If given the choice between investing in an exciting new technology that could revolutionize an industry, or the opportunity to buy a toll road, chances are most people would follow the excitement. In fact, I have myself to a certain extent, investing in a number of small, exciting companies with amazing potential. However, businesses that are often overlooked, yet incredibly important to everyday lives, can be the best long-term winners. Let's take a look at how Brookfield Infrastructure Partners (BIP 2.82%) stacks up against Clean Energy Fuels (CLNE -2.18%) and First Solar (FSLR -2.09%).
Performance versus volatility
FSLR Total Return Price data by YCharts
Brookfield Infrastructure Partners has clearly been the better investment over the past five years, as the company has steadily acquired new assets to grow its business, while continuing to return more than 50% of FFO (funds from operations) back to shareholders, equal to more than a 4% dividend return on average over the past several years, even as the share price has climbed significantly.
Clean Energy Fuels is investing heavily (at the sake of profits for now) to grow its CNG refueling for "return to base" fleet business, and build out a network of LNG stations for over-the-road trucking. And while its CNG business is the largest in North America by a large margin, the ramp-up to adoption for truckers is just getting started, and the future looks strong, much of the investment thesis is still tied to speculation about how the growth story will play out. Brookfield Infrastructure Partners, on the other hand, is investing in more proven assets that, while not offering the same upside potential, have limited downside risk.
First Solar, like many of its solar industry peers, has taken a beating over the past couple of years, largely due to the Chinese government propping up many Chinese solar manufacturers which flooded the market with products well below prices that domestic producers like First Solar could compete at. While -- as the market's action over the past year and even the past few weeks has shown -- domestic solar manufacturers seem to have turned the corner, there's little reason to expect the volatility to lessen as the industry expands (meaning investors could see wild swings from a profitable investment to a loser in just a few weeks time), or to assume that Chinese subsidies are forever gone.
Turning on the growth engines
I'm a big fan of all three of these companies. The solar industry is changing constantly as the technology improves in efficiency and costs go down; The International Energy Agency (IEA) is projecting energy production from renewables like solar to grow by 40% by 2018, less than fie years from now. The 25 billion gallon domestic diesel market is a massive opportunity that Clean Energy is going "all-in" on, as trucking fleets start the transition to cheaper, cleaner natural gas. Brookfield Infrastructure is investing heavily to grow its asset base. From the earnings call on November 6:
"Our results this quarter were strong as virtually all of our operations performed better than the prior year," said Sam Pollock, CEO of Brookfield Infrastructure. "Our focus has shifted from capital recycling to capital deployment. We have advanced a number of initiatives, including increasing our investments in our toll roads and expanding our district energy business. We continue to evaluate a number of opportunities and are enthusiastic about our growth prospects going forward.
Of the three, only Brookfield Infrastructure is investing in assets that offer large levels of downside protection and very little risk of competitive challenge, while also having minimal expense to maintain or support over time.
Final thoughts: Diversification is worthwhile
While you can pretty well guarantee that Brookfield Infrastructure Partners isn't going to double in value over the next year, you can also rest assured that its solid asset base isn't going to lose half its value, either. Clean Energy Fuels and First Solar, on the other hand, are largely influenced by factors that neither company can directly control, and as shareholders over the past few years have learned, this can be a painful experience. A Foolish investor might consider pairing a boring play like Brookfield Infrastructure with more speculative investments. Not only will it soften the blow if the unforeseen happens again, the steady income and growth will go a long way to building long-term wealth.
