The widely held view is that solar and renewables, more generally, will have a tougher time under a Trump administration than they would under Kamala Harris. As the chances of that occurring have firmed, FSLR has been sold off – a logical reaction. Our 6% holding in the International Equities Portfolio is now only up ~8% as the stock pulled back from a recent high of $US300 down to $US200. In hindsight, we should have trimmed our position given the looming election and very different views from each side on renewable energy policies, affording us more flexibility to buy weakness. We may still do this, though from a less optimal level.
If Trump is elected his stance around renewables would be a headwind for First Solar and others – there’s every chance the stock could pull back further, initially at least, however, there are offsets. Trump is big on protectionist policies that generally include tariffs on goods produced outside of the US. This would, in theory, be a positive offset for FSLR, which is the only company manufacturing solar panels on a large scale in the U.S., providing it with a unique distinction in the renewables space.
While we think the election outcome is too close to call, we still believe the outlook for the solar industry looks promising regardless of who wins, given the increasing demand for electricity driven by data centres and electric vehicles. The Inflation Reduction Act (IRA), which is a Biden initiative that Harris is expected to support, provides big incentives for renewable companies. Trump has said he would wind this back, however, that would also be influenced by who controls the Senate. It is also clear that the IRA has created a stack of jobs, largely in red states which would heap pressure on Trump to keep it in play (in some form), or put in place other policies to protect these jobs.
- At this stage, the renewables trade has come off as Trump has firmed as favourite for the Nov 5 election, but we don’t think it is as clear cut as that.
MM remains bullish on FSLR US in the medium-term
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