In the solar energy market, Shoals Technologies (SHLS 1.93%) has an interesting niche. The company provides wiring and components for solar energy systems. This tech has been largely commoditized, but Shoals has been able to profit with its components by providing systems that are much cheaper to install. Motley Fool contributor Jason Hall explains why he's bullish on this company in this episode of "The 5" recorded on Oct 11.
Jason Hall: A company that I've recently started to learn a little bit more about is called Shoals Technologies. Shoals Technologies does something really weird. They manufacturer a commodity products in the United States and they sell it at a higher price than most of their competitors make it for, and their customers love to buy it for them. Shoals makes electrical balance of system solutions, basically wiring and components for utility-scale solar system. Basically it's all the wires, and connectors, and components. When a utility-scale solar system gets drops, and they have to wire all the panels and they have to get all the DC current, run it through the inverters and then get that connected to the grid, it's mostly commodity business, but these guys have figured out how to customize and build systems that costs more for the components, but these components are a very small percentage of the total expense.
The reason their customers pay more, is they significantly drive down the labor costs. When you're deploying these systems, a lot of times you have to have licensed electricians to do it using the systems that most of their competitors put out. But with Shoals Technologies system with their main products, a lot of it can be done by regular labor, you don't have to have a licensed electrician doing it. That means a substantial savings in costs.
The company has a long track record of very reliable products as well. At the end of the day, these are moneymaking endeavors. If these utilities scale systems can't get power to the grid, whoever it paid for that solar system is not making money because they're selling that electricity. It's a really important part of the solution. It's something that they found, by doing it the right way their customers are willing to pay more money for. It's a really interesting approach that Shoals has taken.