>>renewables
>Given climate change worries
I agree with that. However, a stock doesn't do well because the company grows, it does well because the company grows faster than expectations.
I would say that I am one level above naive. In the 1990s, I was zero levels above naive, but stocks then were sort of like crypto now - everyone was buying (not necessarily investing) because it looked like a better deal than the Lotto. I fell into that category.
I assumed that future growth is what mattered and bought a couple stocks based on that. Notably and stupidly, I bought stock in Cisco when it was the most valuable company in the world and I was totally naive. I bought at something like $40/share, then it went up and it seems so great, I bought more at something like $50/share, a price it took 20 years to see again in the summer fo 2019. And yet, Cisco revenue has more than doubled over that time. The problem with Cisco is not that it didn't grow, it's that it did not grow inline with expectations. Fortunately, I didn't have a lot so I didn't invest a lot so I didn't lose a lot. But since then I have seen that repeated.
Tesla is a great example -it is the 2022 version of Cisco in 1999. From an absolute perspective, Tesla had a great year. Year over year growth was a whopping 40%. That's astounding. But the stock price was predicated on a 50% growth, so Tesla stock plunged in value. As one person quipped, Tesla investors realized it's not a "tech" company, it's a "car" company. I honestly have no idea what a "tech" company is, but the operational definition seems not to be a company that develops great technology, but a company whose primary value is their IP, so the cost of goods is very low and expansion is very fast.
When I look at renewables, I think there's a lot of piling on similar to the enthusiasm for Tesla. Every fund now is pushing various forms of ESG and many alternative energy funds are popping up. That suggests that expectations are high.
I do not follow this closely enough to place a bet personally, but if I had to bet, my suspicion is that people are going to find that really, truly expanding renewables at the projected rates is going to require a huge investment in basic nuts and bolts grid upgrades, and there still does not seem to be a will to actually pay for those. I hope very much that I'm wrong about that.
So I'm not convinced that renewables are necessarily a good investment just because they will undoubtedly grow. I'm also not arguing that they are a bad investment. I'm just saying that I don't think "Sector X is poised for massive growth" necessarily maps to "Sector X is poised to see major increases in stock prices."
Stock prices are fundamentally a story people as a collective tell about the future. When the future proves that story to have been incorrect, that's when big gains and losses are made.
Again, that's just one level up from the most naive investor. I've never read a book on investing and I have bought and sold very few individual stocks. So I'm open to the idea that is totally wrong. It's just the one lesson that I have taken from observing booms and busts, mostly from the sidelines.
