Profiting from the Green Revolution

Profiting from the Green Revolution

November 24 2021

Public equity investors are torn between the allure of rising near-term profits and stock prices of oil and gas companies, versus the inevitable transition to a clean energy economy. As to the latter, in the US, Biden just signed a $1 trillion plus bipartisan infrastructure bill, and the Build Back Better bill just passed the House and is on its way to the Senate. We believe there is a 90% likelihood of passage in the Senate with some further changes required by Joe Manchin.

BBB contains $555 billion for climate change solutions with a $7,500 on the spot rebate for EVs, which will make it very difficult for gas and diesel vehicles to compete on price, much less service life and maintenance. In addition, there are ~30% incentives for both consumers and commercial interests to invest in solar installations, battery and storage facilities, wind turbines, the grid, and home and building energy efficiency equipment.

The multiplier on the $550 billion will drive at least $1.5 trillion of capital spending. These incentives will dramatically reduce hydrocarbon use in favor of renewable energy and nuclear power. As a result, we are focused on publicly traded companies that will drive the clean energy transition. When Biden signed the infrastructure bill into law, the EV charging station stocks jumped in price. A similar phenomenon could take place with BBB.

We have been following the stocks and ETFs in the chart below since 2019. Some were up 2X to 5X in the period between late 2019 and early 2021 depending on the name. They then plummeted 25% to 50% in the Spring of 2021 but have since rebounded. We are bullish over the long term on companies in this arena. It is always a big plus to invest where powerful long term tail winds will consistently drive returns. This not a recommendation of any particular security and these stocks could easily decline again, as they did in the Spring of 2021, but they deserve consideration as part of a diversified public equity portfolio.

October 19 2021

The world is in the midst of a global energy shortage almost entirely due to a fossil fuel supply chain breakdown. Today we analyze where the battle lines are drawn and what the future holds for oil and gas.

January 27 2022

This week we take on those who say renewables are to blame for global energy shortages and Putin’s leverage over Europe. And we suggest how everything could be different with an alternative energy policy.

February 23 2021

For environmental impact, China wins. But President Xi has committed to turn things around, so this week, we take a look at what needs to happen to reach his 2060 goal.