I’ve got no shortage of possible topics to write about after a couple weeks respite — the teasers didn’t stop flowing while I was gone, and the hyperbole hasn’t been turned down for the sultry days of summer — but the one that’s been requested most has been the “Einstein’s Space Energy” pitch from Dr. Kent Moors for his Energy Inner Circle trading service.
And yes, it’s all about solar energy — he says he’s got three “Alpha Solar” companies that he thinks will make us rich with 20,000% windfall opportunities… with the line that “The coming global transition to solar electricity is an energy game-changer unlike anything since the dawn of the Oil Age.”
So what are the stocks he likes?
Well, presuming that you don’t feel like coughing up $3,950 (OK, OK, it’s “on sale” for $1,950), let’s see if we can identify the picks for you from the clues he provides in the ad… ready?
Moors says that “Right now, we’re at the pivotal moment in the most lucrative ‘mega shift’ in energy history” as technological advancements have steadily brought down the cost of solar power generation to make it competitive with fossil fuels, and that’s basically the big picture argument — that solar power, or “space energy,” is in an unstoppable advance, and will soon be the number one source of electricity on the planet. Here’s some of the spiel…
“What I CAN give you, though – if you make the one move I’m about to show you… Is a lifetime of potentially huge wins as this global energy ‘mega shift’ plays out.
- In ever-more-efficient solar “harvesting” technologies…
- In conversion-to-AC and transmission technologies…
- In efficient integration of solar into the electricity grid…
- In specialized adaptive solar grid infrastructure…
- In new energy storage and portability technologies…
- In powerful solar “micro grids” for the military and for remote applications…”
And a bit more…
“… solar power is on pace to multiply 5,400% globally by 2050.
“So theoretically, if your solar stocks simply reflect the industry’s growth…
“It stands to reason that a basket of decent global solar plays would make you 54 times your money over the next 35 years.
“But here’s the thing…
“The “alpha” investments in ANY sector outperform simple industry growth exponentially.
“And as the record shows, I’ve got a unique ability to hone in on these ‘alpha’ companies – in any market conditions.”
There’s a lot more of this big picture argument, but I don’t want to bore you (you can see the whole ad here if you like)… And then finally we get into the hints about the specific stocks…
“URGENT SOLAR ALPHA #1: THE “STANDARD OIL” OF PV
“China produces 70% of the world’s solar modules…
“And I consider THIS company to be the best of the more than 400 Chinese PV solar companies currently in business.
That’s because they’re one of the few vertically integrated PV manufacturers in the entire People’s Republic….
“Not only are they poised to increase their market share substantially as this shortage takes effect…
“But even more so because of their ability to buy up their smaller, less financially sound competitors….
“Just a few weeks ago, the Chinese government ordered a mass consolidation of the domestic solar industry….
“These guidelines call for only 10 companies to be producing 70-80% of Chinese solar PV modules by the end of 2017!
“And yes, according to all my research…Are you getting our free Daily Update
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“This ‘Standard Oil of PV” company is going to be one of them – a BIG one… they’ve already started scooping up a number of their smaller, financially distressed competitors in anticipation of this consolidation.
If you make only one investment on this “mega shift” to solar I’m telling you about…
“THIS IS IT.”
Sounds quite irresistible and yet frustratingly non-specific, yes? Well, that’s the problem the Thinkolator runs into on this one — there are a half-dozen large Chinese companies who dominate the solar cell production business, and many of them are more or less vertically integrated and in an acquisitive mood of late. And they do trade on US exchanges, for the most part.
So which one is it? The only additional clue we get is that “already this year, their stock is up more than 55% on the NYSE!”
Well, that narrows it down a bit — both because there are only a few Chinese solar companies that have been up by 55% or more year to date in 2015, and because several of the Chinese solar companies trade on the NASDAQ, not the NYSE… so the best match, though I can’t call it definitive, is Jinko Solar (JKS). Trina Solar (TSL) is fairly close, and the far larger Hanwha Q-Cells (HQCL — long ago known as SolarFun) might be more attractive as a consolidator, but TSL hasn’t been above a 50% gain this year and HQCL doesn’t trade on the NYSE, so that leaves me with JKS.
Is it any good? Honestly, I have no idea — and after the scandals of Hanergy (HNGSF) this year and Suntech Power (STPFQ) and so many others in previous years, I have a hard time trusting the accounting of these acquisitive Chinese firms who do so much business within their own conglomerates. I’d have to study them all a lot more closely to be comfortable with their prospects, and even then I’d keep positions small — I agree that solar power is on a strong uptrend, thanks both to government subsidies and to the huge supply increases from these Chinese firms in recent years, but it’s also quite challenging to be a supplier in an oversupplied market… predictions are that the demand will continue to rise, and possibly even that prices will recover a bit, which would help, but I can’t claim to be very well-versed on this sector so I’ll just leave you with that: JKS seems the most likely match on this one, but you can check into it yourself and see what you like.
How about another one?
“URGENT SOLAR ALPHA #2: THE NEW AMERICAN SUN CHAMP
“This nimble, under-the-radar American firm is a leader in innovative power generation on all scales.
“From the smallest homestead outpost on a combination of solar, wind, and generator power…
“To the biggest manufacturing plant, via the conventional electricity grid…
“This firm does it all.
“Altogether, they’ve got generating assets of over 50,000 megawatts – enough to power over 40 million homes.
Currently, they provide several million residential, business, commercial, and industrial customers with power from multiple sources…
“Including conventional (coal and oil), nat-gas, nuclear, thermal, wind, and more.
