3 Buy and Hold Stocks for 2020

Congratulations, you’re about to discover three companies to watch that could be huge winners in the years ahead… regardless of which direction the market takes.

3 Buy and Hold Stocks for 2020

Dear Reader,

2018 was an interesting year for the markets to say the least.

The longest – and most lucrative – bull market in history hit new all-time highs.

Then, in October the Dow erased its gains for the whole year in one fell swoop.

No one knows exactly where they’re headed next.

So let me be clear: the purpose of this report is not to predict where the wider market is headed.

This report aims to identify three buy and hold stocks with the potential to be winners, regardless of whether the market shoots up, down or sideways.

To do that with any degree of accuracy, I believe there’s only one option.

Find a huge – age old – industry undergoing a fundamental step-change.

Right now, no sector fits the bill better than the $2.2 trillion energy market.

As we speak, the energy market is seeing a disruptive shift away from fossil fuels into renewables.

One of the oldest industries on the planet is essentially being reborn. With that rebirth comes big opportunity.

Now, I’m about to show you three companies that have great positioning in this massive market expansion.

And I believe they could be huge winners in 2020, no matter what happens in the wider market.

During my time as an energy analyst in Manhattan, I learnt a lot about new emerging technologies in the energy market. It allowed me to see behind the curtain and what was on the horizon for energy. And it’s undergoing a major transformation, thanks to the technological advancements from these three companies…

But just to be clear: I’m not laying out these three buy and hold stocks as recommendations. This is analysis I’ve put together overtime – which any investor interested in the energy market should find useful.

As with all investments, I recommend doing a bit of research into these companies – make sure you’re comfortable with the risks involved and draw your own conclusions before taking action. For example, these are new companies in a young, emerging industry, and don’t have the same long track record as many bigger, and better established companies. That makes them inherently more risky. If you’re unsure you should seek advice. However, I think they have huge potential.

Here’s who I believe you need to keep your eye on.

Ignore this industry at your peril

You’ve probably heard of an observation made by Intel’s Gordon Moore known as ‘Moore’s Law’. It’s the notion that computer processing speed doubled every 18 months. It was on an exponential growth curve.

But did you know that technology behind solar power is progressing exponentially as well?

And so is its market share of the global energy industry.

For the last 25 years solar market share has doubled every two years.

Currently market share sits at 2%. Now, that might still be just a fraction of the global market. But just six more doublings – which will happen by 2028 if the historic rate is maintained – will put in place capacity equivalent to more than 100% of 2016 global energy demand.

This gives you a huge opportunity to capitalise on something mainstream analysts aren’t paying attention too.

That’s because mainstream analysts tend to look at linear year over year growth in percentage terms, not exponentially. They look at the solar industry’s market share over the last two decades simply see growth from 0.5% market share in 2012 to 2% market share in 2016.

But they ignore the Law of Accelerating Returns – that as new technologies get smaller and cheaper, their growth becomes exponential.

Now is the time to make your move on this sector.

Look at other tech that has grown on an exponential curve: the desktop computer… or the internet…

By the time these technologies were beginning to infiltrate our lives the growth was already priced into any stock worth owning. And the potential to make money was minimal.

But had you invested when market share was at just 0.2%? Well, you’d have made a fortune.

So which solar companies do I think you should stick on your watch list?

Let me tell you.

And as demand for solar panels grows on an exponential level, so will the demand for essential components within a solar panel assembly.

That’s why the first two companies I suggest you stick on your watch list straight away make parts the Solar Photovoltaics (PV) industry can’t live without.

In fact, saying that PV can’t live without these parts is an understatement.

The companies I’m about to introduce you to manufacture what I call ‘growth enablers’.

They make the parts that are driving this exponential growth we’re seeing right now.

URGENT Watch #1:
SolarEdge Technologies (NASDAQ: SEDG)

SolarEdge Technologies make solar inverters. Inverters convert the electricity solar panels create into a form that’s useable by everything in your home. And with 48.2% in q2, 2018 of the US market – SolarEdge Technologies are the market leading inverter manufacturer.

The reason for their success is largely due to a vastly superior market offering compared to their competitors. Up until recently, the majority of household scale solar panels used something called a string inverter. And these string inverters have one major drawback. They can only produce as much electricity as the least productive solar panel. So, if just one solar panel moved into the shade, it creates a huge bottleneck for electricity production. Thus, making it less cost effective for a typical homeowner to power their home. Up until now, this has been a major sticking point preventing a solar panel powered home from being affordable for the typical home owner.

