We are heading towards a carbon-free future. The renewable energy revolution is a multi-trillion dollar opportunity.

A note from our founder

Volatility roiled markets in 2019. In 2020, we expect more incumbents to falter.

Over the past year, technological innovations have swept through several industries, disrupting legacy business models. Global electric vehicle sales have accelerated, threatening the core business of combustion engine manufacturers. Renewable energy projects expanded rapidly, highlighting the risks of stranded assets across the fossil fuel industry. Internet-based commerce cemented its dominance over physical retail, forcing dozens of legacy brick and mortar shops into bankruptcy, closures, and chaos.

As investors, we lie in wait for moments like this. Broad technological shifts provide ample opportunity for wealth redistribution. Our goal is to harness the disruptive trends we research— and translate them into investment ideas. Looking forward, we are increasingly bullish on the opportunity set ahead of us. Multi-trillions of dollars of market cap are being rearranged. Our goal is to participate in these revolutions.

There will be challenges ahead. But we view 2020 and the coming years as the tipping point that will unlock a massive redistribution of wealth. In particular, we are doubling down and focusing our research efforts on the disruption of energy markets—and the consequences of a full conversion to a renewable energy paradigm. This disruption will affect dozens of industries, from oil drillers to car dealerships to gas stations.

Ultimately, we have two self-defined jobs as long-term investors: 1) Research and understand the impact of technological disruptions in the industries we cover; and 2) Distill our research on these mega-trend into actionable investment ideas. On both fronts, we are beyond excited and eager for 2020. While we anticipate a sustained period of volatility and industrial dislocation, we believe there is immense opportunity for savvy investors.



This may sound simple, but we believe one our core advantages as long-term investors is simply that much of Wall Street is focused on short-term metrics, obscuring opportunities that are often hiding in plain sight. Certain investment opportunities that may seem “overvalued” to Wall Street can appear quite attractive to us.

Our big idea for 2020: Energy disruption

This document is a brief snapshot of what we view to be the most pressing disruption of 2020 and beyond. This year, we’re choosing energy disruption as our theme.

As cars go electric, as utility energy storage goes clean, and as oil and gas assets become devalued—all of these broad technological shifts could have cascading effects into virtually every industry known to man. Investors who don’t move quickly enough, or who are out of position, could possibly suffer the consequences.

Long-term, there is much to be optimistic about. It’s our view that the world we are living in today will look radically different than the world 10, 20, and 50 years from now. Our global climate crisis is being met with unprecedented changes in energy creation. As I have often said, we are living through a Cambrian moment in time—massive changes are afoot, and this creates immense opportunity for wealth creation and redistribution. It’s evident to us that the pace of change is accelerating. We are excited for the journey ahead.

— Arne Alsin, CIO, Portfolio Manager

2020 Investor Outlook

The Big Picture: We believe we are nearing the tipping point for renewable energy.

In our opinion, the future of energy capture and distribution is clear: We are moving towards clean energy distributed over software-enabled grids. The age of fossil fuels is nearing its endgame, potentially resulting in trillions of dollars of stranded assets. Throughout the value chain, from capture, to storage, to distribution, there will be incredible investment opportunities. It will also result in millions of new jobs and a cleaner, and more habitable planet.

What’s exciting as investors is the velocity at which some of these changes are happening—it’s unprecedented. What is clear to us as long-term investors is that there is ample opportunity in this new paradigm. Our firm is focused on three distinct investment opportunities within the cascading effects of renewable energy disruption. They include:

  • Battery production and cell chemistry improvements
  • Solar systems and distribution platforms
  • Industries heavily levered to fossil fuels

The primal cause for our global energy transition is innovation and lowering costs of technology. But it is also urgency. Without major changes, we are on the verge of global climate collapse.

The costs of capturing and storing energy are reaching parity with legacy energy generation systems. Progressive policies, of course, help subsidize certain aspects of renewable energy programs, but that’s not what’s driving the boom.

As we view it, what’s driving the boom in renewable energy disruption is a combination of cost—and urgency.

We believe two major developments will unfold in 2020 and beyond. First, as cost parity is achieved, utilities and consumers alike will increasingly begin the transition to renewable energies. On the utility side, look no further than the FPL Manatee solar storage project in Florida—the world’s largest solar-powered battery announced in March 2019. The implications of such a transition—away from natural gas and other fossil fuels—are enormous.