“Their real specialty, however, is solar power.”
OK, so with 50,000 megawatts of generating capacity this is a pretty large utility company — which means that solar will be a relatively small part of the business. More?
“At the time I’m writing this, they produce 1,200 megawatts of utility-scale solar – around 2.3% of their total generating capacity.
“Now, that many not sound like a lot.
“But when you consider that right now, only 0.4% of U.S. grid electricity comes from solar…
“These guys are ahead of America’s grid-solar adoption curve by 575%!
“They’ve got a strong foothold in the residential solar sector, and are pioneers of large-scale commercial and industrial solar adaptation.
“Oh, one more thing this firm has going for it…
“They’re emerging as a major player in Electric Vehicle (EV) charging.”
This one, sez the Thinkolator, is NRG Energy (NRG) — they do have about 2.3% of their generating capacity from solar (mostly utility-scale, though a bit of distributed solar as well), and they do have an electric car charging business, but both are small parts of what is a large and pretty diversified utility company that pays a steady dividend of about 2.5%. They also have that most modern and trendy of baubles on their books, a “Renewable Energy Yieldco” — NRG Yield (NYLD) was spun off a while back to offer a stronger yield on their generating assets that are under long-term contracts, and pays at about 3.5% rate now (still quite low, particularly for a utility).
I don’t know whether it’s particularly “time sensitive” as Moors indicates, but NRG has been a very poor performer over the past year — at least, compared to their peer companies in the utility sector. They do focus on alternative energy more than many of the large electricity utilities, but I don’t know whether getting 2.3% of their power from the sun is going to give them a substantial advantage over competitors who might get 1% of their electricity from solar… so far, it hasn’t helped much.
Their IPO of NYLD was pretty successful a couple years ago, and gives them another financing source as they “drop down” (sell) generating assets to the yieldco (much like a refiner might “drop down” their pipeline networks to a MLP), but they also face the same pressures as other income-oriented investments in a rate-scared environment: If investors fear rapid rises in interest rates, they tend to sell utilities and REITs and MLPs (and bonds, of course)… and if rates really do rise substantially, a utility that pays a 2-3% yield, even if it can raise that dividend every year by a few percent, is not so compelling compared to a guaranteed bond yield that could conceivably reach 4-5%.
And we’ve got one more to look for…
“URGENT SOLAR ALPHA #3: THE QUIRKY ‘SMART GRID’ ONE-OF-A-KIND
“Unlike today’s antiquated grids, in which electricity flows only one way – from generation point to consumer…
The ‘smart grid’ of the future will need the ability to feed electricity back into the grid from millions of private generation points as solar power takes over.
“It’ll also need the ability to juggle electricity from a myriad of sources – coal, gas, oil, wind, solar, nuke, hydro, thermal, steam, etc…
“And efficiently modulate it for use during periods of wildly fluctuating demand….
“… there’s one company that I’m predicting is going to positively explode out of the gate on this transition…
“It’s a quirky, fascinating international company that’s actually been around in one form or another since 1870.
“Their specialty: controlling energy.
“Through switches, relays, valves, and governors. Through sensors, circuits, computers, and breakers…
“Through every imaginable way of controlling any flow of energy, anywhere.
“Electronically, kinetically, mechanically – you name it.
“Whatever is needed to control any kind of power you want, these guys invent, manufacture, and service it.
“And one of their BIGGEST areas of expertise is controls for electricity generation and distribution.
“In other words, they’re just what the doctor ordered for a major global push into “smart grid” technology….”
“Everybody is going to know about this one-of-a-kind firm soon.
“If I’m right, they’re going to be one of the BIG early winners in the ‘mega shift’ to solar power.”
So who’s this? Well, again we’re fairly light on the specific clues from Dr. Moors here, but the Thinkolator’s best match is the old Woodward Governor Company, now known just as Woodward (WWD). They are not particularly well known, they’re still pretty small with a market cap around $3 billion and they do indeed specialize in all kinds of energy controls, with their two biggest markets being energy generation and distribution and aerospace. The stock has done pretty well over the last couple years, and investors have been generally pleased with recent news (a joint venture with GE Aerospace on fuel systems, and a new authorization for a $250 million share buyback).
Analysts have put pretty stiff growth expectations on WWD, so the valuation looks pretty decent if that growth materializes — they’re expected to grow earnings by about 10% next year (starting October 2015) and 20% in the following year, so the trailing PE of about 20 isn’t out of line even if you wouldn’t call it “cheap”, but it’s also true that they’ve struggled to deliver on that kind of growth promise over the last few years — they’ve only had one quarter of 10% year-over-year earnings growth since 2012.
This one strikes me as interesting, largely because they’ve managed to maintain pretty strong gross margins over the last decade in a business that I would assume is probably quite competitive– they must be doing something right. Whether it’s sustainable, of course, is a call I can’t make after spending 20 minutes browsing their financials, but I’m pretty impressed with this one after my first look and it makes me feel a bit warmer and fuzzier in the belly than the other two solutions the Thinkolator has found for today’s Dr. Moors tease.
But it is, of course, your money at stake — so it’s your call. What do you think? Ready for a new wave of solar riches? Think Moors is picking the right players (or, of course, do you think the Thinkolator’s results are wrong this time? Normally I can give 100% certainty for these solutions, but the clues are squishy enough that there’s room for debate today). Let us know where your thinking leads you, just use the friendly little comment box below. Thanks for reading!