Hey Influence Traders,
It’s the weekend, which means it’s time for the Weekly Roundup.
We had a bunch of D.C. action this week that is producing winners and losers.
One loser? My computer mouse, which I managed to drop into my morning coffee … Real smooth, Frank!
One winner? Investors, because Option Pit trading guru Andrew Giovinazzi had me on the OP Markets show this past Friday and we went deep on green energy opportunities.
If you missed it, you can catch the replay HERE.
- Supply chain shortages are hurting the pumps
- Runaway inflation has markets spooked
- Tesla about-face sends crypto markets into a selling frenzy
- Green energy projects on the rise, including solar
- Cyber Response – In reaction to the Colonial Pipeline hack and other recent cyber-attacks, President Biden issued an executive order calling for the establishment of a review board for major cybercrimes, as well as baseline standards for federal software and IT service procurement. The order also mandates that U.S. government agencies use multifactor authentication and encryption, and it requires vendors to immediately disclose breaches and cyberthreats.
- Anti-Trust Action on the Horizon – The Senate Commerce Committee approved Lina Khan, President Joe Biden’s nominee for the Federal Trade Commission, and the nomination will head to the full Senate. Khan has been critical of Big Tech companies, and her confirmation could indicate a bipartisan desire to limit the power of large online platforms.
- Wind Farm Greenlighted – Secretary of the Interior Deb Haaland and Secretary of Commerce Gina Raimondo jointly announced that the Vineyard Wind project off Martha’s Vineyard has been greenlit, making it the first large-scale, offshore wind project in the U.S.
Its 800 megawatts is enough electricity to power over 400,000 Massachusetts homes and businesses.
The wind farm, located 15 miles off Martha’s Vineyard, is expected to begin supplying power by late 2022.
The word from K Street is that the project will feature 84 GE (Ticker: GE) Haliade-X, 12-megawatt wind turbines.
The news prompted the International Energy Agency to raise its forecast for the global growth of wind and solar by another 25% compared to six months ago.
The IEA anticipates that wind and solar are on track to match global gas capacity by 2022. Wind power increase will be a boon to the entire industry, which is why I also like Scottsdale, Ariz.-based, TPI Composites (Ticker: TPIC), a company that manufactures and services composite wind blades for turbines. TPIC reported a 30.6% increase in operating income in Q4 2020 on a 10.3% year-over-year increase in sales. Yet its stock price is down, with some analysts believing it is 25%+ undervalued. We are putting it in the Power Moves Portfolio, but will watch it closely because it has a volatile history.
- Party Infighting – The mainstream elements of both parties encountered infighting this week. The Republicans removed Rep. Liz Cheney from a House leadership role over her apparent disloyalty to the party during the past election, which led to a group of Republicans to voice the idea of starting a third party. And AOC and the progressive crowd challenged the Biden administration’s approach to the crisis brewing in the Middle East.
Power Moves Portfolio Roundup
After my guest appearance on Friday’s OptionPit show, Andrew made some moves on the Power Moves Starting Lineup based on our conversation:
- We added the General Electric (Ticker: GE) risk reversal to the Starting Lineup. GE should be the beneficiary of the Vineyard wind farm in Cape Cod Sound so the Green part of GE’s business gets a place in the portfolio. Andrew bought 5 GE Jun04 14 calls and sold 5 GE Jun04 13/10 put spreads for a .23 credit.
- Our next stock on tap is TPI Composites (Ticker: TPIC). The company makes windmill blades and has had $17.30 to $80 run to $44.48, with a sharp move up Friday. We are leaning towards a long strangle but with some time to it as TPIC is very volatile.
Power Mover of the Week
The nominees are …
- Hackers – Colonial Pipeline Co. paid hacker collective DarkSide a $5 million ransom in untraceable cryptocurrency. Despite my deep-state connections, I was unable to reach DarkSide for comment or confirmation.
- Truckers – In response to the Colonial shutdown, the Department of Transportation relaxed rules on fuel being transported by road, which allowed drivers in 18 states to work extra or more flexible hours when transporting refined petroleum products.
- Mask Freedom – The CDC did an, ahem, about-face, this week, changing its mind faster than Elon Musk, and declared that fully vaccinated individuals can take off their masks. If the vaccines work, I hope the rest are allowed to follow.
But my Power Mover of the Week is … Green Energy.
The Biden Administration has put a big emphasis on green energy projects and infrastructure, which it pushed this week with the approval of the Vineyard wind farm.
That project will raise the tide for other green projects and will benefit well positioned companies.
Power Loser of the Week
- Consumer Prices – The cyberattack against the Colonial Pipeline shook Americans and prompted fuel hoarding and gas shortages along the East Coast.
The East Coast lost around 1.2 million barrels a day of gasoline supply, which prompted North Carolina to declare a state of emergency.
