Pat Connolly's avatar
$119m follower assets
The Solar Industry
"The trend is your friend" This is something I am trying to keep in mind when deploying new capital in the middle of a bear market. The solar ETF $TAN in only down -6% YTD and is showing impressive relative strength in terms of monthly and quarterly performance as well.

To backfill a reason why it's performed relatively well is pretty intuitive. Home owners are experiencing higher electric bills from an increased cost of energy + increased usage as many are still working from home. This is favorably skewing the calculus for those wondering if they should look to lower their electric bills by installing solar panels.

This is a sector that is very ESG friendly which is a positive for fund flows & experiencing government support to increase adoption. Solar only accounts for about 3% of energy in the United States so it is reasonable to believe we are still in the extremely early innings of adoption of a megatrend. The technology for home solar is improving and is even becoming part of the building code in some places, as California will mandate solar installed on new construction as of 2023.

As an added bonus it appears many solar companies are indirect beneficiaries of EV Car adoption, another ESG fund flow friendly theme & government supported trend. I have yet to dig through these transcripts but it does appear that the solar industry is one of the few bright spots in the market with underlying growth drivers that benefit from the macroenvironment headwinds of higher energy prices.
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I would agree that the Solar industry is one that shows great promise in the coming years. Two follow up questions that I have in relation to your post are-

  1. Do you think that the best way to gain exposure is through an ETF or is it better to have a concentrated collection of individual stocks?

  1. From your research what are names of the key players in the sector ?
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My Non Leveraged Non Inverse ETF Watch List
These ETFs are all in daily chart up trends. I am probably going to buy $TAN tomorrow, solar etf.
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Growth ETF portfolio
Just designed a growth etf portfolio on M1 Finance that I will begin auto investing into soon. I chose etfs with a good historical growth and in industries that I think will be good long term. The portfolio consists of $TAN $VGT $ENFR $QCLN $COMT $IWF $VDE
ETFs are the way to go! I think they are a great means for Investors to gain portfolio exposure to specific sectors, styles, industries, or countries without necessarily possessing all the necessary expertise in those areas. As a passive and relatively new investor, I see great value in the ability of ETFs to offer lower operating costs than traditional open-end funds, flexible trading, greater transparency, and better tax efficiency in taxable accounts.
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$RUN up nearly 10% as utility bills surge. Is it a sign to buy the dip on solar stocks?
It is just the beginning of the month of May and for Q1 2022, demand for solar panels is already hot. As the summer season creeps in, demand for solar will only continue to grow.

Two months ago, I wrote an article on why I see solar being a driver of growth for $TSLA this year. To my surprise, in their Q1 2022 investor presentation, their solar business declined 48% year-over-year. As time goes on, maybe their solar business can accelerate in growth.

Overall, the pure plays of the solar business like $RUN seem to be thriving. Because of this, I can see $TAN, the ETF that covers the solar industry, rebounding to newer highs.
If oil goes to $200, here's what I'm bullish & bearish on
Bearish:
$UBER $LYFT $DASH $GRUB and other gig economy transportation platforms
$AAL $UAL $DAL $LUV and other airlines
$KNX $JBHT $USX $SNDR and other trucking companies

Bullish:
$TSLA $F $GM $RIVN $LCID $FSR and other electric vehicle manufacturers
$SEDG $RUN $ENPH $TAN and other solar stocks
$XOM $CVX $OXY $PXD $COP and other oil stocks

Oil companies today have pricing power like never before. Automakers have pricing power like never before. Solar companies, they'll soon start jacking up their prices as demand for solar energy systems surges during the summer.

Meanwhile, fewer people are gonna use their vehicles to offer ridesharing services and food delivery services because already, fuel costs are eating up a majority of their earnings. Also, airlines will have to balance between finding ways to attract passengers to fly with them (through lower prices) and not deterring them through higher prices (since they want to pass down the higher fuel costs to customers).

Trucking companies have it the worst. The industry has been commoditized as all truckers are essentially independent contractors with their own trucks and they do their own deliveries. The smaller companies are more vulnerable to high oil prices. Meanwhile, the larger trucking companies will have to bump pay for truckers to justify them making deliveries amid the high fuel costs.

These times are unprecedented. We need to drill more oil. Bring back the fracking revolution. The OPEC cartel members have an incentive to produce a lot more oil than their current production target.

Reactivating nuclear power plants takes months or even a few years. Quadrupling down on renewables requires heavy investment and a lot more raw materials, which we are currently struggling to import. Plus, transitioning to a green energy economy takes a very long time. The green energy solutions we currently have aren't dependable. The wind doesn't blow all the time. The sun doesn't shine all the time and it doesn't shine every day and every month. Geothermal plants and hydroelectric plants can only be built in certain places. Biomass may seem viable but we don't want to cause food prices to rise because we're now removing food supply for the sake of energy production.
I don't argue that higher oil prices are good for ALL EV makers, but I can't rationalize the valuations of $RIVN $LCID $FSR and others. While I do believe $TSLA is wildly undervalued (watch their EPS growth this year), too much unearned credit has been given to others trying to follow in tesla's footsteps. These new players have a long way to go before justifying their current valuations, let alone any future growth.
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