The world is at a unique and exciting junction where the shift toward renewable energy and away from the traditional fossil fuel-based economy is an accelerating trend that Fidelity’s Asher Anolic remains steadfastly on top of.
“There’s no question that the U.S. and many other countries around the globe must aggressively move away from fossil fuels over the coming years in order to sustain our current standard of living,” says Anolic, who co-manages Fidelity® Growth Discovery Fund (FDSVX) alongside Jason Weiner.
Both Anolic and Weiner are intently focused on investing in wind and solar energy businesses that could be poised to benefit from a ‘greening’ of the world’s electricity grid.
Anolic says these companies no longer simply represent a long-term megatrend to be cognizant of, but rather a near-term actionable means of investing as lower cost, new technologies scale up to serve companies and governments alike, while pushing to meet more stringent targets for greenhouse gas emissions.
He highlights that wind and solar still account for only about 10% of global power generation, though Anolic expects adoption to accelerate. Additionally, in many regions of the world, the cost of wind and solar power generation is already on par with fossil fuels.
For these reasons, the fund has owned shares in SolarEdge Technologies (SEDG) and Enphase Energy (ENPH), two solar inverter companies whose products allow solar power to be converted to traditional power. “These firms essentially function as a duopoly at a critical point in the residential solar value chain,” Anolic notes.
From an infrastructure standpoint, he points to portfolio holding Eaton (ETN), which he thinks could become a key player as electrical grid and microgrid management become increasingly important amid the modernization and greening of the grid, as well as the ‘electrification of everything’ trend.
That said, Anolic’s forecast isn’t all sunny. “Despite these developments, the long-term shift away from the old energy paradigm will undoubtedly be messy and uncoordinated,” he acknowledges. “For instance, we expect to see shortages in certain parts of the supply chain.”
As a result, he anticipates that capital flight could starve existing fossil-fuel-based infrastructure, which could precipitate inflation over time because supply will be unable to keep pace with demand, making it exceedingly more difficult to bring new capacity to market.
To account for these challenges, the co-managers also have purchased stakes in firms that specialize in taking advantage of tight markets caused by the supply-chain issues in fossil fuels, including global fertilizer manufacturer and distributor CF Industries Holdings (CF), as well as titanium dioxide producer Chemours (CC).
For specific fund information, including full holdings, please click on the fund trading symbol above. Securities mentioned were fund holdings as of August 31.