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Travis Hoium

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Big Oil is struggling and solar energy may be a bigger reason why than you think.

There’s no question that solar energy is the fastest-growing source of new energy in the world today. It’s coming down in cost and going up on everything from rooftops to deserts around the world.

Initially, the increased competitiveness of solar energy will disrupt coal, nuclear power, and natural gas in power markets, but long term that’s only the start. As more vehicles are powered by electricity and more electricity is coming from solar energy, it makes sense that solar is indirectly replacing oil, especially if you’re charging an electric vehicle (EV) at home with rooftop solar. We dug into the companies making that energy transition happen, and Sunrun (NASDAQ:RUN), SolarEdge (NASDAQ:SEDG), and Blink Charging (NASDAQ:BLNK) are the three stocks three of our Motley Fool contributors see as the solar energy stocks disrupting oil right now.

Solar is the “new king”

Howard Smith (Sunrun): Sunrun, the nation’s leading provider of residential solar and related energy services, just got bigger. The company completed the acquisition of Vivint Solar last week, giving it a base of more than 500,000 customers.

The combined companies have an enterprise value of approximately $22 billion, and are a step closer to moving electricity generation to the home and away from fossil fuel-powered plants. The company’s products “have already and will continue to help shut down inefficient carbon-producing power plants,” Sunrun co-founder and Chief Executive Officer Lynn Jurich said in a statement on the acquisition.

IMAGE SOURCE: GETTY IMAGES.

Company executives aren’t the only ones touting the growth of solar power at the expense of fossil fuels. In a new release by the International Energy Agency (IEA), an autonomous global organization for the industry, Executive Director Dr. Fatih Birol said solar has become “the new king of electricity.”

The agency just updated its world-energy outlook for October, and it provided four possible scenarios for how the world’s emergence from the COVID-19 pandemic should affect energy production and demand. “Renewables grow rapidly in all our scenarios, with solar at the center of this new constellation of electricity generation technologies,” the report said.

Investors looking to benefit from that trend have already noticed the growth at Sunrun. Revenue has almost tripled since 2016, and the combination with Vivint Solar will only boost that growth. The share price, in turn, has also risen, with the vast majority of the gains realized in a 360% gain since the start of 2020.

But a recent pullback of nearly 20% from its highs may mark a good time to invest in the longer-term storyline. Fossil fuels may not quite be obsolete, but the trend in solar generation is under way. Sunrun is a good way to invest in the residential side of that growth.

Helping solar beat Big Oil everywhere

Jason Hall (SolarEdge): Solar power is mostly disrupting coal and natural gas in power generation. But the growth of electric vehicles around the world is impacting Big Oil where it matters most — in the use of oil as a transportation fuel. SolarEdge is positioned to profit from the growth of renewable energy across the value chain.

The company’s biggest business today is module-level power electronics that connect solar panels to the grid. Since going public just over five years ago, sales have increased more than 600%:

SEDG REVENUE (TTM) DATA BY YCHARTS

And going forward, the solar business will remain important. But it’s not going to be the only source of growth for SolarEdge. Over the past several years, management has taken action to expand the company beyond its core business, and SolarEdge now sports electric vehicle chargers and the manufacture of electric vehicle powertrain components.

The growth of demand for electric vehicles is expected to last for decades, and automakers are looking for trusted suppliers they can count on. With a long history as a reliable partner to solar panel makers and installers, SolarEdge’s new business segments could go a long way toward taking away Big Oil’s most important source of revenue: automobiles.

Charging up the end of oil

Travis Hoium (Blink Charging): I’m going to go a little adjacent to solar energy with this pick, but Blink Charging is related to the solar industry in more ways than you might think. The picks Howard and Jason made are all about producing solar power and turning it into a usable form of energy. Blink Charging is about completing the cycle and getting renewable power into vehicles through a nationwide EV charging network.

Blink Charging has built or deployed 23,000 EV charging stations and is growing its network at a rapid pace even during the pandemic. Between June and August, the company sold or installed 539 EV chargers, up nearly 100% versus a year ago. Growing the base of chargers gives the company more potential points of contact with users, who are growing in numbers as electric vehicle sales pick up.

