In the darkest days of the Great Depression, a man named John Templeton convinced a bank to lend him $10,000. He took that money and did the unthinkable…
He bought every stock priced below $1.00 on a major index.
In the throes of the Great Depression, this seemed like a suicide mission. Everyone thought he was crazy. But sure enough, as the dust settled on the economic downturn, stocks began to tick upwards.
Templeton made his fortune. And he did so because he went against the grain. He defied consensus. He invested when others were too scared.
Templeton is known as one of the world’s greatest “contrarian” investors. If you’ve got a stomach of steel and money you can potentially stand to lose, this strategy can pay off big time. So, inspired by Templeton, let us introduce you to 2017’s most contrarian play:
Green energy investments.
With President Trump in the White House, alternative energy stocks have become toxic in many circles. Which, from a contrarian’s view, is exactly why you might consider them.
Here’s Why Investors Are Scared of Green Energy
Donald Trump becoming president sent alternative energy stocks into a tailspin. On the day after the election, almost every solar energy company shed value. That same week, the world’s most popular green energy ETF, PowerShares WilderHill Clean Energy (NYSEARCA:PBW), fell to a new all-time low.
It’s not difficult to see why. Trump was vocal on the campaign trail about his distaste for green energy. And we’re about to see that manifest into real policy.
Trump has denied any link between fossil fuel usage and climate change, famously calling it a “hoax.” He promised to gut or even eliminate the Environmental Protection Agency (EPA). Trump also promised to revive the coal industry and back out of the landmark Paris Agreement that would limit global temperature rises.
Now in the Oval Office, it’s clear that President Trump is beginning to follow through on campaign pledges, to the letter.
As president, he has already begun to repeal restrictions on fossil fuels. He’s appointed Scott Pruitt to head up the EPA, a man who sued the agency 14 times for imposing regulations.
While Trump cannot eliminate the EPA without congressional approval, it’s probably safe to assume the department budget will be slashed. Green energy subsidies are also on the firing line, putting immense pressure on private companies.
All in all, Trump has made 42 promises about the reversal of green energy policy. One of Trump’s former advisers estimates he’ll try to implement at least 30 of them within the next four years.
There’s no doubt about it; the green industry faces a tough challenge ahead.
Investors are therefore pouring funds back into traditional energy stocks. Shares in mining companies have risen since November. Coal, oil, and gas companies all shot up in value after Election Day.
The consensus is clear: Green energy stocks are toxic, and fossil fuel stocks are back in vogue.
The Ultimate Contrarian Play
But here’s where we diverge from the consensus.
Sure, Trump will make it very difficult for alternative energy companies to thrive under his administration. But there are signs that the industry is already taking off. Trump may be able to slow it down but might be powerless to stop it.
We need only look at the figures. There are now twice as many solar jobs as coal jobs. And the growth itself is phenomenal. The solar industry now accounts for one in every 50 new jobs created in the US.
Trump cannot simply ignore one of the fastest growing industries in the country after committing so fervently to job growth.
Not only that, but it makes financial sense. Solar power is now cheaper than coal in some parts of the world – Chile, the UAE, and India, for example. The price is dropping rapidly in the US too. 62% since 2009.
When solar power hits the price tipping point in America, it may eclipse sales of fossil fuels.
Solar City, which is owned by Tesla’s Elon Musk, is another example where cost could trump politics. The company claims it can produce solar roof tiles cheaper than traditional tiles. Green energy is simply good business, and Trump cannot fight organic market forces.
A second driving force is performance and technology, which is zooming into focus. Blackrock recently concluded that low-carbon firms outperformed those with a large carbon footprint. According to Blackrock, alternative energy pays.
And consider this for green energy performance: The fastest-accelerating production car on the planet is electric.
There’s a tipping point coming. Green energy won’t just be a half-baked climate-change experiment; it will be the cheapest and most high-performance option.
Even Fossil Fuel Companies Are Embracing Green Energy
We always take notice when established giants start adopting the disruptive technology around them. It signals a clear shift in the industry.
Royal Dutch Shell just invested in the world’s largest offshore wind farm, in the Netherlands. Other major fossil fuel companies are also pouring money into wind-power projects.
Meanwhile, almost every car company on the planet is building electric vehicles. Where does that leave traditional petroleum companies in 10 years?
There is a clear vision of the future here. Not to mention pressure from shareholders and the public. Indeed, 89% of the country supports clean energy, while 57% say they oppose further coal mining.
A Word of Caution
Let us reiterate that this is a risky, highly contrarian play.
Renewables still produce only 9% of all energy in the US. And only 1.4% is produced by solar and wind. So any investment in this sector is highly speculative. Trump’s policies may still cripple the industry before it really gets off the ground.
However, there’s good evidence to suggest the train has already left the station. That it’s picking up steam faster than Trump will be able to reign it in.
High performance, low cost, soaring public opinion, and rapid job growth. It’s a cocktail that should not be ignored. At the very least, this shift ought to factor into any future investment decisions.
With that, we’ll leave you with a final thought: What would John Templeton do?
