Solar is shining and clean energy is fired up. July’s Wall Street Rally was a robust 9.11%. Some of the companies mentioned in the blog below, like Sunpower, have already soared up to 46% over that same period. Part of this was increased anticipation for the Inflation Reduction Act. However, sales were on fire for many companies, even before the passage of the Act in the U.S. Senate today. Learn more below.
Is the Inflation Reduction Act of 2022 Law Yet?
The Senate just passed the Inflation Reduction Act, which includes a great deal of incentives for clean energy and climate action. According to the Congressional Budget Office, it also includes a “net decrease in the deficit totaling $102 billion over the 2022-2031 period.”
H.R. 5376 is expected to pass The U.S. House of Representatives and be signed into law, which means blue skies and smooth sailing for a lot of clean energy companies (once it happens). So which of the following segments and companies will benefit most?
The word solar is mentioned 36 times throughout the text of the Inflation Reduction Act. There are a lot of incentives for homeowners, apartment buildings and commercial buildings to power with solar, wind and hydro, and become more energy-efficient. This could really benefit companies like Sunpower that focus on rooftop solar, and Renesolar that focuses on medium-sized grid solar projects. Sunpower’s sales have already soared, with a 60% increase year over year. According to Sunpower’s CEO Peter Faricy, homeowners are buying rooftop solar for three reasons: to save on their utility bill, to be a part of the climate solution, and for peace of mind, if the grid fails. There is a 26% federal tax credit available for residential solar in 2022.
One of Sunpower’s most popular new products is their Sunvault energy storage system. Renesolar’s projects are expecting to start showing up in revenue in the 2nd half of 2022.
A renewed worldwide focus on solar will also benefit Daqo, a Chinese based polysilicon provider (a key raw material in the solar photovoltaic supply chain). (Click to learn what other global clean energy initiatives are gaining momentum.) Daqo saw revenue growth of 182% in the most recent quarter. With silicon prices elevated, Daqo’s Forward Outlook is extremely good. The company just increased their guidance, and is expecting annual production volume to increase to 129,000 to 132,000 MT from 86,587 MT in 2021. That’s a jump of 52% on the upper side of the guidance.
In 2Q 2022, the average selling price for polysilicon was about $33.08 per kilogram. According to BernReuter.com, today’s prices are $38.86/kg. With increased production and higher prices, robust revenue growth should continue for Daqo.
What’s even more amazing is that Daqo’s bright future is not baked into the share price. The company is currently trading at a price earnings ratio of just three, according to MSN’s money site. It’s very rare to see such an amazing growth story with such an affordable price – and this key inflection point rarely lasts for long.
SunPower and Renesolar were cash negative in 2021. Both companies have a higher price to sales ratio than Daqo. If you’d like to see the Solar Stock Report Card, just email info@NataliePace.com with Solar SRC in the subject line.
The turbine industry benefits from investments in onshore and offshore wind. This should play to the strengths of American Superconductor (symbol: AMSC) and TPI Composites (symbol: TPIC). The wind business at AMSC accounts for just 13% of total revenues. However, their revenues in the wind unit increased 49% in the most recent quarter, without the help of the IRA 2022 bill. TPI Composites shut down its Ohio factory late last year, and advises that it could take a minimum of 6 to 9 months to restart the factory to serve US based contracts.
AMSC’s 2nd quarter revenue was down -10.67%, while TPI Composites reported a drop of -1.41%. Both companies are projecting continued weakness in the coming quarter. However, AMSC’s CEO is excited about the “tailwinds” for his business. His team should start translating their backlog, which increased by 30% in the quarter, into revenue toward the end of 2022.
International wind companies include Gamesa and Vestas based out of Denmark. Vestas is trading off the boards in the US. Gamesa is a division of Siemens Energy, a German company.
Regenerative Agriculture and Healthy Soil
The IRA 2022 Bill is focused on reducing waste, while sequestering carbon. The IRA 2022 Bill provides funding for following the science for forest, crop cover and soil solutions. Farmers are incentivized to plant cover crops. There are also funds for farmers transitioning to organic production. There is money for planting trees in urban communities.
There is a big push in the bill for energy efficiency. This impacts everything from energy auditing, home energy smart systems, retrofits, insulation and much more. Google and Amazon both have smart home energy systems. ITron does this for cities and utilities. Itron is having serious supply chain issues that are impacting the company’s ability to translate a $4.1 billion backlog into revenue. The company expects to have flat year-over-year revenue in 2022.
The good news for homeowners and business owners, and even school principals and CEOs, is that simple, affordable energy efficiency fixes can result in substantial savings on power bills. So filling out the paperwork for federal funding is a step towards fiscal health, in addition to being part of the solution for healing our planet.
Clean Energy Funds
Most people are going to be better served by investing in a clean energy ETF, than by gambling on an individual company. Individual companies require babysitting, particularly in a contracting economy, with a recession on the horizon. I would steer clear of E.S.G. funds. Most are missing the E. They have no solar, wind or EV companies, and include a lot of oil, gas, plastic and other petrochemical providers. I would also want to be assured that the fund company itself is creditworthy (as many financial services companies are at the lowest rung of investment quality). One of my favorite clean energy funds is the iShares Global Clean Energy Fund, with the symbol ICLN.
Governments around the world are leaning into clean energy, both as needed for healing the planet, and also to become energy independent and less reliant on hostile regimes. However, as we discovered at COP26, the commitments made are not enough to prevent a climate disaster. Individuals must be the change we wish to see. So, please read, share, like and comment on The Power of 8 Billion: It’s Up to Us.
In this book’s pages, you’ll find the how-to guide for reducing our personal CO2 footprint and healing our planet. The good news is that it is a quadruple win of healthy planet, healthy budget, healthy body and happy life. The challenge is for each of us to reduce our personal CO2 by 30% this year, next year and every year until we’re back on track for a healthy Earth. In the meantime, each one of us can save thousands of dollars on things we like a lot more than the utility bill, the gas station and car insurance.
We have one to two slices of clean energy in our sample pie charts these days, as one of the bright spots of a challenging economy. Remember that your best strategy against a bear market is proper diversification, regular rebalancing, overweighting safe, and knowing what is safe in a world where over half of the S&P500® is at or near junk bond status. You can read about these time-proven, 21st Century, wealth strategies in my bestselling book The ABCs of Money fifth edition. You can learn and implement these strategies at our online investor educational retreat. You can also call our office for pricing and information on receiving an unbiased second opinion and a step-by-step blueprint that protects your wealth from recessions, while outperforming the bull markets in between.
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Natalie Wynne Pace is an Advocate for Sustainability, FinancialLiteracy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money was released on September 17, 2021.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.