SolarEdge Technologies (SEDG) – A “picks and shovels” investment in Renewable Energy

Company:                                             SolarEdge Technologies Inc

Sector:                                                 Technology – Solar/Alternative Energy

Price/Market Cap:                                 $245/$13.1B

I first encountered SolarEdge in mid-2019 while reviewing a non-Wall Street report on the solar industry ecosystem.  I was reading the report purely out of curiosity. It was only after digging in that I realized there might be some decent investment ideas within the sector. I was not interested in solar panel manufacturers that would be heavily reliant on imported raw materials and subject to fluctuating commodity prices. The installers are services businesses, characterized as cyclicals with high operating costs and scalability headwinds. Cabling is commoditized. But when I read the section about power optimizers and inverters, I had an “Aha!” moment –These are the proverbial “picks and shovels” within the renewable industry. These devices are built using semiconductor technology that I am highly familiar with, and these systems are essentially the “brains” of the solar panels built with technology that can likely be applied to numerous other form factors in and out of the sector. Opportunity.