infrastructure which is not necessarily feasible for a small organization. In the face of competition, Lemke discussed it is difficult for a business to do well in the case it is not already established as a leader. That being said, any emerging clean energy stock needs to have characteristics setting itself apart from the clean energy sector’s existing powerhouses. Lastly, since nations outside the U.S. are focused on purifying their electric grids, multi-national corporations are in the optimal position to succeed.
Lemke suggested readers look into First Solar, BWX Technologies, Cheniere, Brookfield, and Tesla. Although Lemke initially valued the consistency of energy stocks, he spoke about how First Solar experienced quite the rollercoaster due to fluctuations in demand, pricing and political uncertainty. While the stock poorly performed from 2009-2017, the company has sold out their orders for the next couple years and are expanding production. Moving into the nuclear energy realm, Lemke conveyed BWX Technologies is a phenomenal stock to buy because it diversified its production to include submarines and air craft carriers, as well as acquired a medical isotope business. Next, Lemke introduced Cheniere as a great stock to buy considering liquified natural gas already provides 35% of U.S. electricity. On the other hand, while Brookfield owns 5316 power generating facilities across the world, lack of rain hurt their operations due to relatively low output from its hydroelectric dams. However, similar to BWX Technologies, Brookfield intends to expand its capacity in wind and solar energy. Finally, while Tesla is widely-regarded automaker, its investment into solar energy and battery technology makes it a competitive company. It is remarkable Tesla pioneered battery technology to run their cars as the batteries also have a range of other uses in terms of increasing electric grid efficiency which propels alternative energy sources such as wind and solar. For all five of the stocks, the article has information about its revenue from recent quarters which brings quantifiable support to Lemke’s points. I appreciate how Lemke illustrated his investment values through examples of strong stocks.
Are there any other clean energy stocks you suggest looking into? Do they have any strengths similar to the ones illustrated by Lemke?
What are potential risks of investing in innovation?
How does discounting come into play in regards to stock investment into new technology?
Is there also a disadvantage to a company diversifying its product line because it cannot specialize and devote all of its resources to a particular technological advancement?
Lemke, Tim. 2020. “Clean Energy Stocks for 2020: Can You Make Money Investing Clean Energy?” The Balance. Accessed July 22 2020.