The Next Millionaire-Maker Megatrend

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

Think about it. When's the last time you went to your neighborhood video store ... or went to the mall to hunt for a birthday gift ... or took something to a consignment store instead of just logging onto Netflix, Amazon.com, or eBay?

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 launch of Sputnik has come to so dominate our lives.

Even more incredible...
Investors who understood how profoundly the Internet would change our world have been able to making an absolute fortune off of it. Which is why I was so intrigued back in 2007 when I read that a well-respected venture capitalist saw a megatrend on the horizon that he said 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 -- meaning venture capitalist Ray Lane thought he had found something that could be 10 times as big as the Internet. And he would know.

After all, he's a partner at the famed venture capital firm Kleiner Perkins Caufield & Byers -- an early investor in dozens of millionaire-maker Internet companies, including Sun Microsystems and Intuit.

And he wasn't the only one taking notice
Not long after I read about Lane, I saw that Fidelity Magellan manager Harry Lange had outlined several reasons why his fund had begun focusing more on "cleantech" in general, and on solar energy in particular:

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

The next great bull market?
All of these factors certainly contributed to Wall Street's love affair with solar stocks in 2007 and early 2008. But then the market began selling off steadily, before heading into an all-out tailspin in 2009.

Stock

2007/2008 High

2008/2009 Low

Current Price

SunPower (Nasdaq: SPWRA  )

$133.61

$20.59

$18.07

First Solar (Nasdaq: FSLR  )

$311.14

$92.81

$131.95

Evergreen Solar (Nasdaq: ESLR  )

$17.27

$1.03

$1.18

LDK Solar (NYSE: LDK  )

$68.90

$4.27

$7.86

Akeena Solar (Nasdaq: AKNS  )

$15.00

$0.61

$1.10

Solarfun Power Holdings (Nasdaq: SOLF  )

$37.64

$2.80

$8.54

Data from Yahoo! Finance. All prices dividend- and split-adjusted.

As you can see, while some of those who snapped up shares at the lows have been handsomely rewarded, for the most part, long-term shareholders have been absolutely crushed.

Of course, much of this poor performance is because of general market turmoil, massive hedge fund sell-offs, cheaper oil and gas, tightening credit, and ever-present recession fears. But it also illustrates that just because you recognize a developing megatrend, 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've been doing plenty of research on cleantech and keeping a close eye on solar stocks in particular -- yet you won't find us recommending every solar stock under the sun. Among the stocks above, in fact, we've only recommended First Solar, which leads the solar-panel industry.

Granted, nearly all solar stocks are still selling well below their lofty 2007/2008 highs. But as the economy recovers and the Obama administration begins to make good on its promise of massive investments in green energy, we believe First Solar -- along with two other solar-related investments -- presents a very compelling profit opportunity.

10 times bigger than the Internet?
Only time will tell -- but at Rule Breakers, we're always on the lookout for the next millionaire-maker megatrend, and the next great growth stock.

So, if you'd like to sample our research and get all of our recommendations, including our top alternative-energy picks, we invite you to take a free 30-day guest pass. There is no risk, nor any obligation to subscribe. Stick with us if you like what you see, and pay nothing if you don't. To learn more, simply click here.

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

Austin Edwards doesn't own shares of any of the companies mentioned -- but he does look forward to a world powered by sunshine. Amazon.com, eBay, and Netflix are all Motley Fool Stock Advisor recommendations. First Solar is a Rule Breakers selection. Motley Fool Options has recommended bull call spreads on eBay. And yes, even the Fool's disclosure policy sneered at that pun about "recommending every solar stock under the sun."


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