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Renewable energies have become a major theme for forward looking investors and several different niches in the energy sector are looking to capitalize on them. Water, wind and solar energy are the greatest potential sources, all with their various advantages and disadvantages. But solar energy is at the heart of the renewable energy market thanks to the companies that produce it and the many ways it can be harnessed by consumers.
Of course, saving the world takes time, and investors aren’t known to be patient. Today we’re going to take a look at 5 solar stocks that could be making waves in 2020.
Overview: Solar stocks
Solar power is a clean and potentially unlimited source of energy and many companies have tried to harness it. Solar energy is not a unique technology either. The sun’s energy is transformed into energy by 3 different methods:
- Solar heating and cooling (SHC)
- Concentrated solar (CSP)
When talking about solar energy, most people talk about solar photovoltaic systems, which convert sunlight into energy through semiconductors that line the inside of solar panels. Concentrated solar power and solar heating and cooling systems actually use solar energy. thermal energy to create energy. CSP and SHC systems are often used to heat public swimming pools or provide hot water to residences.
Despite the potential, problems remain when it comes to implementing solar power systems. The sun could reliably rise and set at specific times, but the weather is about as reliable as the X-Files smoker. A long period of bad weather could wreak havoc on solar power systems and storage systems are essential for any solar power application. Daylight hours have to count for solar systems to achieve maximum efficiency and the weather often just won’t cooperate.
Then there is the cost. For the average homeowner, installing a solar power system will cost around $ 14,000 to get up and running after factoring in the federal tax credit. While long-term energy savings can make it a worthwhile investment, most homeowners just don’t have $ 14,000 in the budget to switch to a new source of electricity.
Best Online Brokers For Solar Stocks
Before you invest in solar energy companies, you will need a broker to provide you with stocks. If you don’t have a broker, you’re in luck – there’s never been a better time to open an account. Almost all of the major brokerage houses have removed commissions on stock and ETF transactions, and many offer sign-up bonuses like deposit matching or free stocks.
Your level of experience will determine which broker is the best. If you want to trade on the basis of technical analysis and buy / sell signals, you won’t want a broker that only offers basic line charts. And of course, make sure your broker owns shares of the solar companies you want to invest in.
Features to look for in solar stocks
Solar energy stocks haven’t been great investments in recent years. Despite advances in efficiency and government advocacy around the world, most solar stocks languished behind the S&P 500 during the decade of the bull market. There is no doubt that solar power will be a big part of our lives for years to come, but how long will investors be willing to wait to see more widespread adoption?
When looking for solar companies to invest in, always keep a few key characteristics in mind.
- Debt Levels: Solar energy is expensive. Panels are expensive to manufacture, installations are expensive to build, and storage systems are expensive to maintain. These costs will likely decrease in the future as technology continues to improve, but solar energy companies need significant capital today. Make sure you don’t invest in a company with an unhealthy level of debt – just watch Solyndra.
- Consistency of cash flow: Plus, solar energy companies need a ton of capital to keep their operations running smoothly. Much like its peers in the oil and gas industry, the equipment required to manufacture, install and maintain solar systems is expensive. Even the solar panels themselves are not cheap! To make sure you’re investing in the best solar stocks, keep an eye on their cash flow. Cash flow and debt often go hand in hand here.
- Management who believes: If you are there for the money, you are in the wrong business. Solar energy companies have an uphill battle to escalate thanks to a familiar enemy – inertia. Fossil fuels remain the world’s main source of energy and their replacement would require massive changes in infrastructure. The management team of a solar energy company needs to have the longest view of the coin because adoption will be a slow and arduous process. It’s not the industry to cut corners just to make money.
Where do solar stocks fit in your portfolio?
Solar energy companies are trying to serve 2 masters at the same time. On the one hand, solar energy is a formidable public good that would significantly reduce the consumption of fossil fuels and make the environment healthier. On the other hand, solar energy systems are expensive to build and maintain, and businesses in the industry are often in debt.
When adding solar stocks to your portfolio, be sure to consider the pros and cons of individual companies and the industry as a whole. Just because a business tries to do good doesn’t mean it’s run well. Always check solar companies carefully before investing and have a plan to exit a speculative trade.
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