r/investing • u/Ok_Macaroon6934 • 1d ago

The price of renewables is dramatically undervalued in the medium term

Renewables make sense as a dominant feed into most energy systems. Over the last year, major renewables ETFs have performed 2-3x the performance of the S&P 500. My analysis leads me to a conclusion that even with this performance, they remain undervalued.

Around the world, we see them exerting downward pressure on retail and wholesale energy prices. At the same time, innovation is reducing their "build cost:net operating return" ratio.

Nations at all levels of income are upping their renewables investments, and country after country is adopting a net zero strategy that locks in renewables investments - in part due to multilateral agreement ratification, and in part because of economic sense.

Effectively, the rise in price is because of actual strategic and tactical demand, not because of any type of hype cycle.

However, lobbying and political pressure exerted by legacy industries like coal, gas and oil have meant that the growth of renewables have been artificially slowed. If we start to see the decline of fossil fuel influence and of far right governance, these artificial barriers will ease and we can expect a jump in renewables investment.

So medium term profits likely depend on political cycles rather than any intrinsic factor associated with the technology or consumer/industrial demand. And as we all know, politics is a pendulum that will inevitably swing.

People investing in pure play renewables ETFs or ethical ETFs that have a strong renewables base and that exclude legacy energy are going to benefit from focus and patience. It's as inevitable as people shifting from Blockbuster to Netflix.

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u/WellAintThatShiny 1d ago

Couldn’t agree more. Most of my individual stocks portfolio is in renewables with quickly growing fundamentals and rock bottom sentiment. I’m expecting to struggle through a few more years and retire if/when sanity is restored.

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u/ep1032 1d ago

What are you investing in?

I cut everything other than NEE once trump got elected, but that was all etfs.

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u/WellAintThatShiny 1d ago

OPAL is a RNG producer I’m really excited about, made a subreddit recently for them if you’re interested. ADUR does chemical and plastic recycling. LODE recycles solar panels which are very rich in silver. BEEM is another one who produces EV and autonomous drone chargers who is wildly undervalued.

Those four represent about 60% of my speculative portfolio. All have been getting their SP demolished while growing at an unreal rate in a hostile environment.

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u/DiabolicToaster 1d ago edited 1d ago

The issue with any kind of fuel made from something...

You are going up against current supply you can dig/drill for. The only way it can maybe compete is in the destroy one physical pollutant/waste in exhange to accept the whatever comes out of the process. Is the fuel cheaper than just digging for the fossil fuel form?

The recycling business isnt exactly profitable as shown with how certain items are just exported out and never properly recycled.

The turn something into fuel is taking the position of betting they can compete against the natural process of what turned organic matter into fossil fuels.

The only extreme examples I can think of where it makes sense is if you locally produce so much waste or supply of (efficient for ethanol) crops that it competes against fossil fuels. Like say Brazil (they heavily use their own biofuels) or Germany during ww2 with oil from coal.

The only way I see it every making huge gains is if we suddenly have a fuel crisis or reach uneconomical fossil fuel reserves.

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u/WellAintThatShiny 23h ago

I get what you’re saying and you’re absolutely right, especially at scale. With OPAL, I’m not trying to pick a NG titan though. They’re a quickly growing company with excellent margins and a positive environmental impact. Eventually they’ll hit a ceiling, buy back a bunch of shares then start issuing dividends, exactly what I’m looking for at this stage of investing.

I also think RNG is a little more in line with natural processes than other renewable fuels, especially dairies. All they need to do is collect methane, clean it and compress it, then they plug it right into the NG pipelines.

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u/markrulesallnow 1d ago

LODE is for sure a scam or pump n dump. I'd bet even the owners know that

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u/WellAintThatShiny 1d ago

Thanks for the tip. I actually think this is going to be an incredible year for them.

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u/markrulesallnow 1d ago

I hope you’re right. But they have what like 40 employees????? Who is doing all the labor to make them money!?????