I’ve been focused on energy a lot lately. To be fair, so has all of Wall Street.
Earlier this month, the big oil giants reported blowout earnings as a result of those skyrocketing oil prices.
And now that we’re heading into summer, I expect the crude oil prices to go up even higher. We’re rolling into deep summer driving demand — I can tell you myself, having recently driven from Arizona to Nevada, that those prices are still sky high.
The energy sector has been an oasis in a time when stocks have been struggling against rising inflation. Just take a look at the chart below to see the year-to-date performance of the Energy Select Sector SPDR ETF (NYSEARCA:XLE) versus the S&P 500:
As you can see, while the S&P has dropped over 18% year-to-date (YTD), the energy sector has shot up 58%.
Now, since we’re on the topic of energy, I’d be remiss if I didn’t discuss what’s happening in the solar energy space right now. The Invesco Solar ETF (NYSEARCA:TAN), which tracks solar energy stocks, popped early in the week in the wake of an announcement by the Biden administration on Monday.
Specifically, the administration revealed that it will suspend tariffs on solar panels from southeast Asia. Here’s why that’s big news for solar stocks…
Huge News for Solar Stocks
In 2012, the Obama administration slapped major tariffs on Chinese solar panels. This was an effort to bring more business to United States solar panel makers, as it had been previously determined that the cost of making solar panels in China was well below the cost to make solar panels in the U.S.
Rather than building their solar panels in the U.S., however, renewable energy companies turned to southeast Asia for their panels. And for the last decade this has been considered the norm.
But earlier this year, the United States Department of Commerce launched an investigation, citing the potential of “tariff circumvention.”
Basically, accusations were made alleging that Chinese solar panel makers have been shipping their supply to southeast Asia and then shipping it to the United States to get around the tariffs.
If the Department of Commerce found sufficient evidence of circumvention, bigger tariffs would be slapped on panels from southeast Asia. The threat of these higher costs has halted many projects. And coupled with the fact that renewable energy projects are hyper-sensitive to rising interest rates, this spelled trouble for the solar power industry.
But things are now looking up. The White House announced earlier this week that, while the investigation will be completed, no tariffs will be placed upon southeast Asian solar panels for at least the next two years, regardless of the findings.
This means that projects that have been halted due to concerns over high taxes can get underway in 2022 and 2023.
My Favorite Solar Energy Play
One of my favorite stocks in the solar industry is Enphase Energy (NASDAQ:ENPH). It’s why I recommended it in Breakthrough Stocks back in November 2019, when the company was still flying under Wall Street’s radar despite its triple-digit earnings and revenue …….