It’s been an outstanding year for innovators.
Propelled by mega trends like the rapid adoption of artificial intelligence, top tech stocks are outperforming the market by leaps and bounds.
Since January, shares of Google’s parent company Alphabet are up nearly 60%. Tesla gained over 140% in that time, and Nvidia’s stock more than tripled.
But this year’s wave of innovation isn’t limited to Big Tech stocks.
In fact, one of this year’s most promising innovators is so small it’s practically “off the radar” for most investors.
And it’s not even a tech stock at all…
Free Market Innovation
Back in 1978, President Jimmy Carter signed the National Energy Act into law.
This new law deregulated the natural gas market and created incentives for the development of renewable energy sources. In other words: States now had the opportunity to break up existing monopolies and take more of a free market approach to providing utilities.
A wave of energy deregulation followed, with 28 states eventually deciding to deregulate — and opening a massive new market for utility companies.
One of those new retail utility companies was Genie Energy (NYSE: GNE).
Genie operates in 18 of America’s 28 unregulated energy markets, providing natural gas and electricity to retail customers and commercial clients.
And thanks to outstanding management, it’s gone from earning $0.12 per share in 2010 to nearly $4 per share in 2022.
The company’s balance sheet is debt-free, which leaves it with plenty of cash to give back to shareholders in the form of dividend payments and share buybacks.
That’s part of the reason why GNE has the highest possible Green Zone Power Ratings of 100 out of 100:
Genie has proven that it can adapt and thrive in America’s deregulated utilities markets.
But the company’s biggest innovations are still in the early stages.
A Blueprint for American Energy 2.0
When it comes to the energy business, fuel is like religion.
Most pipeline companies don’t build solar farms. And most solar companies don’t own traditional power stations.
But Genie Energy does both.
So even while its electricity revenues rise 39% year over year, it’s about to break ground on a 6.25-megawatt solar farm in upstate New York, and a massive 30-megawatt project in Pennsylvania.
This is a fundamental long-term advantage that gives Genie more options to grow, expand and serve its customers. The company’s essentially playing both sides of the energy equation to deliver the best utility solutions for each individual community.
As I’ve said in the past, I believe it will take 20-plus years before an ultimate winner between fossil fuels and green energy is decided.
One side should win … but it will be of little consequence to those of us who, today, are assessing the market’s best opportunities over the next three, five and ten years.
Anyone choosing to invest in just one side is missing the big picture. Untold billions of dollars are pouring into both industries simultaneously. At the same time, the demand for any energy, no matter its source, is accelerating.
And Genie Energy gives us the chance to get the best of both worlds.
Energy’s Surprise Winner
I initially recommended Genie Energy to my Green Zone Fortunes subscribers in March.
Shares have gained over 66% since my initial recommendation, and its Green Zone Power Ratings have remained at or near 100 for the duration. It’s still an outstanding stock, but I’ve reduced it from a buy to a hold for my Green Zone Fortunes subscribers based on that price action.
Will Genie Energy come out ahead on the fossil fuels or renewables side of its business? It’s too soon to know for sure.
But I do already know of one group that will come out victorious. GNE’s investors…
After all, we’ve seen massive underinvestment in oil and gas production for the past decade, as exploration and production companies pulled back or went out of business during the energy bear market that began in 2014.
Companies in the fossil fuel space are making money hand over fist right now. And they continue to serve the vast majority of the world’s energy needs. (Especially in emerging market countries, where every extra ounce of energy produced is gobbled up as quickly as it comes online.)
Meanwhile renewable energy companies — though generally not as stable and high-quality, yet, as those in the well-established oil sector — are benefitting from the watershed of public and private investment pushes aimed at the “transition” toward cleaner energy sources and technologies.
All that adds up to a field day for energy investors, with a diverse set of opportunities unlike anything we’ve seen before.
I believe we’ll soon be able to look back on today’s markets and thank our past selves for the supremely smart decision of investing in energy stocks — across the board — as we have been and will continue to.
To good profits,
Chief Investment Strategist, Money & Markets