Article by Investment U
| View the Investment U Video Archive |
In focus this week: Steve Jobs’ lesson for the solar energy industry, U.S. as a LNG exporter, money in mobile phone payers and the SITFA
The first companies in do not always dominate the industry.
That was the message in a Journal article this week about solar energy and the development of the computer mouse.
When solar costs drop to the point they can compete with carbon power generation, demand in the industry will explode.
Xerox it seems invented the mouse, but Steve Jobs and Apple made it a household item, and made the money on it. The earliest computer pioneers, Xerox in this case, are now only also rans.
According to the Journal, the recent carnage in the solar energy industry is following the same pattern as the computer industry.
The 12 biggest solar manufacturers have dropped in total market value from $70 billion to $6.4 billion, and First Solar, one the kings of early development, has dropped from $20 billion to around $2 billion.
Much of the drop has to do with what the Journal calls structural changes in the industry. The caps on carbon emissions didn’t work out and all of the subsidies, both here and abroad, that allowed the industry to reduce production costs, have either dried up or have become much more difficult to come by.
The result is dropping prices for solar panels and a surplus of solar energy production capacity. Currently solar is on line to produce enough panels this year to generate 40gw of power, but the demand sits at 24gw.
The excess has resulted in a drop in panel costs of about 32% since 2007, almost exactly what computer memory has dropped since 1974.
The similarities between development stumbles in the computer and solar energy industries are eerie. Natural gas is also going through a similar over supply situation that has resulted in prices dropping to record lows, as well.
The Good News
When solar costs drop to the point they can compete with carbon power generation, demand in the industry will explode. But only bigger companies that can absorb the cyclical swings between here and there will be around to capitalize on it.
GE is the only name the Journal mentioned, but it is hardly a pure play. The solar energy industry is still in its infancy. Watch for the suppliers to the manufacturers for the best plays. Think disc and memory manufacturers in the 90s.
The U.S. could be the biggest LNG exporter in the world as soon as 2017; that’s five years, if, and this is a big if!
Barron’s reported this week that the U.S. is in line to be the king of LNG if politics don’t get in the way.
Cheniere, symbol LNG, already has deals with the U.K., Spain and India to export LNG, and it this hasn’t even gotten off the ground yet.
Not only is demand for LNG enormous and growing daily, Asia of course would be the biggest buyer, but our gas surplus has prices at around $2 per million BTUs while the equivalent price compared to oil is around $17 per million BTUs.
That means oil is eight times more expensive than natural gas at current market prices! That’s the kind of advantage the U.S. has as an exporter.
Asian markets pay around $15 per million BTUs for LNG and the demand there has grown by 6% to 8% for the past 10 years and it is expected to continue to grow indefinitely.
Here’s where the big if comes in; the Energy Department has put a moratorium on exporting licenses for LNG. Even Obama estimates LNG exports could create two million jobs but the Energy Department wants to make sure this in the best interest of the American people.
Are you kidding me?
Can you imagine if the auto industry and the grain industries were told there was a moratorium on their exports. This is insane.
We finally have the wherewithal to become a driver in the energy game and Washington puts on the brakes.
Fear not, this will come to pass as soon as the thieves in Washington get their share, and that’s all this moratorium is about.
Cheniere by the way was a pick by The Oxford Club’s Dave Fessler at least a year before the big run-up. When this export situation is settled after the election, and it will be, LNG exporters will be the only place to be.
Making Money on Mobile Buyers and Payers
Transactions on mobile phones are estimated to grow 56% a year to $1 trillion by 2015, that’s just three years. But making money on this monster could be a little risky.
Google and Arm Holding, ARMH, are both in the game now but neither is a pure play. One pure play option mentioned in a Barron’s article last week was Monitise, a U.K. software group.
Monitise is a micro, micro cap stock, about a $461-million company. Their revenue is doubling annually and 300 financial groups are running their software and they have six million users out of 300 million mobile banking users worldwide.
This is far from a done deal.
BofA Merrill Lynch estimates if they only capture 1% of the market, and have a similar PE and margin to their competitors, Global payments, GPN, and Wisecard, their stock price could double.
This is a risky play but the industry has virtually no limits at this point and is well worth a second look. At $.54 per share it may be worth a little play.
Finally, the SITFA
This week Nordstrom’s gets the slap in the kisser.
Nordstrom’s, you know where a $79 pair of shoes costs $500, well, it just had a record year; 10.5 billion in sales in 2011.
But despite a record year their executives don’t get the perks we have come to expect from Wall Street.
Most of the executive perks at Nordstrom have come in the form of discounts on purchases at, you guessed it, Nordstrom’s. In fact, of $85,867 in perks last year, $62,000 of it was from the discounts.
That’s pretty tight! A $10-billion year and the perks only total $85,000 and change and most of that is in their own store. I’m sorry, that’s a slap in the face of what must be an excellent executive team.
I wonder how much of the $65,000 in merchandise will show up for sale on eBay?
Article by Investment U
