Here’s one that’s been churning around my head for the last few months. I started thinking about this a few months ago when the whole AI thing got a lot of attention. Have you heard of it? You can read my layman’s overview of AI here.
This is somewhat like the late 90’s dot.com boom. At that point anything with .com in the name was soaring. It’s the same today with companies that market themselves as AI companies.
I like to avoid the obvious bubbles and go with the smaller stories. I did this about 3 years ago with computer chip makers and it worked out quite well. The big story at the time was post-COVID supply chain issues that meant we couldn’t get cars, washers, dryers, TVs and many things that had a computer chip.
This got me thinking about computer chips and I ended up buying a basket of chip stocks.
Energy
The less-cool AI story is energy.
From techcrunch.
The 1st paragraph says it all.
BBB
Not the Better Business Bureau, the bill. It ends the generous 30% tax credit for solar starting in 2026.
The government is also putting the brakes on solar and wind projects. They’ve talked about prioritizing oil, gas and nuclear, but I’ve read this is more talk than action at this point. Read more here.
Putting it all Together
I was never great at math, but I got this one.
More demand for energy + slowing solar projects + delayed permitting for oil & gas projects = likely shortage.
Our grid is aging. It needs to be updated.
As it is, my electric company pays me to use the electricity in my battery during high demand times. National Grid is counting on me to keep your air conditioner running. That’s scary.
With the end of the solar credit, fewer people like me will be spending money on solar and battery installations, so that’s creating more demand and less production.
And AI will eat up as much energy as it can get ahold of.
So, I see high demand, limited supply and a grid upgrade to boot.
Wrap Up
I’m wrong about this stuff sometimes. I nailed it on chips, but after the Russia invasion of Ukraine, I created a wishlist of defense stocks (I didn’t buy). They did OK, but underperformed the S&P 500.
Great ideas don’t always pan-out.
So, I’m buying a basket of 7 stocks. I spent a few hours on Sunday reading investor reports. I’m concerned about debt levels and the amount of capital these businesses need.
But I like the dividend. This portfolio of 7 stocks will pay me 3.99% in dividends each year.
I expect it may take a few years for this to play out. AI is just ramping up. We’ll see what happens in the energy sector and with the grid.
I’ll enjoy my 3.99% each year and I’ll expect some volatility. I’m committed to hold on for 3 years and will check back in 2028 – boy that seems like a long way away.