Investment Thesis
Renewables is a growing and immature marketplace. There are opportunities across wind, solar, hydrogen, sub-suppliers or otherwise that play into the transformation towards a more sustainable future. The world leaders have committed our economies to the transformation with renewables becoming an ever increasing part of the world's energy mix as a result - in my opinion a clear megatrend. It is difficult to identify the winners of tomorrow in an industry where we are yet to have seen consolidation and clear indications of who will dominate the marketplace. I think investors will do themselves a favor by playing into the megatrend, but that one must also try and be smart about it. Picking an ETF is a way to gain exposure and hopefully pick winners who will create significant alpha while allowing for the losers to fade into eternity. There has been a recent pullback in the iShares S&P Global Clean Energy Index ETF (NASDAQ:ICLN) which might provide an interesting entry point. However, deep diving into its underlying securities, it becomes evident that pricing as measured on P/S and P/E ratios are very rich. Further, that nothing much has changed for many of these companies despite delivering absolutely mind-blowing returns during the last year. I've looked at both small and large companies within the ETF and none of those really impress me at the current valuation. Personally, I really want to gain exposure, but I simply find it too risky at this point in time.
No matter where you turn your head...
You see business news tutoring the green transformation towards a sustainable future powered by renewables. Throughout the last decade, more than $2.7 trillion has been invested in renewables, leading to its share of the energy mix more than doubling from 5.9% in 2009 to 13.4% in 2019. Reading