On the consumer side, consider the hyperbolic adoption rates of electric vehicles, in particular Tesla.

In 2018, the global electric car fleet exceeded 5.1 million, up 2 million from the previous year and almost doubling the number of new electric car sales, according to the International Energy Agency. In September, Daimler, widely once considered the benchmark for the entire auto industry, announced it would discontinue its combustion engine altogether.

Second, as these transitions manifest, legacy fossil fuel firms could find themselves with an immense load of stranded assets. Some analysts are referring to this stage as a “carbon bubble” that is certain to pop, roiling not just energy markets, but potentially disrupting the global financial markets.

As Carbon Tracker , the financial think-tank, concluded in 2018: “The fossil fuel sector has built assets with a value of around $25 trillion, and the fossil fuel and related sectors compose up to a quarter of equity and debt markets.”

Battery production—and advanced cell chemistry—are the future of renewables

The costs of lithium ion batteries are in steep decline—enabling cost-parity with combustion engines.

As the costs of batteries decrease, sales of electric vehicles will surge. It’s our view that many legacy OEMs have not invested in the supply chain necessary to pivot towards a radical adoption of electric vehicles. Our focus is on manufacturers who are winning among customers and spending enough on research and development to meet the future demand of electric vehicles.

1,000,000-mile battery?

Innovations in cell chemistry will result in improved energy density. This will result in improved electric vehicle range and faster charge times.

As evidenced by Tesla’s acquisition of Maxwell Technologies, there is increasing attention on the necessary developments within cell chemistries to improve energy density and increase a vehicle’s range. Eventually, we are confident that vehicle batteries will last considerably longer than traditional internal combustion engines (ICE), forcing the auto industry into a major reckoning that will result in high rates of depreciation among ICE manufacturers.


Costs of natural energy sources are dramatically declining—resulting in disruption

Utilities are at the forefront of the global energy transition—already, there are massive planned project set to go online in the next few years.

A shift toward utility-scale battery storage systems is gaining significant momentum. We have been tracking several modernization plans across the country, which will replace natural gas and other types of power generation units. One project in South Florida, for example, aims to save customers $100 million in energy costs—while eliminating one million tons of carbon dioxide emissions.

Residential solar is quickly approaching the stage between early adopters and the mainstream.

The residential solar market is still in its infancy. However, with the advent of cost-effective local storage, we anticipate a step-change in residential solar systems over the next several years.

Software is the future of energy distribution and grid modernization.

In the future, we believe energy systems will become more distributed and decentralized. This presents enormous opportunities for software-enabled platforms to replace legacy metering systems of energy distribution. While still in its early days, we are tracking several innovative upstarts and investment opportunities competing in this new space.


Stranded assets will burden the fossil fuel industry—and the global economy.

A new report from think tank Carbon Tracker warning that major companies risk wasting $2.2 trillion on stranded assets by 2030.

Simply put, we believe much of the established oil and gas industry is not moving quickly enough to renewable energy systems. This could result potentially in trillions of dollars of waste and stranded assets. This dynamic will affect not just fossil fuel extractors, but a host of providers cascading down the value chain, from oil pipelines manufacturers to legacy auto makers. We anticipate policy changes to aid in this transition, but ultimately, we believe will be driven by innovations and cost reductions in energy capture and storage.

We are anticipating a “big auto short” as the prices of ICE vehicles drop, affecting OEMs, auto dealers, car rental companies, and suppliers.

For several years, the auto industry has coasted along, making modest upgrades to its product lines and supply chains to ready itself for the coming EV revolution. We anticipate a massive shock to the industry as customer preferences rapidly shift towards electric cars, which are cheaper to maintain (hurting dealer margins) and last much longer than ICE vehicles (which hurt the long-term cash flows of OEMs and suppliers)

Once the carbon bubble bursts, many long-term investors (including pension funds and institutional managers) will be hurt.

As the world inevitably transitions to renewable energy, the market valuations for oil and gas industry participants will be damaged. We expect asset managers and indexers (i.e. S&P 500, Dow 30, etc.) to react slowly to these changes, resulting in underperformance and damage to shareholders.


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