Inflation Reduction Bill: Do Clean Energy and Electric Vehicle Investments Look Interesting?

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

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Transcript:

Easan Arulanantham:

With Sinema agreeing, in principle [to sign the Inflation Reduction Bill in Congress], should I be buying Clean Energy and electric cars?


Tom Vaughan:

Yeah, WE did. So, last week, you know, clean energies jumped on the news, that there was some possible agreement on this inflation reduction bill. But it was for a variety of reasons. I wasn’t positive that this thing was going to pass. And still we’re not right? I mean, it is nice that the two senators on the Democratic side that normally are the hardest ones to get through both seems to agreed that this is going to happen. So that helps and maybe get some more confidence towards that area. But the main reason that we bought our Clean Energy ETF was because it has been -on a relative basis- making more than the overall stock market since the invasion of Ukraine on the 24th of February, which makes sense, and that trend isn’t going to change.

Europe is trying to get off of Russian oil, natural gas and coal, one of the solutions will be Clean Energy, wind, solar, and whatnot. And so these companies are in front of the possibility of some money, because it’s not just gonna be the US, that’s looking to put money like they are here with this, this bill into Clean Energy, it is Europe, China’s already working on it, everybody’s looking at this, in my opinion, I’m going to start to think Man, we need to get to a spot where we have our own energy that we control, and that we’re not getting from some other country who could all of a sudden become, you know, a country we don’t want to deal with. So yeah, I think Clean Energy is a good bet here. The problem is that they’re still fairly overpriced. When you dig into these ETFs. Or you dig into these individual holdings. A lot of times, they’re still pretty expensive versus earnings. So in this market environment, it’s a little bit of an aggressive move to be in those, you know, high P E ratio stocks. But I do like the relative strength that they’ve been showing recently.


What about electric cars and those companies, because electric cars are a little bit harder to invest in? Because there’s not a lot of pure plays? I’d say you can think about Ford, Ford also has their gas, and electric, or most of those major kind of car manufacturers have mixed.

Tom Vaughan:


Yeah, yeah, General Motors has a fairly big presence in electric, but obviously has an awful lot in non electric cars. And so you know, how do you play those, generally speaking, when you see a electric vehicle ETF, they’ll have a lot more exposure to the universe of different pieces, the battery makers and the companies that are making the little inverters that make solar cells, you know, better is a big one that fits in those regular Clean Energy ones. And so the plug power things, you know, we got to plug these cars in somewhere that target and Max and you know, New Mexico or whatever it is where you know, where we’re traveling, so that that type of thing is the more pure play, it’s tough, and then those will be included in those electric vehicle ETFs. And that’s how they do it, because otherwise, you’d have what Tesla basically, there aren’t, you know, there are a couple of other pure plays, you know, internationally and whatnot, too. But they’re rivian, I suppose, is another one, right. And so it’s a really limited list, you’d have a very small ETF. And the way that they do that is just spread it into the ecosystem of that whole whole arena, all of the different pieces. And I actually like spreading it even farther, we’ll call it Clean Energy, put the car stuff in there, and the wind stuff and the solar stuff, I like that more diversified Clean Energy PS, once you start really narrowing it down, if you watch those, they can get a lot more volatile. Like, you know, the pure solar, you know, ETFs have been, you know, they’re fantastic sometimes, and then they’re really, really can be aggressively to the downside when things aren’t going right. So, again, a lot of these things are overpriced. on a relative basis, Tesla’s be in that category, it’s selling at a pretty high multiple times its cash flow, etc.

Easan Arulanantham:

So, yeah, talking about those solar ETFs earlier this week, I forgot the name. It was Solar Edge. Basically, we had a pretty abysmal earnings report and the market didn’t take kindly, and they dropped like 15 to 16%. And then all the solar ETFs got hammered.


Tom Vaughan:

Yeah. And that Solar Edge actually was selling at 78 times earnings. The average market right now is around 18, I think. So that’s very expensive. And if you miss your earnings people are paying that extra premium for a company like that, because they’re growing so fast. All of a sudden you realize they’re not, you’re gonna take a big hit to the stock price. So that’s where the risk stands at certain markets. Nobody cares about the P 2020. is a good example. It didn’t matter. I mean, companies didn’t even need earnings, they were selling at 300 times their revenue, and just crazy stuff. Same thing we had in 2000. But this market is much more reasonable, much more focused on cash flows, which is not an unusual scenario when the market is down. People are being less risky, taking less risk as far as that goes. So that’d be my only real big caution about over investing in this category. It’s just they are still fairly expensive.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
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  • thinkpipes®
  • Right Capital
  • YCharts, Inc.