There’s an old quote I’ve always loved:
The harder I work, the luckier I get.
No one really knows who said it. A similar quote was attributed to Thomas Jefferson, our third president and Declaration of Independence signee.
Perhaps a more elegant version is that of the brilliant French scientist Louis Pasteur:
Fortune favors the prepared mind.
I find this sentiment holds true when investing.
At one point or another, every investor gets lucky. You buy a stock or an option, and the next day it soars for reasons you never anticipated.
It’s happened to me, and I bet it’s happened to you!
But here’s the thing. I find that when I do my research and follow my system, these lucky little surprises happen at a higher rate. Here’s my version of the quote:
The more disciplined I am, the luckier I get.
I mention this because the U.S. Senate wants to provide a major shot in the arm for alternative energy, one of my highest-conviction mega trends.
Inflation Reduction Act and the Renewable Energy Mega Trend
We’ll see just how much the proposed Inflation Reduction Act actually reduces inflation. The biggest inflation drivers these days remain the pandemic-related supply chain mess, the war in Ukraine, the labor shortage and the lingering effects of the Federal Reserve’s massive COVID-era stimulus.
This bill doesn’t really address any of that.
But it does offer provisional investment tax credits for energy storage. Energy Storage News reports the credits would reduce the cost of new energy storage projects by around 30%!
If you’ve been reading Green Zone Fortunes for any length of time, you know that I am über-bullish on renewable energy.
This isn’t political or ideological for me. It’s just basic economics.
Renewable energy is, by its very definition, unlimited. Oil and gas wells get depleted over time. But the sun still rises in the east every morning, and the wind keeps blowing.
The cost of new solar and wind projects is now cheaper than coal or natural gas, and this was true before the war in Ukraine.
Renewable energy will become a larger and larger percentage of the energy grid. It’s inevitable.
Up until recently, the biggest hurdle to broader renewable energy acceptance was storage. The sun doesn’t shine at night, and some days are windier than others. For renewable energy to compete with oil and gas in terms of reliability, we needed a good way to store it.
And the proposed Inflation Reduction Act addresses that in a huge way.
Manchin & Co. Juiced Energy Storage Stocks
This was one of my favorite investment opportunities long before the new bill was announced, and I recommended a utility-grade battery storage firm in Green Zone Fortunes back in March. We’re up more than 34% so far, and this is despite the broader stock market sell-off.
The fun part? About half those gains came the day the Inflation Reduction Act was announced!
I’m a builder of trading systems, not a political analyst. I had no way of knowing that the Senate would propose this or that my home state representative, Senator Joe Manchin, D-W.Va., would get on board, making its passage more likely.
But I did know that we had a durable mega trend in place: the rise of renewable energy. I also knew that battery storage was a smart way to play that trend.
The odds were already stacked in our favor, and I expect that this trade would have worked out nicely for us even without the Senate’s help.
But to return to the quote:
The harder we work, the luckier we get!
Bottom line: I still see massive upside ahead for utility-grade battery storage and for green energy in general — even without the Inflation Reduction Act.
This trade is still in its early stages. If you’d like to know more about how my Green Zone Fortunes subscribers are playing it, click here to watch my “Infinite Energy” presentation.
To good profits,
Chief Investment Strategist