The Next Millionaire-Maker Megatrend

I don't know about you, but I'm starting to forget what life was like before the Internet.

I can't even remember the last time I used a pen to write a letter ... or went to the library to do research ... or looked up a stock quote in a newspaper.

In a lot of ways that's sad. But it's also incredible to think that a technology that evolved out of the U.S. government's reaction to the USSR launching Sputnik has come to dominate our lives.

Even more incredible ...
Investors who foresaw how profoundly the Internet would change our world have been able to make an absolute fortune off it.

Take those who understood the potential of e-commerce, for example. Most people scoffed at the idea of buying retail goods "online," but early investors in Amazon.com (Nasdaq: AMZN  ) and eBay (Nasdaq: EBAY  ) have grown their money anywhere between 1,200% and 3,800%.

And while it's doubtful that anyone ever thought Google (Nasdaq: GOOG  ) would become one of the most popular words in the English language, those who got in early are up 338% in less than four years. And that's after the recent market slide that cut Google's shares nearly in half.

Needless to say, the Internet revolution turned out to be an unprecedented source of wealth creation. That's why I was blown away when I read that a well-respected venture capitalist now sees a megatrend on the horizon that he says could be ...

"Bigger than the Internet by an order of magnitude"
In case you're unaware, an "order of magnitude" is a multiple of 10.

That's right ... venture capitalist Ray Lane recently told The Wall Street Journal that he's found something he thinks could be 10 times bigger than the Internet.

And he would know. After all, he's a partner at the famed venture capital firm Kleiner Perkins Caufield & Byers. He was also an early backer of Internet companies like Google, Amazon, and Netscape.

And he's not the only one who's taking notice
In a recent shareholder update, Fidelity Magellan manager Harry Lange outlined several reasons that his fund has begun to focus more on clean tech, and on solar energy in particular.

  • Technological advances and greater economies of scale are making it cheaper to produce electricity from solar energy.
  • Thanks to a declining cost curve and the rising cost of conventional fuels, solar energy is becoming more competitive in high-electricity-cost areas.
  • Governments worldwide are providing tax incentives for both producers and consumers of solar energy.

All of these factors are contributing to Wall Street's "new love affair" with solar energy, and they also led to some heady gains among top solar stocks last year:

Stock

Gain in 2007

Suntech Power (NYSE: STP  )

142%

SunPower (Nasdaq: SPWR  )

254%

First Solar (Nasdaq: FSLR  )

795%

From the look of things, Ray Lane may actually be understating the case, but does that mean it's time for us all to hop on board the solar-powered money train?

No way!
With oil topping $100 a barrel, gas prices at an all-time high, and the strong possibility that we'll have a much more environmentally friendly administration come 2009, it's looking like solar stocks really could be the next millionaire-maker megatrend.

But as any 20-something slacker who worked in Silicon Valley in the late 1990s can tell you, the Internet spawned more big losers than big winners by an order of magnitude.

And the dismal performance of the following solar stocks so far in 2008 seems to indicate that this trend isn't unique to the internet:

Stock

% Gain YTD

LDK Solar (NYSE: LDK  )

(51%)

Evergreen Solar

(56%)

Solarfun Holdings

(74%)

Granted, some of this poor performance can be blamed on general market turmoil and ever-present recession fears.

But it also serves as a strong reminder that just because you recognize a developing megatrend, you aren't guaranteed to cash in on it. In fact, more often than not, those who jump on board without doing their due diligence will end up losing a fortune.

A better approach ...
At Motley Fool Rule Breakers, we're doing plenty of research on clean tech, and keeping a close eye on solar stocks in particular -- but you won't find us recommending every solar stock under the sun.

Among our recommendations, you will find a few carefully selected clean tech companies, including the aforementioned Suntech Power, a Chinese company taking the lead on forays into new clean-coal and nuclear power technologies, as well as an alternative-energy ETF that buys companies involved in solar and wind power, ethanol, fuel cells, and other renewable sources of energy.

These were picked using Motley Fool co-founder David Gardner's proprietary Rule Breakers criteria, which was designed to uncover top-notch growth stocks by finding companies that have:

  • Top dog and first-mover status in an important, emerging industry.
  • A sustainable competitive advantage gained through business momentum, patent protection, visionary leadership, or inept competitors.
  • Great management with financial backing from smart investors and corporations.

... With better returns
This approach has already led David and team to high-growth Internet stocks like Akamai Technologies and Baidu.com, and it has allowed us to find other high-growth stocks that, on average, are returning 8% more than a like amount invested in the S&P 500.  

While only time will tell whether it will lead us to gains 10 times that great, we're always on the lookout for the next millionaire-maker megatrend and the next great growth stock.

In the meantime, you can get full access to all of our research and recommendations, including our top two picks for new money now, by accepting a free 30-day guest pass to Rule Breakers. All you have to do is click here. There is no obligation to subscribe.

Fool contributor Austin Edwards looks forward to a world powered by sunshine. He also owns shares of Google. Suntech Power, Akamai Technologies and Baidu.com are Motley Fool Rule Breakers recommendations. Amazon.com and eBay are Motley Fool Stock Advisor recommendations. And yes, even the Fool's disclosure policy sneered at that pun about "recommending every solar stock under the sun."


Read/Post Comments (0) | Recommend This Article (89)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 605292, ~/Articles/ArticleHandler.aspx, 9/19/2014 2:08:26 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement