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What’s that “Ordinary Cargo Crate at the Center of a $16 Trillion Energy Revolution?”

Checking into a teaser from Ted Bauman at Banyan Hill about "Solar-on-Demand’s Standard Oil"

The teaser ad I’m covering today is actually dated March 2021, but it’s circulating pretty heavily right now, in March 2022, and leading to a lot of questions — and if that’s not just a typo and it did indeed start making the rounds a year ago, we didn’t cover it at that time… so I guess it’s new to me.

Ted Bauman is selling The Bauman Letter, which has been around as an entry level newsletter for several years. I haven’t covered it before, but if the name sounds familiar it might be because his father, Bob Bauman, who was a member of the House of Representatives for several terms, was a high-profile advocate for The Sovereign Society’s push to move your assets into overseas tax havens… Ted eventually went into the family business (The Sovereign Society changed its name to Banyan Hill a decade or so ago), and his newsletter sounds like a jack-of-all-trades intro letter — he says each issue focuses on a major trend and then identifies a way to invest in that trend, sometimes a “home run” type recommendation and sometimes something more conservative.

This time, it’s energy. The headline of the order form pretty well sums it up:

“Stake Your Claim in “Solar-on-Demand’s Standard Oil” — Before This $16 Trillion Energy Revolution Takes Off”

The ad opens with a photo of a shipping container, which looks like it includes either a bank of batteries or a fuel cell of some kind, and the basic idea of “Solar on Demand” is that it matches solar power with energy storage, allowing solar energy to be a baseload source of power (without batteries or some similar storage technology, after all, solar power can’t be expected to generate electricity when that portion of the earth is facing away from the sun — and the sun has turned away from us for about half of every day for ages now, which, depending on who you ask, is obviously either Trump’s or Obama’s fault).

We’ve certainly seen teases about energy storage before, and about batteries and fuel cells and lots of other ways to better harness clean energy and balance the electric grid (there are half a dozen pitches for the “forever battery” alone, and plenty of recommendations for other technologies like vanadium flow batteries, fuel cells or alternative storage technologies like ammonia and hydrogen). So which one is Bauman pitching?

Here are some clues from the order form:

“This company is on track to make solar power not only cheaper than traditional energy, but also just as reliable.

“And it’s already paying off…

“In 2020, it made more money than any other solar company — and all the oil supermajors combined…

“It has smart money piling in from Goldman Sachs, BlackRock, JPMorgan Chase and Citadel…

“Yet, right now, its stock is worth less than 1% of the traditional energy majors. “

That’s a little disingenuous — I also made more money in 2020 than all the oil supermajors combined, and if you collect a paycheck you probably did, too. As you might remember, oil prices collapsed in 2020 when we all stopped driving to work and flying places, and all the “oil majors” I’m aware of lost money for that calendar year as demand for their product disappeared. They bounced back pretty nicely in 2021, and many of them are booming now as oil prices surge in the wake of Putin’s brutal invasion of Ukraine, getting some extra juice in recent days because of the rising likelihood of the US and some other customers banning Russian oil imports (though the oil majors who are trying to extricate themselves from Russian oil partnerships are facing quite a bit of uncertainty)… but yes, 2020 was a tough year for everyone in the oil patch.

Still, however, he says this company also made more money than any other solar company… and several of them were profitable in 2020, so that might count as a clue.

What else do we learn about this secret company? Bauman goes into the comparison with Standard Oil…

“Standard Oil…. had a unique approach to business. The result? It eventually controlled 90% of America’s oil industry. That’s practically the entire industry!

“Rather than just drilling for oil, it set up its own refineries, pipelines, even railroads.

“It controlled every part of the production process in-house … which allowed it to cut prices so low no one else could compete.

“And the North American company I’ve been telling you about is working straight from Standard Oil’s playbook.

“It controls everything in its solar-on-demand process … from making the components, to building out the infrastructure and managing the software.

“This allows it to produce incredibly efficient, reliable and cheap power plants. And to do so steadily.

“But it doesn’t just get paid for building the plants, it keeps getting paid once they’re up and running, too.

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“It retains minority ownership of every key project it builds … and along with it, a share of the profits … forever. So it has this continuous pipeline of cashing coming in.”

And we get a few clues about some of the specific projects it has worked on, including:

“In November, it created the biggest solar infrastructure fund in Japan — valued at $475 million. It retains a 15% stake in that.”

And…

“just a couple months later, in January, it broke ground on one of the largest solar-on-demand plants in America. A 2,400-acre site in Kings County, California.”

So that tells us the ad really is a year or so old now, and they haven’t updated that part — that’s January of 2021 that Bauman’s citing, not 2022, and what’s being hinted at there is called the Slate Project…

Which confirms that the stock he’s been teasing is the developer of that project, Canadian Solar (CSIQ). Canadian Solar has been public for 15 years or so, and has been through some strategic shifts and restructurings along the way, but the appeal is largely that it’s both a low-cost solar module manufacturer and a solar project developer. They compete with several other brands who, like Canadian Solar, mostly manufacture panels in China, like JA Solar and Jinko Solar, as well as with brands like SunPower, First Solar and others in the market to varying degrees. There has been tremendous push to lower costs in the solar panel industry so margins will probably continue to be tight, but they do also focus on trying to build large projects at premium prices, including with their relatively recent focus on adding battery storage to their projects… and they do also retain partial ownership of at least some of their solar projects, both through private partnerships and through the infrastructure funds that they’ve spun out in recent years.