The tie to solar energy is that the charger is what ends up making oil obsolete. I recently got a quote for solar panels on my roof; my family could not only make enough solar power on our roof to replace electricity from the grid, but we could also add at least one and maybe two electric vehicles and provide enough power for them at home. Solar energy on my roof could literally replace trips to the gas station, but a charger is necessary to make that happen. And Blink Charging is one of the companies making charging possible from homes to businesses to public charging networks.

If you look at oil stocks today, they’re down because investors see this disruption coming. Wind and solar energy get cheap enough to compete with fossil fuels, then electric vehicles become cost-competitive with traditional vehicles, and then the gas station is replaced by EV charging stations. Disruption of oil consumption is coming, and companies like Blink Charging are making that disruption possible.

The solar ecosystem is what matters

You can see here that the companies we picked play in different parts of the solar and electric vehicle market, and that’s the way the industry works today. From producing solar power (Sunrun) to getting it into electric vehicles (Blink Charging) to making electric vehicle components (SolarEdge), solar energy is disrupting oil and has decades of room to grow as it replaces our traditional vehicle market.

Author: Travis Hoium, Jason Hall, And Howard Smith

Source: Fool: 3 Solar Stocks Making Big Oil Obsolete

Don’t be scared off by the high dividend yields on these companies. Their businesses can support the payouts long term.

High dividend yields can be a great way for investors to generate valuable income from their portfolios. Companies use a portion of their earnings to pay back investors, and those funds can be used to reinvest or for life expenses. But high yields can also be a warning sign that something is going wrong with a company’s operations.

If you know where to look, there are stocks with high dividend yields that still have room to grow. I think AT&T (NYSE:T), MGM Growth Properties (NYSE:MGP), and Brookfield Renewable Partners (NYSE:BEP) are companies that fit this description, are misunderstood for a variety of reasons, and are now three top high-yield dividend stocks available today at rock-bottom prices.

1. AT&T: The wireless giant

The telecommunications industry hasn’t been a favorite of Wall Street lately, and AT&T hasn’t done itself any favors with a number of missteps at Time Warner and the HBO Max launch. But that doesn’t mean the company isn’t a great dividend stock long-term.

Wireless is the company’s core, accounting for $17.1 billion of the $41.0 billion in revenue the company generated in the second quarter. And with 5G communications ramping up this year and next, there’s an opportunity to grow the business as new devices are connected and consumers upgrade to faster networks. Segments like entertainment and the Time Warner studios were hit harder by the shutdown of movie theaters and other COVID-19 effects, but they’ll return to form in time.

Ultimately, the reason to own AT&T long-term is the dividend. You can see that the company generates tens of billions in net income each year and that fully funds the dividend.

AT&T REVENUE (TTM) DATA BY YCHARTS

While there are some weaknesses in AT&T’s business in the entertainment and Time Warner segment, those businesses should improve over time. Despite its flaws, HBO has high-quality content and HBO Max is considered one of the long-term streaming contenders. Add in the stability of the wireless business, and this is a 7.3% dividend yield that’s a great buy today.

2. MGM Growth Properties: Gamble on this REIT

There has been a lot of uncertainty for real estate investment trusts (REITs) in 2020. Those in the hotel and entertainment industries are especially concerned because business has been crushed by a reduction in demand caused by the COVID-19 pandemic. Naturally, it’s easy to think that MGM Growth Properties is in trouble given that its rent is coming from casino operator MGM Resorts (NYSE:MGM). But the casino business has been surprisingly resilient over the last few months.

In July, gambling revenue on the Las Vegas Strip was down just 39% versus a year ago, and even hotel occupancy was decent at over 40%. And the number of resorts open and the number of visitors coming in the door keep going up over time. There’s no indication that Las Vegas is at a standstill, and that means rent will keep coming to MGM Growth Properties.

Even for a REIT, MGM Growth Properties’ dividend yield is high at 7%. But I think the gambling business is more stable than the market is assuming right now, and that’s why a high yield like this is still a buy.

