"Solar is the best, net most clean, and ultimately cheapest source of power we know of today (and its base source input (sunlight) is free, unlimited, and enormously powerful). It's been growing as an industry at a 40 percent compound annual growth rate over the last 10 years, it is America's fastest growing industry at over 100% in 2010, and it shows no signs of slowing."
Indeed, it's a rapidly growing space. Solar is actually the fastest growing industry in America, and among the fastest in the world. So with CSIQ and JKS, the Graham-Dodd equation seems well balanced. We've found profitable, low-priced companies in a high-growth space that we believe will continue to grow rapidly because continued overreliance on fossil fuels is causing problems.
Increased growth means solar is also rapidly becoming less and less expensive; so much so that a new solar plant will soon be as inexpensive in dollar-per-watt electricity as a new coal plant. In turn, electricity derived from solar is quickly becoming competitively priced, and it does not contribute to climate change. If our investment thesis is, as it must be, concerned with future externalities, these facts are critical. Cheap, effective, non-destructive and trading a low valuations? Sign us up.
Do we know with certainty what will happen in the future? Of course not. But we do know what major problems are emerging, and we know which are likely to have major impacts on the future economy.Do we know with certitude which technologies and approaches are best for addressing these problems? No, but we have a good idea and we know which ones are working profitably now.
Do we know exactly which companies are best positioned to provide these solutions? We think so, and we can certainly select the most profitable, best managed examples, and endeavor to get them at good valuations. We wouldn't invest in these companies if we didn't think they had a better than average chance of providing great opportunities. And in investment management, maximizing your chances of earning a competitive return is what--and all--you can do.
Ultimately, we believe the green economy will prevail because we believe people are rational and, as they see changes occurring around them, will make the economic decisions necessary to preserve the best of civilization. Buying the best, most profitable companies already supplying the most effective solutions to our leading concerns could offer the best chance at long term competitive portfolio performance.
Garvin Jabusch is co-founder and chief investment officer of Green Alpha® Advisors, and is co-manager of the Green Alpha ® Next Economy Index, or GANEX and the Sierra Club Green Alpha Portfolio. He also authors the blog "Green Alpha's Next Economy."
Disclosure: Green Alpha Advisors is long CSIQ and JKS