That’s where SolarEdge comes in.

SolarEdge manufacture a type of solar inverter that is vastly superior to the string inverter. Their inverters optimise the power of each solar panel individually, so next to zero electricity production is lost. Previously their power optimisers were only cost-effective on industrial scale installations. But in recent years SolarEdge have reduced their cost to manufacture to a point where it is now viable to be used on residential scale installations.

This has had huge implications for both the solar panel industry and SolarEdge.

First, the use of more efficient inverters has brought the price of solar modules down to a point where it is now cheaper to power your house with solar than it is with fossil fuels. And importantly that’s without any government subsidies whatsoever.

Second, SolarEdge are the market leader of an innovation driving this drop in price. This has meant that their market share of the US residential market has grown from just 1% in 2012 to 48.2% in 2018. They’re positioned perfectly to profit – and grow their earnings – substantially as a result of this exponential growth we’re seeing in the solar PV market.

URGENT Watch #2:
Sempra Energy (NYSE: SRE)

I mentioned earlier that the energy industry is an archaic market ripe for disruption. The energy industry is made up of some huge companies living in the dark ages. And if they don’t get their act together, there is the very real possibility that they could disappear as this shift takes place.

That’s something I don’t believe can be said of Sempra Energy, however. Because this energy company is by far one of the most advanced utility companies in the US. This is – in part – thanks to innovative San Diego-based energy company SDG&E.

And right now, SDG&E are leading the race to solve the last piece of the solar panel puzzle. It’s a question that has to be answered if solar is going to replace fossil fuels as a source of electricity on a global scale…

What do we do when the sun isn’t shining?

To answer that, we need to think about energy storage, and the analysts at Bloomberg New Energy Finance are most excited about lithium-ion batteries. Lithium-ion batteries can act like a sponge, soaking up and storing energy when it is abundant – when the sun is shining, the wind is blowing and energy use is low – and releasing it when energy resources are in high demand, helping to smooth out power flows on the grid.

In 2017, SDG&E went live on a bank of 400,000 lithium-ion batteries – one of the largest battery projects in the world – in California.

Last year, SDG&E announced five new energy storage projects totalling 334 MW have been approved.

As one of the first companies able to integrate lithium into its mix, Sempra has a huge advantage over the competition. To my mind, Sempra shares look deeply undervalued by the market.

URGENT Watch #3:
Greencoat UK Wind (LSE:UKW)

In this $2.2 trillion energy disruption, there’s room for more than just solar.

And if you want to potentially make a pile of cash from renewable energies, then you’d be well advised to take a long hard look at the wind power sector.

Just three years ago, in 2016, wind power overtook coal as a supplier of energy to UK homes. Like solar, wind power is also growing at an exponential rate.

In 2017, approximately 15% of the UK’s electricity demand was supplied by wind energy.

But it’s still growing at 13%! And the wind energy sector is expected to create more than 2.4 million jobs by 2030.

To grab your slice of this rapidly expanding market, in my opinion, you need to keep your eye on Greencoat UK Wind.

Greencoat UK Wind, a leading listed renewable infrastructure fund, owns a portfolio of domestic wind farms that stretches across the UK.

The UK-focused fund has stakes in 30 off- and onshore wind farms, which generated 1,145GWh of electricity in the first half of 2019.

This makes it perfectly positioned for its share price to track the wind power sector’s growth trajectory.

With wind power costs approaching levels where projects no longer require government subsidies, the outlook for wind in the UK is extremely positive.

“The wind energy sector is expected to create more then 2.4 million jobs by 2030”

Greencoat UK Wind is in a great position to benefit as electricity production from wind becomes an increasingly important part of the UK’s generation mix. A constituent of the FTSE 250, the fund also offers an attractive 5% yield.

Now is the time to move

Any investor looking to grow their portfolio in 2020, regardless of what happens in the markets, should make the energy sector their first port of call.

Energy, solar and wind plays are a no-brainer in my opinion.

We’re starting to see completely new approaches to how energy is made, stored and used. New, innovative advances in technology are solving problems the energy industry has been trying to tackle for years.

It’s an exciting time. One that could make some savvy investors very rich right now, regardless of which way the wider market turns.

Until next time,

James Allen
Exponential Investor

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