3. Brookfield Renewable Partners: A great renewable energy dividend

In energy, the highest growth segment is renewable energy, and the nature of wind and solar assets requires a lot of upfront investment. But the benefit is that assets usually come with 10- or 20-year contracts to sell electricity to utilities. In effect, these are like long-term bonds that companies like Brookfield Renewable Partners are buying.

What makes Brookfield Renewable Partners unique is that it grows the business organically. The company aims to grow the dividend 5% to 9% each year by buying new projects that grow cash flow with excess cash generated by the business. You can see below that the dividend has been growing steadily for more than a decade.

BEP DATA BY YCHARTS

A dividend yield of 4.3% isn’t the highest you’ll see on the market, but if the payout grows at 5% to 9% for decades to come, this will grow into an extremely high yield for investors. And that’s why this is a great dividend stock.

Great dividend stocks today

Not only do AT&T, MGM Growth Properties, and Brookfield Renewable Partners have high dividend yields, they have great businesses backing them up. That’s ultimately what makes these stocks great buys today and what will keep their dividends growing in the long term.

Author: Travis Hoium

Source: Fool: 3 High-Yield Stocks at Rock-Bottom Prices

Disruption can come from a lot of places. We’ve identified three companies Tesla should be worried about.

Tesla’s (NASDAQ:TSLA) market cap has surged to over $400 billion in 2020 as investors have bought into everything from Tesla’s growth to its future as an auto technology company. And with automotive competitors struggling to catch up in electric vehicle manufacturing it’s easy to see why investors are excited about Tesla’s future. But let’s be honest, even the smallest disruption to the growth or technology story could sink Tesla’s shares.

Three of our Foolish contributors think there are some disruptive forces coming Tesla’s way in 2021 and they should make Elon Musk and the company worried. The challenges range from Cruise’s autonomous technology to Rivian’s competing vehicles to SolarEdge’s (NASDAQ:SEDG) energy storage ambitions. Here’s why these companies are worth watching in 2021.

Real autonomous driving

Travis Hoium (Cruise): Elon Musk has been claiming for years that Tesla is the industry’s leader in autonomous driving and has teased unleashing a fleet of self-driving Teslas. But by any objective measure, Tesla continues to lag competitors in autonomous driving technology and there’s no reason to think affluent Tesla buyers will be willing to let their $50,000+ vehicle go off driving by itself to make a few bucks on rideshares on a Friday night.

The companies that are diving headfirst into the autonomous driving business are doing so with a vision that goes far beyond vehicle ownership. They’re developing the technology that will drive autonomous ride-sharing and even building the ride-sharing service themselves. The one Tesla should be really scared of is Cruise, a subsidiary of General Motors (NYSE:GM), because it’s better at driving autonomously and is building a business that will make car ownership obsolete.

According to Navigant Research, there are over a dozen companies that have both a better strategy and better execution in self-driving technology than Tesla. In fact, Navigant calls Cruise a “leader” and Tesla just a “challenger” in the space. Elon Musk himself has admitted that “self-driving” isn’t exactly what its name implies. Here’s his comment during the first-quarter 2020 earnings call: “Regarding Autopilot, we released a new software update for traffic lights and stop signs to early access users in March and to all U.S. customers with full self-driving package just last week. Our cars will now automatically stop at each stop sign or traffic light until the driver gets a confirmation to proceed.”

Teslas are just now starting to recognize stop signs and traffic lights. Meanwhile, Cruise logged 831,040 autonomous miles in California during 2019 while Tesla logged 12.2 autonomous miles. You read that right, 12.2 miles. When it comes to fully autonomous driving, Tesla is far behind Cruise and that should be a concern for investors.

What’s ultimately the bigger concern is what autonomous driving could bring to transportation. Cruise showed the Origin concept vehicle earlier this year, which has no driver and is built to comfortably transport people around cities. The vehicle is designed not to compete with Tesla for space in people’s garage, but to replace vehicle ownership altogether.

Not only is Cruise beating Tesla in autonomous driving, but it’s also trying to upend the entire business model behind manufacturing vehicles, which is Tesla’s core business. In 2021, if Cruise launches its self-driving service as planned, it’s something Tesla should be very worried about.

