This Clean Energy “Pick and Shovel” Play Could Hand You 119%

By 2027, the global renewable energy market will be worth a whopping $1.1 trillion. Countries worldwide are rapidly switching power sources in favor of more renewable solutions, and Russia’s current war on Ukraine has only sped up the process.

Any investor worth their salt is currently preparing for the global adoption of clean energy that’s destined to transform the market for good.

The operative word there is “destined.” We’re obviously not quite there yet. Renewable energy companies, as tracked by the SPDR S&P Kensho Clean Energy ETF (NYSEArca: CNRG) are doing well, up around 180% from their pre-“COVID Crash levels,” but most of them are still heavily affected by market volatility. Skittish investors often pull their money out of renewables when looking to protect their portfolios.

We’ve seen this all too often, so we’re recommending a play that will get you a prime position in the world-changing advancements of clean energy while protecting you from the downside volatility risk.

I’ll share the ticker in just a second…

Renewables Can’t Flourish Without These

Not a lot of investors think about the problem this way, but semiconductors are a classic “pick and shovel” play on the global renewable energy sector.

Chips are extremely valuable in their own right, but they’re absolutely indispensable when it comes to making clean energy actually work. Renewable energy resources like wind turbines and solar panels require semiconductors to extract energy from their sources.

In other words, no chips, no clean energy.

The semiconductor industry has been thrown for a loop or two by the pandemic and the loss of Ukraine’s critical neon supplies, but it’s been bouncing back nicely. Analysts expect total chip sales to reach a record-high $680.6 billion in 2022, an 11% increase from last year – a huge win, considering how much the supply chain shortage affected this industry in 2020 and 2021.

More chips on the market means more chips available to run equipment, boost energy efficiency and distribution, and increase energy production altogether.

Semiconductors are the fuel that’ll help propel global renewable energy to a predicted $1.9 trillion by 2030.

Here are the two stocks I mentioned to help you claim your piece of that massive pie…

Move on These Chip Stocks Now

ON Semiconductor Corp. (NASDAQ: ON), doing business as Onsemi, is an American semiconductor supplier company – one of the largest in the entire country. Don’t let that intimidate you, though. This stock is surprisingly affordable relative to the S&P 500 and has vast earnings potential.

While popular semiconductor stocks like Qualcomm Inc. (NASDAQ: QCOM) cost more than $150 per share, ON is selling for under $60.

The company is an ESG dream, as it designs and sells solutions that fuel solar power and reduce carbon dioxide production. It’s determined to create a better world, one semiconductor at a time.

Growth investors will love this stock because experts expect this company’s EPS to grow 41% this year, blowing the industry average of 28.2% out of the water. ON has also seen year-over-year cash flow growth of 88.9%, much higher than the 38.5% industry average.

You can slash your risk even further with this ETF – the iShares Global Clean Energy ETF (NASDAQ: ICLN). Now, this is a great direct play on clean energy, like solar, wind, and other renewables. It owns Vestas Wind Systems AS ADR (OTC: VWDRY) and Enphase Energy Inc. (NASDAQ: ENPH), for instance.

But – and a lot of investors don’t realize this – semiconductors make up nearly 23% of this ETF’s 80 holdings. Management, like us, recognizes that chips and clean energy go hand in hand. And speaking of management, this fund has a 0.42% expense ratio, meaning 99.58% of earnings go into investors’ pockets.

Since the fund dipped below $18 in February of this year, we’ve seen a distinct uptrend. Look for “slow and steady” gains from this one – 26% over the next 12 months, up to a maximum of 119% in the next five years. There are other clean energy ETFs out there – and other semiconductor-focused funds, too, but at $22 per share, this one offers more upside potential for much less money.

— Lyric Mott

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Source: Money Morning