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 called a travel agent instead of just using priceline.com (Nasdaq: PCLN  ) , or looked up a stock quote in a newspaper instead of on Yahoo! (Nasdaq: YHOO  ) Finance.

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 Soviet Union's launching of 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 have grown their money by as much as 2,880%.

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 has 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 -- which has made a killing on everything from Electronic Arts (Nasdaq: ERTS  ) to Intuit (Nasdaq: INTU  ) .

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 why his fund has begun to focus more on cleantech in general and on solar energy in particular.

  • Technological advancements 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 areas with high electricity costs.
  • Governments worldwide are providing tax incentives for both producers and consumers of solar energy.

The next great bull market?
All of these factors contributed to Wall Street's love affair with solar energy last year …

Stock

Gain in 2007

Suntech Power

142%

SunPower

254%

First Solar

837%

By the end of 2007, it looked like Ray Lane was actually understating the case. But then 2008 hit, and the market began selling off steadily, before slipping into an all-out tailspin. The solar sector has been particularly hard hit.

Stock

Year-to-Date Gain

Ascent Solar

(84%)

Trina Solar

(86%)

JA Solar

(86%)

Granted, much of this poor performance can be blamed on general market turmoil, massive hedge fund sell-offs, and ever-present recession fears, but it also serves as a reminder that just because you recognize a developing megatrend, that doesn't mean you're 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.

Just look at the Internet
As anyone who was a 20-something slacker working in Silicon Valley in the late 1990s can tell you, the Internet spawned more big losers than big winners by an order of magnitude.

That's why at Motley Fool Rule Breakers, we're doing plenty of research on cleantech 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 cleantech companies, including a proven leader in the solar industry, a Chinese company taking the lead on forays into new clean-coal and nuclear power technologies, and an alternative-energy exchange-traded fund that holds a wide range of companies involved in cleantech including Calpine (Nasdaq: CPN  ) , Applied Materials (Nasdaq: AMAT  ) and Air Products & Chemicals (NYSE: APD  ) .

Granted, these stocks have been pounded into the ground, along with the rest of the solar sector, and the market as a whole. But as the market begins to recover and a much more environmentally friendly administration takes office, these stocks present a compelling profit opportunity.

Not to mention, they were handpicked using Motley Fool co-founder David Gardner's Rule Breakers criteria, which were designed to uncover top-notch growth stocks by finding companies that have:

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

This approach has already led David and his team to excellent high-growth companies, like Intuitive Surgical, that should continue to outperform the market for years.

Only time will tell whether it will lead us to gains 10 times greater than those generated by the Internet, but we're always on the lookout for the next millionaire-maker megatrend and the next great growth stock.

If you would like full access to all of our research and recommendations, including our top two picks for new money, we invite you to take a free 30-day guest pass to Rule Breakers. All you have to do is click here. There is no obligation to subscribe.

This article was first published March 24, 2008. It has been updated.

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


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