Going after a profitable niche

Howard Smith (Rivian): One of the more promising players in the electric vehicle (EV) sector looks to be one that isn’t trading publicly yet. But some big names have already taken notice. Ford Motor (NYSE:F) may have been hedging its bets on its popular — and profitable — F-150 when it invested $500 million into electric truck start-up Rivian in 2019.

Rivian plans to begin delivering its electric R1T pickup truck and R1S SUV in the summer of 2021. The company is billing both as “adventure” vehicles, and EV fans with the means may stray away from Tesla for them.

IMAGE SOURCE: RIVIAN.

The R1T pickup will start at $69,000 and the R1S at $72,500. For EV devotees, there is a lot to like. Both will accelerate from 0 to 60 mph in 3 seconds, and provide up to 750 horsepower. They will also be able to wade through three-foot-deep water, the company says, and have a battery range up to around 400 miles. The vehicles will be produced at Rivian’s 2.6 million-square-foot manufacturing facility in Normal, Illinois.

Besides the two adventure trucks, Rivian also aims to supply Amazon (NASDAQ:AMZN) with last-mile delivery vans. Amazon led a $700 million investment round in the company in February 2019. It also participated in a $1.3 billion investment round in December, along with Ford and others. Rivian announced its most recent investment round in July 2020, where it secured an additional $2.5 billion. It’s clear the company is well funded going into production with several interested parties.

Rivian is not a recent start-up. It was founded by RJ Scaringe in 2009. Rivian has designed a “skateboard” chassis, which houses four electric motors, air suspension, battery management, and other systems all below the height of the wheels. It’s designed for off-road capabilities.

While these features may not take business away from Tesla’s Model 3 customers, Rivian looks like it will be on the radars of high-end EV customers. If this EV design of the popular truck and SUV categories are as profitable as the internal combustion engine versions, Tesla will have a new competitor in less than a year that should have it looking over its shoulder.

Another big winner entering storage and EV business

Jason Hall (SolarEdge): Since going public about five years ago, SolarEdge shares are up an incredible 806%. That’s nearly Tesla-like gains over the period, and a remarkable run on the company’s success in dominating the module-level power electronics business for distributed residential and commercial solar in the U.S.

So far, it hasn’t been a threat to Tesla at all; the electronics it makes are actually important for solar panel makers and installers like Tesla, since they’re how the solar power gets to the grid.

But as we head into 2021 and beyond, SolarEdge represents, if not a threat, then definitely the reality that Tesla isn’t going to have the energy storage and electric vehicle markets all to itself. SolarEdge has made huge strides to diversify into the EV and battery markets, and 2021 will be a big year for both.

As a major supplier of solar electronics to the residential market, SolarEdge has an immense network of installers and distributors it works with, and a strong reputation. Its StorEdge residential battery system is a lock to take market share from the fast-growth battery business Tesla has been a leader in so far.

Tesla’s leadership in EVs is in part due to its vertical integration. Traditional automakers have spent a few years trying to catch up, working with suppliers to establish supply chains for EV components. This represents a huge opportunity for SolarEdge, which is already in pre-production with multiple leading automakers to supply powertrain components.

2021 is expected to be a very important year for EVs and energy storage. Tesla will face more competition than it ever has, and SolarEdge is a big winner that will threaten Tesla’s dominance in its two most important businesses.

Threats to Tesla are on the horizon

Tesla has been the disruptor for its entire history as a company, but it’s now the most valuable automaker in the world and that makes it a target. Whether you’re looking at autonomous driving, electric trucks, or energy storage, there may be threats in 2021 that Tesla isn’t ready for.

Author: Travis Hoium, Jason Hall, And Howard Smith

Source: Fool: 3 Companies Tesla Should Be Worried About in 2021

These stocks would be even better buys at lower prices.

The stock market has absorbed the disruption of COVID-19 and a global recession almost as if nothing has happened. As of last weekend, the S&P 500 was up 5.2% over the past year and the Dow Jones Industrial Average was only down 1.9%, following a rapid recovery after both indexes dropped 30% this spring.

