Innovation and energy go hand in hand.
On Friday, I wrote that unexpected benefits can come out of crises, using the oil embargoes of the 1970s as an example.
Following the 1973 Yom Kippur War, the Arab states of OPEC restricted oil exports to most of the Western world, which caused the price of crude oil to skyrocket.
And just a few years later, in 1979, we had a second oil crisis due to the Iran-Iraq war reducing both countries’ crude oil output.
In both cases, dependence on oil imports from unstable parts of the world rocked our economy. It contributed to the stagflation and general economic malaise of the era.
But it also spurred a wave of innovation that’s shaped the world we live in today.
A Wave of Renewable Energy Innovation
Those oil price shocks of the ‘70s juiced the renewable energy movement. It simultaneously:
- Lowered our dependence on imported energy.
- Gave us cleaner air.
- Massively lowered the cost of our electric bills.
With everything happening in Ukraine today, I believe we’re about to see a flood of new innovation in the energy space.
There’s been a fundamental change.
While there was already incredible decades-long momentum in the renewables space, it’s been accelerating in recent years.
The potential removal of Russian energy from the market is the proverbial gasoline on the fire.
How to Invest in Innovation
If you want a piece of this renewable energy innovation wave, one place to start is the Moonshot Innovators ETF (NYSE: MOON).
This ETF is exactly what it sounds like. In the manager’s own words, it’s a collection of 50 of the “most innovative U.S. companies at the forefront of changing our lives today, and tomorrow.”
Specifically, the fund finds disruptive companies in emerging sectors like:
- Smart transportation.
- Genomics (another one of my favorite long-term mega trends).
- And of course, clean energy.
Ranking companies based on their propensity to innovate might seem wildly subjective, but the managers quantify it two ways. They rank companies based on two things:
- “Allocation to innovation” based on the ratio of research and development expenses to revenue.
- And “innovation sentiment” by scanning their SEC filings for key words and phrases related to innovation.
Naturally, MOON is tech-heavy, with about 45% of its portfolio in tech stocks. The fund holds another 22% in both health care and industrials.
That’s all fine and good. But it’s the sub-themes that make MOON interesting.
Drill Into MOON for a Renewable Energy Opportunity
The fund has a 17% allocation to “genetic engineering,” which overlaps with my own genomics research.
Just shy of 20% is allocated to autonomous and electric vehicles.
And nearly 20% more is allocated to “smart” tech. The most interesting allocation within this segment is the 6% dedicated to smart grids.
Let’s focus on that last little nugget of information.
You see, renewable energy isn’t just about soaking up more solar radiation or throwing up more wind turbines.
It’s also about getting the most efficient production out of the assets we already have.
It’s a lot cheaper to squeeze more juice out of existing infrastructure than to build something new from scratch.
But the systems required to pull that off require sophisticated software and engineering.
That’s the domain of one of my very favorite investments in the renewables space.
This tiny Silicon Valley company’s artificial intelligence software (AI) is about to disrupt the $7.6 trillion global energy industry.
How? By unleashing the largest untapped energy source in the world.
It has the potential to create life-changing wealth for its early investors.
To good profits,
Chief Investment Strategist