Every investor searches for the next trillion-dollar opportunity, which don’t present themselves often. When they do, it pays to find growth stocks that will take advantage.
One of the biggest growth opportunities this century is the transition of our global energy system from fossil fuels to renewables. This is an inexorable shift, one based on economics, not regulations.
“We are at an inflection point when it comes to the deployment of clean technology and renewables,” notes a research report from Goldman Sachs.
Bet on this $10 trillion market
Wind and solar power costs are driven by Moore’s Law. Just like televisions and computers, clean energy tech gets cheaper year after year. Fossil fuels, on the other hand, are driven by resource economics, meaning they generally increase in price over time.
The short-term price volatility for fossil fuels is another challenging factor versus renewables that have stable operating costs over a period of several decades. These fundamental differences create a funding imbalance. Renewable energy companies are able to borrow at cheaper rates than their fossil fuel peers, only exacerbating their economic advantages.
“Renewable power will become the largest area of spending in the energy industry in 2021, on our estimates, surpassing upstream oil & gas for the first time in history,” the Goldman Sachs report continues, highlighting that the growth is “…driven by bifurcating cost of capital (up to 20% for long-term oil projects, down to 3-5% for renewables).”
Wind and solar power continue to fall in price versus fossil fuels. Like Goldman Sachs points out, we’re at the beginning of an inflection point. Over the next decade, we should see renewable energy investment snowball. Bloomberg expects $10 trillion in new capital to be deployed by 2030.
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This growth stock is rising
Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) is capitalizing on this emerging phenomenon.
It’s important to note that this isn’t Brookfield’s first rodeo. It’s been investing in renewable energy for more than two decades. It was one of the industry’s first big capital partners.
Since 2000, this growth stock has risen by nearly 600%, crushing the S&P/TSX Composite Index. That return doesn’t even include the annual dividend, which now yields 4.5%.
Brookfield rode the first wave of renewable energy adoption, and it’s primed to capitalize on its biggest decade yet. That’s because it focuses on early-stage projects with attractive risk-reward profiles. For example, it recently purchase wind assets in Spain for $1 billion, a fantastic price due to the regulatory uncertainty there.
Brookfield isn’t in this for short-term gain. It’s willing to look years, or even decades into the future. That allows it to scoop up bargains when they’re available and maintain patience until their value is restored.
All the company needs to do to succeed is repeat its proven strategy. It has one of the biggest deal pipelines in the industry, and its management team has demonstrated a clear track record of creating shareholder value.
The renewable energy boom will ultimately be the biggest growth opportunity of our lifetime. Brookfield Renewable stock gives you the best seat at the table.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Ryan Vanzo has no position in any stocks mentioned.