But the market could crash again if there’s a second wave of COVID-19 and a lasting economic impact from the virus. If it does, Disney (NYSE:DIS), MGM Resorts (NYSE:MGM), Virgin Galactic (NYSE:SPCE), and Vail Resorts (NYSE:MTN) are the stocks I want to add to my portfolio.

IMAGE SOURCE: GETTY IMAGES.

Disney

Few companies have had their businesses disrupted as much as Disney. Theme parks were shut down around the world and movie theaters have largely closed, cutting off the lucrative box office. As a result, nearly half of the company’s business has been disrupted.

But at the same time, Disney launched Disney+, which could be the future of its business. Over 50 million people have already subscribed to Disney+, and that was a number revealed in early April — it has likely grown as the pandemic went on. That’s an incredible number of subscribers for a new service, but it’s just a piece of the company’s streaming strategy. ESPN+ and Hulu are also majority-owned by Disney and can be packaged with Disney+ to create a full streaming offering.

While streaming will keep revenue coming in during the pandemic, the company is still set to thrive when the rest of the business opens, even if it takes a year or more to get back to normal. Theme parks still have some of the world’s best media assets driving experiences. And movies generate value from theaters to network TV to streaming and theme parks. Streaming provides a path to the future for nearly all of Disney’s media assets. Long-term, this is still a media giant I want to own, and if I can get it on sale it would be even better.

MGM Resorts

Gambling may be one of the hardest sectors hit by the pandemic: Casinos had to shut down for months, and it may take years for the business to return to normal. But when gamblers do return, MGM Resorts will be set to thrive.

MGM owns some of the most valuable property in Las Vegas and Macao. Not only is the property valuable, in Macao the company is one of only six concessionaires even allowed to run a casino. In 2019, these resorts generated $3.0 billion in EBITDA, a proxy for cash flow coming from resorts.

MGM will no doubt have a tough year because of COVID-19, but a recent $750 million debt offering should create a bridge to the other side of the crisis. And when business returns, this stock could be a steal if we get a discount from the current $9.4 billion market cap.

Virgin Galactic

My extremely long-term play in this list is Virgin Galactic. The company is building spacecraft that will take normal consumers into space in the course of point-to-point terrestrial travel. Think of it like an airline, but for those with the need and means to travel extremely quickly around the world — for example, a 12-hour flight from LA to Tokyo could be cut to 2 hours by Virgin Galactic.

The price tag to board the spacecraft is steep, currently at $250,000 per flight. But if we think out a decade or more this could become a normal mode of transportation. Management expects 270 flights per year by 2023, and as flights increase we should see costs come down and the number of destinations increase.

Disruptions taking place in the economy today should be little more than a blip for Virgin Galactic as it tries to disrupt travel. The company is serving the ultra-wealthy, and has a long-term horizon for growing its business. And with $419 million in cash on the balance sheet and deposits from more than 400 people, this is a growth stock I want to own long-term.

Vail Resorts

If Vail Resorts can survive the next year, it’ll arguably be in a better position than it is today, and I am looking to get into the stock at an even more discounted price. The company’s resort network has a strong competitive moat because the company owns properties and mountain resorts that are limited by the natural geography. 2020 will likely be slow, but as seasonal vacationing returns, so will business.

I think this is also a company that will find a way to limp through the next year in order to survive. Amenities like restaurants and clubs may be closed in resort towns, but skiing and snowboarding outdoors and then either driving home or going to a hotel room looks like it’s much lower-risk than a lot of other activities people can do right now.

Vail Resorts was able to generate about $300 million in net income per year before the pandemic, and if we use that as a proxy for future profits I think the stock would be a steal below a $4.5 billion market cap (or a 15 P/E ratio). If the market crashes again and shares end up near $115 per share, this is a stock I would jump on.

Be ready if the market provides an opportunity

The market can be irrational on both the upside and downside. Right now, I think there’s too much optimism priced into the market, and there’s a lot of risk that both COVID-19 will return globally and the recession will get worse from here.

If you’re ready with cash and great investment ideas, though, a market crash can be a great opportunity. As Foolish long-term investors, these are stocks I would add to your watchlist or My CAPS page to keep an eye on.

Author: Travis Hoium

Source: Fool: 4 Stocks I Want to Buy If the Market Crashes Again

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