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Alternative energy stocks, as tracked by the iShares Global Clean Energy ETF (NYSEArca: ICLN), have really taken an undeserved beating over the past two weeks.
The ICLN is down more than 2% from its November highs – which, I'd point out, were also 10-year highs.
So what's going on here? You'd think with a Democrat about to move into the White House and the worsening economics of crude oil and other fossil fuels, that the sector should be off to the races.
Don't worry: Nothing has really changed, and the forecast for clean energy looks even better than it did just a year ago.
What we have here is simple profit-taking; big investors who've bet correctly on green energy this year are just skimming a little cream off the top.
So what we've got on our hands is a technical buying opportunity – one of the best of this year, I'd say.
And here's the company that'll help you make the most of it…
"Alternative" Energy Is Now Leading the Mainstream
You're probably old enough to remember when solar power was really just an expensive and inefficient undertaking for folks who wanted to "go off the grid."
It wasn't all that long ago that wind and geothermal were still pretty much theoretical. Electric cars were more like a hobby; oddities with three horsepower and 20-mile range. These were some mighty unattractive "alternatives" for most consumers.
But 20 years later, and solar and wind power are literally squeezing the life out of traditional energy sources like oil and coal. Don't look for ExxonMobil Corp. (NYSE: XOM) to go out of business next week or anything, but let's be realistic: The writing is on the wall and has been since before Exxon was booted off the Dow.
The contrast with clean energy looks really stark when you gauge the year-to-date performance of the U.S. Oil Fund LP (NYSEArca: USO) against the ICLN. USO is down more than 70% in 2020, whereas ICLN is up nearly 118%. There's just no contest there.
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Of course, a lot of people feel strongly about the environmental impact of fossil fuels, but emotions aside, it's cold, hard economics and not warm, fuzzy feelings that have been hammering nails in oil's and coal's coffins.
Coal use fell 3% worldwide in 2019, its biggest yearly decline from a 2013 peak. Yale University reports construction of new coal-fired energy generation plants fell by 84% between 2015 and 2018, and in the United States alone, 39,000 megawatts of coal-generated power have come offline since Trump's election in 2016.
On the other hand, solar power has long since achieved and blown past "grid parity" – where the cost of power generation is at least as cheap or cheaper than traditional fuels – in many countries, it's simply cheaper to use than many fossil fuels.
In the United States, renewable energy use increased 100% between 2000 and 2018, to the point that, by 2050, it's thought we'll get more than 50% of our power from renewable sources, mainly solar. And that's a conservative estimate that assumes things will keep going at their present pace; history tells us that pace is likely to accelerate.
Does that sound "alternative" to you? I didn't think so – more like the mainstream.
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So, whether you grow organic veggies off the grid in a carbon-neutral, sustainably-sourced wood cabin, or you're T. Boone Pickens reborn, you've got to be in solar and renewable energy to maximize your profits.
I think the best way to play this right now, the stock to own, is SunPower Corp. (NASDAQ: SPWR).
Now, I just issued a research recommendation for an option on this company for my paid subscribers; we've got our sights set on big gains.
But I can share the stock recommendation with everyone.
The fundamental, business case for owning a company that manufactures silicon photovoltaic cells and solar panels in the middle of a decades-long solar energy bull run is crystal clear, but this stock is also on the precipice of a big, technical jump, running above three – count 'em, one, two, three – key simple moving averages, the 200-day, the 50-day, and 20-day.
The chart above represents a golden buying opportunity and the perfect moment to strike.
If you couldn't tell, I'm bullish on renewable energy in the short and long term; there are a lot of great companies in this space, and the ICLN ETF is a great way to capture the best. But if you only own one renewables stock right now, make sure it's SunPower.
SunPower is potentially a great trade, too, as my subscribers might tell you.
The truth is, I have just three criteria that stocks need to meet to become a trade recommendation.
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About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Straight-Up Profits. He also contributes to Money Morning as the Quant Analysis Specialist.