In today’s Exponential Investor…
- What’s behind the incredible year for energy transition investors?
- What’s next in 2020?
- Could this be the “Masterkey” to the next phase of the bull market?
It’s been an incredible year for energy investors.
It’s pretty unthinkable, even in hindsight.
At the start of the year, investors in the energy transition were a fairly quiet niche.
Then in March, all stocks were down, oil prices had crashed and some people were starting to write off renewables and clean technology.
Today? They’ve just had the best year imaginable. What happened?
Aside from being your investment analyst here at UK Uncensored, trying to ask and answer the most important questions for your savings and investments, I am also the analyst over at Exponential Energy Fortunes.
Of the 17 stocks recommended by the service this year, none have lost money and the portfolio has returned an average of 218% per recommendation, from 1 January to the middle of December.
Even just yesterday, one went up 50%. Today, another is up 22% at the time of writing. It’s kicking off.
Here’s what James, the investment director and editor, had to say about this year…
When future historians look back on the energy transition, my guess is they’ll view 2020 as the decisive year.
The market shift, after all, has been dramatic.
Source: @adam_tooze on Twitter
Quite simply, the divergence between the oil market and clean energy has been stunning.
While the impact of Covid-19 decimated oil demand, cratering prices as well as the market caps of Big Oil, the exact opposite effect was seen in renewables.
In fact, according to the International Energy Agency (IEA), only wind and solar will see an increase in demand this year, with every other energy source suffering a year-on-year decline.
Indeed, 2020 will be the first year ever in which wind and solar account for 100% of the increase in global energy demand – which is an incredible statistic when you consider wind and solar accounted for only 34% of the increase in global energy demand in 2019.
As clean tech investors, you don’t need me to tell you what this has meant for any green energy-based portfolio.
Certainly, if you like your statements in pithy form, then the news last week that clean tech poster boy Tesla had replaced Occidental Petroleum, one of the biggest producers in the US oil industry, in the S&P 100, was, well, just about perfect.
But while we’ve reached a tipping point, let’s not pretend 2020 was a flash in the pan or an isolated one-off, special event resulting from a black swan-shaped pandemic…
Global oil demand growth has been decelerating for years, after all. Meanwhile, the growth of clean energy such as solar has been exponential.
As I wrote last month…
“Remember, global solar growth has already risen 100X since 2004 and 10X since 2009, so the expected growth rate from here really is astonishing.
“Although the last three years have seen a flattening of growth around the 100 GW/year level, most forecasts see around 110-120 GW of new solar growth this year before around 150 GW of growth is added in 2021.
“As Beyond Oil speaker Gregor Macdonald states, this opens up the pathway to the first 200 GW year before 2025.
“As Macdonald notes, that’s more than double even the most bullish of forecasts from just five years ago (which, safe to say, did not come from the IEA).
“This breakout is truly remarkable, coming amid the economic impacts of coronavirus that’s set to cause oil consumption to fall by around 7-10% this year.”
As for oil, indeed, I think we’ll see demand bounce back a bit next year as vaccines are distributed and economic activity returns to normal, though I certainly don’t think we’ll get back to pre-pandemic levels.
In fact, I’m reasonably confident that global oil demand has now peaked. As I’ve long said, it will probably go the same way as coal right after its own peak in 2013, in that we’ll see a long plateau then consumption start to really fall off a cliff.
Certainly, I think 2020 has offered a taste of what is to come in energy markets over the next decade and longer. Back in May, I said the pandemic power markets were a postcard from the future and I fully stand by that.
As for Exponential Energy Fortunes, well, let the good times roll. We’ve had success after success this year. We’ve recommended 17 stocks this year, and, at the time of writing, every single one is up or was sold at a profit.
Meanwhile, some of the stocks recommended in previous years have either exploded or moved back towards positive territory…
My forecast is that 2021 will be the year of energy storage.
Now I obviously can’t tell you exactly how we’re positioned for the boom in energy storage.
But I can link you back to this piece where I spoke about why we liked the sector.
Since then though, the case has become even stronger.
With the wave of fiscal support from Covid-19 government spending, plenty of it is following a Build Back Greener approach.
Commitments to net zero abound, and Joe Biden will soon join the cohort.
The build-out of renewables projects means they are likely to be the top beneficiaries, and we are already seeing that being anticipated by investors in the solar sector:
Investors are missing not one, but two tricks though.
Not only is solar power vastly better at supplying electricity when it has appropriate energy storage capabilities attached to it…
… but energy storage installations are way behind, and have an enormous amount of catching up to do.
That’s why it’s such a gem for energy transition investors right now: it’s still under the radar.
Because the challenge after such a wildly successful year is not which car to buy. Which private island to choose…
It’s how to protect what you’ve won. How to move on. How to win the next round. Find the next sector to boom. The next stock to soar.
That’s what we are all about. And that’s exactly what James has been doing.
You’ll also find out how you can get your hands on his latest research, and which stocks he thinks are best positioned for the next phase of the energy transition investing bull market.
For me though, it’s all the best.
I wish you all the very best Christmas possible.
Editor, Southbank Investment Research