You can see Canadian Solar’s last investor presentation here — that will probably be updated next week, when they report earnings (expected on March 17), but as of today CSIQ is pretty reasonably valued and, while the business has presumably been slowed somewhat by supply chain clogs and COVID shutdowns, is also still growing (at least on the top line — if analysts are right, their profits probably dipped last year). Given current estimates, the stock is valued at about 20X 2022 earnings — that’s a pretty stiff premium to JinkoSolar (JKS), which is currently valued at about 12X earnings, but it is cheaper than First Solar (FSLR), which focuses almost exclusively on utility-scale projects (and has kept its manufacturing out of China).

Canadian Solar is really a company with roots in both China and Canada, with the Chinese connection causing it to trade at a discounted valuation at times over the years. Almost all of its manufacturing is in China, and it has run into the import bans and tariffs that have characterized the US/China trade relationship for several years. The stock has been through some wild boom and bust periods since going public in 2006, and that’s true of the whole sector, but it has also, like several of the solar panel companies, underperformed its own index over the past few years — the biggest winners in the space in recent years have been the makers of inverters, like SolarEdge (SEDG) and Enphase (ENPH), so the panel makers have generally not kept up with the performance of ETFs like Invesco Solar (TAN).

So… will Canadian Solar manage to develop a leading position in utility-scale projects with battery storage? Will they be able to grow, and continue to be successful in both Asia and North America without running afoul of trade wars? I don’t know… but given the consistent profitability of the business, it looks pretty reasonably valued… and if Ted Bauman did indeed start pitching this idea in March of 2021, and continues to believe it’s a big winner from here, well, the bonus is that you can buy the shares for about 30% less today than you would have paid a year ago.

It’s your money, of course, so it’s your call — I don’t own any direct solar investments at the moment, perhaps partly because I’ve seen so many boom and bust stocks teased in this space over the past 15 years… though I do think it’s likely to be a growth industry, it has clearly matured and a lot of solar projects are cost-competitive with natural gas now, and I have some indirect exposure through infrastructure and royalty companies (and through Berkshire Hathaway’s utility companies, I suppose, Warren Buffett’s firm is investing heavily in solar and wind farms). If you want to just make a sector bet, the Invesco Solar ETF (TAN) is the most liquid option, though there is also a newer and smaller ETF available called Global X Solar (RAYS) — Canadian Solar is a small part of both, about 2.6% of TAN and only about 1% of RAYS, but the portfolios are broadly similar.

So… are you ready for a solar panel and storage company to be your bet on “Solar on Demand?” Think Bauman’s CSIQ recommendation is a good call, or do you prefer one of the many other companies who make panels and build utility-scale or residential projects? Let us know with a comment below.

P.S. We have not covered The Bauman Letter in the past… so if you’ve ever subscribed to it, please do our readers a favor — pop over to our Bauman Letter reviews page and let us know what you thought.

Disclosure: Of the companies mentioned above, I own shares of Berkshire Hathaway. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.

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13 Comments
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aron.schoenberg
Irregular
aron.schoenberg
March 8, 2022 11:40 am

Could it be that he meant energy vault?

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jackson57
jackson57
March 13, 2022 2:58 pm

I used subscribe to Baumans stock picks until I lost way to much listening to his advice

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youwannabet
youwannabet
March 8, 2022 12:51 pm

I can confirm that CSIQ is a stock in the Bauman Letter. I own both CSIQ and TAN as I’m bullish on the solar energy sector for the long haul. CSIQ is a 2% position inside the TAN ETF portfolio which is dominated by ENPH at 12% , SEDG at 11%, RUN at 7.2%, FSLR at 7%, SPWR at 3.2%

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cabaoke
Member
cabaoke
March 8, 2022 10:33 pm
Reply to  youwannabet

Not sure how this will be received but whenever I hear the words “I’m bullish” I’m reminded of the first time I made and then lost a pile of money. Then it was geothermal (which to this day has a much better ROI than solar) and promised to solve the dependence on carbon based fuels. It still checks more boxes than anything but hydro electric…and still in the toilet. Fundamental don’t seem to mean s#@t anymore. Not to be critical just food for thought.

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ibtrdr
Irregular
ibtrdr
March 11, 2022 7:14 pm
Reply to  cabaoke

Yes, pump stock

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Chris
Member
Chris
March 14, 2022 1:52 am
Reply to  youwannabet

Thank you so much !

J WAYNE MITVCHELL
Member
J WAYNE MITVCHELL
March 8, 2022 5:38 pm

I HAVE BEEN TRADING FOR 5 YEARS & JUST LOVING IT

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perch08
perch08
March 8, 2022 7:21 pm

Sorry Travis a little of topic , but can you tell me whats going on with skyh , the stock has been shooting up and I don’t see any related news . I bought the shares on your recommendation (yellowstone)
I still own the shares plus the warrants and not sure what to do with both at this point ?
Can you shed some light any guidance would be greatly appreciated.
Thanks

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Walter Pisary
Member
Walter Pisary
March 12, 2022 2:00 pm

I took a small position in TAN some time ago. I wish I invested much more than I did. Up triple digits.

john foley
Member
john foley
March 12, 2022 10:09 pm

Thank you for your information you provide. I am an amateur investor, and find your views more informative than others. I make sure I read the whole article, too help me make the best and most informative decision I can make. I need all the help I can get. Thanks!

jackson57
jackson57
March 13, 2022 2:59 pm

I used subscribe to Baumans stock picks until I lost way to much listening to his advice

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