Investment Ideas: Energy Transition

Today we will see a little about some investment ideas to take advantage of the energy transition.

Renewables are forecast to have more than 50% of the market by 2050.

The cost of producing renewable energy has fallen tremendously in the last decade. For example, the cost of wind power has dropped 85% since 2010.

Historically, the support of public policies is a decisive factor for the growth of the industries that benefit from them.

With the rise in the price of hydrocarbons, many wonder if these plans will go to waste. I think it’s the opposite. My hypothesis is that just as it happened with the oil embargo of the 1970s, which resulted in American policies to depend less on foreign countries and boosted shale and with it natural gas, the same will happen here. Europe depends a lot on Russia and I don’t think they want to continue doing so for many more years.

The rise in the price of hydrocarbons is temporary due to all the disruptions caused by the pandemic and other natural events.

Here we have two ways to invest: we make individual stock selections or we buy ETFs with exposure to this theme. You already know that I am in favor of the fact that most people should put together an index portfolio to suit them and they will do better, but for those who want to venture and have the capacity and time, then here are some ideas to analyze:

For stocks we have 4 alternatives:

Pure play, that is, having direct exposure to renewable energies and their production.
Electric utility companies are involved in generation, distribution, and transition.
The oil companies are divesting from fossil fuels and investing in clean energy and carbon capture.
Companies that will make use of that energy or that will be involved in the value chain. There could even be some miners here:

FSLR
BEP
SPWR
RUN
SEDG
TPIC
CSIQ
cwen
AEP
OH
ENPH
EXC
AES
HASI
EMR
QS

In this case, those with low ROIC and capital intensive should be avoided since this combination does not give good results in most cases.

And here are some ETFs to analyze:

ICLN
PCB
QCLN
ACEs
ERTH
grid

After the optimism experienced in the sector last year that ended with a good correction this year, I think it would be a good time to investigate some and wait for the momentum to pick up again.

Energy Transition Investment Ideas

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