[Graeme]

Renewable Energy Outshining Big Oil in 2013

Two of the Dow Jones Industrial Average's (DJINDICES: ^DJI ) biggest components have become two of the biggest laggards so far in 2013. ExxonMobil (NYSE: XOM ) and Chevron (NYSE: CVX ) are dominant players in oil and have been great investments for a long time but this year they're being overshadowed by smaller renewable energy companies that are beginning to take share in the energy industry.

Recent earnings from ExxonMobil and Chevron show the challenges they're facing. Yesterday, ExxonMobil said revenue fell 2.4% in the third quarter and net income was down 21.6%, primarily on lower refining earnings. A similar trend played out today for Chevron, which reported that revenue was up just 0.8% to $58.5 billion and net income was down 5.8% to $4.95 billion, or $2.57 per share. As a result, Chevron is the worst performer on the Dow Jones Industrial Average today, falling 1.9%, and you can see that performance has been weak for both stocks this year.

In contrast, both First Solar (NASDAQ: FSLR ) and SunPower (NASDAQ: SPWR ) have reported earnings in the past two days that have crushed everyone's expectations. First Solar earned $1.94 per share, demolishing the $1.18 estimate, and SunPower's $0.44 in earnings was well above the $0.29 estimate from Wall Street.

As renewable energy companies have grown and improved profits, their stocks have outperformed big oil by a wide margin, as you can see below.

Long term, the trends continue to be in the favor of renewable energy and against big oil. Solar projects in Chile, Hawaii, Germany, and elsewhere are competitive with the grid without subsidy, and costs are only coming down. New markets like Saudi Arabia, Africa, and China are just scratching the surface of their potential.

On the flip side, oil is becoming harder to find, forcing explorers to look in ultra-deepwater and shale deposits around the world. This increases the cost for oil, and as demand for gasoline has dropped in the U.S. and Europe there's become less appetite for passing those costs on through higher gas prices. Not only is big oil's top line not growing, it's getting pressure on the bottom line as well.

Big oil isn't going away overnight, but it may be time to start considering a little renewable energy exposure for your portfolio. Energy trends are certainly tilting in their favor.

fool

[John_A]

Renewable Energy Outshining Big Oil in 2013

Excellent progress sounds like. The sooner everything else proves can prove that oil is becoming obsolete, the better.

[Graeme]

John, Oil has no future for the US or anywhere else. It's vitally important that everybody moves away from oil and toward renewables. Everybody here knows that oil production is declining. I posted in the "The Set Up For a Collapse of Oil Prices" thread that there is a belief by some analysts and Saudis that there will be a glut in oil and consequent decline in oil prices. But they are really deluding themselves. Here is a better option:

Renewable Energy Portfolio Outpaces Market

The Paradigm Portfolio is a select list of green investments that are considered best positioned to benefit from the energy paradigm shift away from foreign oil and polluting coal and toward cleaner power alternatives. These leadership companies are culled from a list of nearly 250 alternative energy stocks that play an important role in redefining our energy future.

Accounting for additions and removals from the Paradigm Portfolio since inception in January 2013, returns* have profited 35%. This greatly outpaces returns of the overall market – the S&P 500 was up 24% and the tech-heavy NASDAQ gained 27% over the same time period.

cleantechnica

[misterno]

It is the economics that dictate everything

if solar panels are getting cheaper by the year, lower cost of power generation from solar is inevitable thus this will have a domino effect in the energy markets. Sooner or later something has to give. Inthis case it will be the most expensive which is oil.

[ROCKMAN]

“Everybody here knows that oil production is declining.” Apparently the EIA and IEA missed the news: their stats show the world is currently producing more oil per day now than ever before in history. In fact, an increase of almost 20% in the last 10 years. Increasing values of the stocks representing any segment of the economy is an indication of how those stocks are doing…not the output of the segment itself. It’s great that more alts are being developed. But in 2012 the U.S. posted the biggest increase in oil production in the world and the largest increase in U.S. history. Oil production in the U.S. jumped 14% last year…a much bigger % gain than the alts have experienced over several years in the US. And how bad are times for US oil producers? In the last 10 years their gross revenue has increased over 400% from $62 billion/yr to $277 billion/yr. Oh woe is us. LOL.

The stats will change in time, of course. But IMHO it may be a tad early to start writing the obituary for oil. And while high oil prices may have boosted development of the alts it has also triggered a big increase in coal production including for the US which has now claimed the title of 4th largest coal producer on the planet. Wanna know how much coal Btu's have increased compared to alt Btu's in recent years? Hmm...no, you really don't. While it's great that solar panel prices are coming down but at the same time all the economies are suffering from high fossil fuel costs which limit how much capital is available for the alts and everything else. That's part of the false economics about alts which is occasionally presented. Many alts might outshine the ff IF they existed at the same time. But they don't and will have difficulty being expanded due to capital limits produced by the high price of ff. And that's the bitter irony: we could more readily afford to expand the alts during times of low ff prices. Unfortunately it's the high ff prices that drive the desire for alt expansion at the time when fewer funds are available to do it. Folks can tout percentage gains of the alts all they want but it doesn't change the sad fact that even with today's high ff costs the globally the alts are providing an insignificant amount of energy in absolute terms compared to ff's.

[ROCKMAN]

“Two of the Dow Jones Industrial Average's biggest components have become two of the biggest laggards so far in 2013. ExxonMobil and are dominant players in oil and have been great investments for a long time but this year they're being overshadowed by smaller renewable energy companies that are beginning to take share in the energy industry.”

There are other opinions apparently: Reuters - Warren Buffett's Berkshire Hathaway disclosed a new $3.45 billion stake in Exxon Mobil Corp...it signals Buffett's approval of one of the world's largest and most profitable companies. "He likes buying big, established global brand names, and Exxon is a good flight-to-quality stock," said Gheit at Oppenheimer.

Warren Buffett…what does that crazy old man know about stock values? LOL.