The picks and shovels investing strategy uses a gold mining analogy. It posits that once a gold find occurs, the surest way to profits is not to buy land around the first lucky prospector, but to open a nearby store selling mining equipment to benefit from those who do.
A recent report from Citigroup analyst Martin Wilkie makes a strong argument that electrical equipment stocks are the picks and shovels investment for the power shortage that is gripping Europe and China, and for the longer term efforts toward net zero emissions and decarbonization.
There are some remarkable statistics in Mr. Wilkie’s report. For one, the European Commission estimates that there are eight billion electric motors in that region alone, accounting for roughly half of electricity consumption. The analyst estimates that new motors, and motor drives that control machinery speed, from companies like ABB Ltd. “can easily save 20 per cent of power consumption.”
Lighting accounts for more than 15 per cent of global power usage, according to the report. Citi believes that higher electricity prices will speed the transition to LED lighting. The U.S. Department of Energy estimates that LED lighting currently makes up 51 per cent of outdoor lighting in the United States but only 30 per cent indoors.
Mr. Wilkie lists three companies he believes are poised to benefit from these trends: ABB for motors and related sensors, Schneider Electric SE for energy management systems and Signify NV for lighting. (In addition to their primary listings in Europe, all three trade as American depositary receipts – ABB on the New York Stock Exchange, the others in the U.S. over-the-counter market.)
A research report released Wednesday from RBC Economics called The $2-Trillion Transition: Canada’s Road to Net Zero highlighted the scale of investment and commitment that will be necessary for this country to reach net zero emissions targets by 2050. In Canada and globally, power management and conservation through electrical equipment will certainly play a major role.
-- Scott Barlow, Globe and Mail market strategist
This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.
Stocks to ponder
Gibson Energy Inc. (GEI-T) If you’re dead set against fossil fuels, move on. But if you have an open mind about holding some traditional energy stocks in your portfolio and locking in some high yields, Gordon Pape explains why Gibson Energy is worth considering.
Getting spooked by inflation? Here are four things every investor should know
The return of inflation is now the market’s most feared Halloween horror story. But how petrified should investors be about the threat from rising prices? Ian McGugan shares some thoughts.
So you think you’ll teach your online broker a lesson by moving your account
A whole lot of investors were rightly angry at online brokers earlier this year because of their terrible client service. But now, complaints are getting rare. There’s a lesson in all of this for people on how to pick the right broker, as Rob Carrick explains.
Riding the crypto rollercoaster: Bitcoin nears record high
Bitcoin is on the cusp of an all-time high, its latest rally fuelled by the launch of the first U.S. bitcoin futures exchange-traded fund that investors think could make the cryptocurrency accessible for swathes of new investors. But the advent of cryptocurrency ETFs in the world’s biggest economy hasn’t been the only driver of this chapter of bitcoin’s 2021 rollercoaster. Here’s a look at dynamics of its push towards a record high this week.
Others (for subscribers)
Number Cruncher: Seven U.S. restaurant stocks with tempting gross profit margins
Number Cruncher: Are there investment opportunities amid shipping industry logjams?
Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation - a powerful tool to help you manage your clients’’ portfolios.
What’s up in the days ahead
Rob Carrick has a chat with actuary Fred Vettese about a new book that explains how young people can juggle housing and retirement saving. Unfortunately, his formula doesn’t work in Toronto.
More Globe Investor coverage
For more Globe Investor stories, follow us on Twitter @globeinvestor
You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.
Compiled by Globe Investor Staff