Brighten your Portfolio with Green Energy
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By Nathan Slaughter Editor, The ETF Authority Visit this link to learn more about this premium newsletter. View our subscription options for The ETF Authority. |
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Electricity. Most of us rely on it from the minute we wake up until the minute we go to bed. And it can be very easy to take for granted — until the power goes out for one reason or another.
For the most part, the electricity that lights our homes and keeps our televisions running is generated from fossil fuels like coal and natural gas. However, there is a global movement taking place to transition toward cleaner, renewable sources of power.
This seismic shift has been in the works for decades, but it is finally gaining traction — and investors that have backed emerging new technologies are racking up eye-popping gains. Today, we will discuss ways that ETF investors can harness the power of alternative energy within their own portfolio.
Solar Power Heats Up
In the late 1960s, President Nixon hired a specialist named Fred Morse to determine whether it was economically feasible to generate solar power — a power source both powerful and plentiful.
In a word, Morse's answer was yes, and he would later go on to conduct solar-related research in the Energy Department under Presidents Carter and Reagan. Still, for many years the prospect of harnessing the energy of the sun seemed little more than a science project.
However, that is all rapidly changing. Led by Germany and Japan, many nations around the world have begun to embrace the sun as a viable form of alternative energy. This shift has been partly fueled by generous government subsidies, tax credits and other incentives. At the same time, technological advancements have paved the way for solar panels that are cheaper and more efficient than ever — to the point where solar power will soon be price competitive with grid-produced power derived from fossil fuels.
Meanwhile, the companies engaged in this dynamic business are growing enterprises turning out real profits. In early November, solar power industry leader First Solar (Nasdaq: FSLR) reported third-quarter revenues of $159 million — a staggering increase of +290% from the same period last year. Meanwhile, earnings skyrocketed more than ten-fold to reach $46 million, or $0.58 per share.
Those results blew past Wall Street's expectations, and the shares surged nearly +35% to a new all-time high of $230. Analysts quickly ratcheted up both their earnings forecasts and their price targets — with some now expecting FSLR to climb past $300 per share.
It's easy to see why the company has attracted a wave of buying interest. First Solar has a highly efficient manufacturing process and is the industry's lowest-cost producer in terms of panel cost per watt. And the firm's advanced "thin film" modules use cadmium telluride to convert sunlight into power, so it has no dependence on more expensive silicon — a major competitive advantage.
Yet, this is just one of more than two dozen companies involved in the nascent solar power field — and those stocks already have a combined market capitalization well in excess of $100 billion.
The Winds of Change
Currently, solar power accounts for just a tiny fraction (one-tenth of one percent) of the nation's electricity. Yet, the growth potential is mind-blowing. Consider this: one hour of sunlight provides enough energy to meet the world's power needs for an entire day — if we could just harness that power.
And the United States is rich in sunlight, particularly in the Southwest. According to Fred Morse, the solar resources in Arizona alone are enough to "dwarf" the oil and gas resources in all of Texas. And as you might expect, steps are being taken to capture, store and transmit that energy.
According to the International Energy Agency, the United States currently produces about 480 megawatts of solar power each year. By 2010, that total could easily reach 3,000 megawatts. Of course, all of this will translate into billions in revenues for companies like First Solar. In fact, industry-wide revenues are expected to climb as much as +55% annually over the next few years, pushing annual revenues north of $25 billion.
With all of this in mind, those looking to cash in on the bright long-term growth prospects of the alternative energy space might want to consider the funds below. . .
Important Note: In the remainder of this article, ETF Authority editor Nathan Slaughter provides more insight on the increasingly important alternative energy industry. In addition, he profiles two alternative energy funds with 2007 gains of +40% and +60%, which will help you profit from the recent boom. However, in order to view the remainder of this article, you'll need to subscribe to our premium investing newsletter — The ETF Authority. After you subscribe, you'll receive immediate access to this full article, as well as our monthly ETF Authority newsletter and a host of additional premium content. Please visit one of the following links to continue.
Good investing!
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