That shortage came as the world saw renewed tensions in the Middle East, which is compounding the gas issues (Iran is waging a proxy war against not just Israel but the Saudis – the US Navy intercepted a boatload – literally! – of weapons intended to attack Saudi oil fields).
In addition, lower-than-expected employment gains coupled with a new report showing accelerating inflation is testing Biden’s economic agenda. Inflation fears as measured by CPI rose 4.2% in April after rising 2.6% in March.
That rise was well beyond economists’ predictions and represents the largest increase in more than a decade. According to DOL, it was the largest 12-month increase since Sept 2008, when the index rose by 4.9 percent.
The Energy concerns are not helping to ease those fears, since much of the April increase was driven by a 25.1% jump in year-over-year energy costs, with gasoline prices up 49.6% and energy commodities rising 47.9% over the 12-month period ending in April.
Inflation is hitting in some unexpected areas. Have you tried renting a car lately? Prices have gone to the moon! That is primarily due to many rental car companies selling their inventories during the pandemic and now being short vehicles. They can’t buy new cars because production is down from the chip shortage.
That has also caused the price of used cars, including sedans, pickups and SUVs, to soar 10% in April, the fastest climb ever in data going back to 1953.
Global stocks, meanwhile, fell to a six-week low as markets lost confidence that the Fed has things under control.
- Colonial Pipeline – These schmucks paid almost $5 million in ransom to hackers, and still got shut down … a move that sets a bad precedent for future attacks.
- Tesla & Crypto – Elon Musk did a 180 and announced that Tesla (Ticker: TSLA) will no longer accept Bitcoin (Ticker: BTC) as payment, just months after buying $1.5 billion in BTC and announcing that it would accept payments in the crypto.
He clarified that TSLA may accept crypto payments again if mining becomes more sustainable and stated that TSLA won’t sell any of its current holdings.
Naturally, this rocked the crypto markets, with BTC and Ethereum (Ticker: ETH) dropping over 20%.
One thing to keep an eye on will be the reaction from DC. Reports have popped up that there was a large block of suspicious trades a few minutes prior to Musk’s announcement. I’d be surprised if the SEC does not start poking around.
But my Power Loser of the week is … the Chinese Solar Supply Chain.
The vast majority of global solar production occurs in China, but it has recently come to light (no pun!) that China relies on forced labor for much of its production.
That does not play well into America’s support of human rights across the globe.
China’s Xinjiang region is a major production hub for many of the companies that supply the world with parts needed to build solar panels.
China has between 71% and 97% of the world’s capacity for various solar panel components, with Xinjiang producing nearly half of the world’s solar-grade polysilicon.
But a recent report entitled “In Broad Daylight: Uyghur Forced Labor and Global Solar Supply Chains" suggests that much of that work is relying on the exploitation of the region’s Uyghur population and other ethnic and religious minorities, and that dirty coal is used in the production.
China called the claims “an outrageous lie" and a spokesperson stated that “those in the US and the West who are hyping up the issue have a dark and sinister intention."
Energy emergencies will allow the Biden administration to further push green energy, and he wants to transition America to a green economy.
Even my wife, who consumes fossil fuels for breakfast, is talking about getting an electric vehicle.
So let’s round out a week of green eneergy ideas and talk solar!
Despite the bad headlines regarding China’s supply chain, many countries are betting on solar as a critical form of renewable energy.
A report from the International Energy Agency predicts that renewable energy, led by solar power, will make up 80% of the growth in electricity generation over the next decade.
That means that three times as much solar capacity will be deployed in the United States as was installed by the end of 2020.
And this past year, the European Union generated more power from renewable sources than from fossil fuels for the first time.
When one part of a supply chain gets bad press, it creates opportunities for other participants. With China’s solar supply catching heat, there are opportunities for American companies and those from friendly nations to step up.
First Solar (Ticker: FSLR) – This Tempe, Ariz.-based, company is a global leader in developing solar energy solutions. In addition to designing, constructing and selling solar power systems and providing operations and maintenance services, FSLR is manufacturing solar modules.
FSLR has a proprietary panel technology that works better in low-light conditions than traditional silicon panels. They’re also larger in size, which helps reduce the cost per watt. Those factors make them ideal for utility-scale solar energy projects.
The company also has a strong balance sheet which should allow it to optimally expand as demand increases.
SolarEdge Technologies (Ticker: SEDG) – An Israeli company that is domiciled in the U.S. SEDG manufactures power optimizers and inverters that improve the way solar panels convert the sun’s power into AC electricity.
SEDG is considered a low-cost supplier of high-quality power optimizers, which makes it a formidable competitor. It, too, has a cash-rich balance sheet that allows it to invest heavily in R&D.
The company’s share price dropped 37% in the last quarter, but it still has a high P/E ratio of 82.63. Nevertheless, I’m keeping an eye on a #PowerMove into it because SEDG has grown its earnings per share at 9.7% a year over the past 5 years.
Cutting Through the Noise for You.