Why Cleantech Stocks are Just Starting to Boom

The recent bullish moves in a great number of cleantech stocks will ultimately be extended for reasons discussed in this article.

Stocks like Tesla, (TSLA), whose innovation has brought a massive EV industry to life, have taken off. And Tesla isn’t merely reaping the rewards of innovation. The Company’s innovation capital has forged strong support from stakeholders and has generated competitive advantages thru economies of scale and scope.

Likewise, Workhorse Group, (WKHS), a manufacturer of electric delivery and utility vehicles is another cleantech stock to watch. Workhorse has competitive advantages as the first mover and only U.S. pure play in medium duty electrification of last-mile delivery, and I’m confident the stock will be a longer term winner as well.

Another cleantech stock that’s been outperforming more recently is Plug Power, (PLUG), whose recent advances in both electrolyzer technology which creates hydrogen by splitting water into its components, and PEM (proton exchange membrane) fuel cells are game-changing.

Chart of cleantech stocks TSLA, WKHS, PLUG vs. NASDAQ
3 month chart of TSLA, WKHS, and PLUG vs. NASDAQ

Of course this is only three out of of dozens of cleantech stocks that are just getting started, (yes, even TSLA should be much higher in a year), and I’ll be writing about them, and many others using fundamentals-based articles in the future (subscribe now for free). There’s a huge investment opportunity in finding the cleantech companies with the intellectual property, market opportunity, and early mover advantages it takes to transform an average stock into a charging bull.

Brief Background on Cleantech and Cleantech Stocks

The term “Cleantech” was first used with some regularity in the late 1990s and gained usage after the Cleantech Group, a leading research and consultancy group in the space began using it routinely. Another early mover, ahead of the curve in the space, is Cleantech Open, which launched in 2005 and is now runs the world’s largest cleantech accelerator.

Cleantech stocks in those earlier days, however, were hampered by two major obstacles: the existing, inadequate technology of the day combined with a lack of majority awareness/acceptance of climate science and the planetary impacts of global warming.  That backdrop has changed dramatically since then, and a vast number of cleantech stocks will be powered higher in the near term by rapid improvements in technology combined with the steady increase and acceptance that climate change is a leading, if not the leading challenge we face as a nation and as a planet.

Powering the Charge in Cleantech Stocks are Politics and Technology

The politics surrounding cleantech is quickly changing. Once the domain of the more liberal leaning, climate change is rapidly becoming a concern of centrist and even right leaning politicians. U.S. Rep. Matt Goetz Matt Goetz for example, who is on the far right of most issues, stated:

“Climate change isn’t something people get to choose to believe or not, it’s happening. I can tell the earth is warming based on overwhelming scientific evidence and I don’t think it’s a coincidence that we’ve released like 300 years of carbon in the last several decades.”

And while there are still older, and more conservative climate science deniers, there is a clear generational divide within the GOP itself. A recent NPR/PBS NewsHour/Marist research poll found that Millennial and Gen Z Republicans are “light years ahead of their elders” on climate change.

However, it’s not just the kids in the GOP, Republicans of all generations now favor restrictions on power plant emissions, are in favor of carbon-based taxes and stronger fuel efficiency standards.

chart showing GOP research on climate change is another example of climate change acceptance is good for cleantech stocks
Political pressure for climate change solutions is growing steadily

This is a sea change from just 5 years ago and it will ultimately drive politicians in the GOP to join with Democrats in funding more serious climate actions to the benefit of cleantech stocks and more importantly, the planet. When even swimming can be dangerous due to the spread of Naegleria fowleri, the brain-eating amoeba proven to be caused by increasingly warm rivers and lakes that tragically took the life of a 6 year old boy last recently, people take notice.

With sea levels rising, glaciers melting, longer, more intense heat waves, increasingly frequent and stronger hurricanes, wildfires, and a long list of other cascading negative global effects, fewer and fewer climate science deniers will be heard from. Ever-increasing pressure will be made by constituents from all sides of the political spectrum on Congress, the White House, as well as local and state governments to address climate change. 

It’s worth mentioning that even in the brawl that unfolded in the first presidential debate of 2020, President Trump and Joe Biden actually agreed on ONE thing: They both support electric vehicles.

The International Energy Agency forecasts one of the steepest growth curves you’ll see for electric vehicles of all types over the next decade. And beyond electric vehicle OEMs, their supply chains will undoubtedly show high growth to meet demand.

growth in electric vehicles

Beyond EV Cleantech Stocks

Beyond the EV niche in cleantech stocks, there are high-growth companies in wind, solar, water purification, recycling, waste management, and more, which I’ll be writing about in more detail (subscribe now for free).

Less obvious cleantech stocks are companies in additive manufacturing/3D printing, which is expected to eventually replace injection molding as the technology improves.  This will have an extremely positive impact on reductions in both waste and greenhouse gas emissions.  Because 3D printing produces “just in time” and locally, global shipping costs and associated emissions will be greatly reduced.

There is a cleantech component in artificial intelligence, (AI), as well. AI-powered innovations aim to reduce or eliminate inefficiencies in the processes that service our daily utilities and waste management needs. Additionally, improvements in countless different materials will also be brought about thru AI.  

“A unique opportunity exists to apply AI to a specific part of the clean energy value chain: materials. Materials serve as the building blocks of clean energy, such as the solar cells that make up the photovoltaic panels found on rooftops. Innovating the materials used to manufacture components of clean energy is important because existing materials are often toxic, non-earth abundant, and require carbon-intensive processing.”
(see How AI is revolutionizing the world of clean energy materials)

In Summary

Many cleantech stocks will deliver some of the best returns in the market in 2021 and beyond. Their moves will be brought about by current and future advances in technology paired with increasing climate science acceptance and political pressure to address the climate crisis.

Although this is a brief, high level overview of cleantech stocks, going forward, I’ll be writing detailed, fundamentals-based articles on many that I believe have the technology, intellectual property, market opportunity, and early mover advantages to become dominant future players with corresponding share price appreciation.

Best wishes for profitable investing!

Gary Anderson

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