The rich just keep getting richer.
Saudi Arabia has been prepping for the ultimate IPO of its state-run oil industry. According to the company's prospectus, the Saudi Aramco IPO could take place in December, with shares being priced on Nov. 17.
Selling shares of the oil giant will bring in billions for Saudi Arabia, putting an impressive trillion dollars on the value of the company.
As always, those buying shares in this hot IPO won't be the ones getting rich. It will be those selling shares that reap the rewards.
But there is a sneaky "backdoor" that will pay off in a huge way for investors.
Think about what Saudi Arabia is planning to do with all those billions of dollars raised.
Those proceeds will fuel massive investments in other industries as Saudi Arabia diversifies its economy away from being solely reliant on crude.
The biggest winner is going to be the solar industry. Here's why...
Saudi Arabia is sitting on 268 billion barrels of oil reserves as of the beginning of 2019.
While that number is 2 billion more than what was reported previously, such reserves will not last forever.
At some point, Saudi Arabia will run out of oil. And the Aramco IPO is the first step in planning for that future.
And where better to start than the sun-drenched deserts in its territory.
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The sun shines bright in Saudi Arabia, perfect for generating solar power.
It's an obvious move for diversifying the Saudi economy. Best of all, it's stated directly in the Aramco IPO documents.
Proceeds of the Saudi Aramco IPO will be used to implement the Vision 2030 plan.
A huge component of Vision 2030 includes renewable energy via solar power and a desire for Saudi Arabia itself to be less oil dependent.
Vision 2030 calls for renewable energy to generate 9.5 gigawatts by the year 2030.
In the Aramco IPO prospectus, Saudi Arabia notes a solar complex covering 100,000 square meters, producing 10.5 megawatts.
Imagine the opportunity for solar companies to fill that gap and do so with the proceeds of what will be the biggest IPO on the planet.
Clearly the Aramco IPO will be a trigger for the solar sector making today, before the IPO, an excellent time to open a position.
That's why we're bringing you this solar stock to buy today...
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My favorite solar stock, Canadian Solar Inc. (NASDAQ: CSIQ), comes courtesy of our proprietary Money Morning Stock VQScore™ system.
The VQScore™ identifies stocks poised for appreciation based on strong fundamentals.
When combined with the explosive growth that will come thanks in part to the Saudi Aramco IPO, we get a stock that has the potential to double in value or more.
Canadian Solar has over $3 billion in sales across the globe, including the Middle East. And it's positioned to benefit greatly from a burst of investment triggered by the Saudi Aramco IPO.
At the moment, analysts expect Canadian Solar to increase earnings by 5%, but such an estimate does not account for what is coming further down the road.
To get to its Vision 2030 targets for renewable energy production, Saudi Arabia will invest a significant portion of its Aramco IPO proceeds in solar parks similar to the example given in the prospectus.
There's no way to know if these proceeds will directly impact CSIQ, but the implications for the entire solar industry are huge.
Today, the market is pricing shares of Canadian Solar as if there won't be any growth in the future.
Shares trade for only 5.5 times current-year estimated earnings.
That's extraordinarily cheap considering the various triggers for sales, including Saudi Arabian investments in solar.
On a revenue basis, Canadian Solar trades for about one-third of expected 2019 revenues.
And yet analysts expect sales at Canadian Solar to grow by more than 10% in 2020.
That's impressive, but clearly the market is unmoved by the growth.
It's a classic case of "prove it to me."
Well with billions of dollars about to be spent by Saudi Arabia thanks to the Aramco IPO, the proof is coming sooner than many market participants think.
If one assumes earnings of an extra $1 per share and the same 5.5 multiple earnings, you get a stock worth 30% more than the current price.
My own target is way higher.
Canadian Solar is a growth stock and deserves a much higher multiple.
Add a $1 per share in earnings plus a 10 multiple, and you get a $41 stock.
It's not hard to see that outcome happening, especially in light of this massive catalyst coming in the form of the Saudi Aramco IPO.
Ignore any short-term gyrations with this stock. The play here is the long term.
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