Turmoil this week in the Ukraine sent global stock markets plunging and energy prices spiking. It’s a stark reminder that when political tensions intensify, a host of investments are put at risk. That’s why a diversified global portfolio is key to preserving wealth.

But the definition of a diversified portfolio that can protect against war and political tensions is changing. Investments in global and diversified renewables companies make great sense today.

Owning companies in oil, utilities, defense, health care, and precious metals has been the standard recipe during deep uncertainty. But this time, many blue chip American, European and Asian firms that had invested heavily in Russia stand to lose if there are economic sanctions or—even worse—war between Russia and the West. These vulnerable players are found in the banking, consumer, and energy sectors, among others.

Moreover, a wide range of companies gets hurt when the price of oil increases spectacularly. On March 3, the price of oil jumped more than $2 a barrel, as Russia’s military advance into Ukraine raised fears of economic sanctions. Increased oil prices can cut deeply into the margins of transportation and logistics firms, as well as cutting disposable income for the average consumer which in turn impacts consumer staples demand and spending in many other sectors.

An opportune investment in this dangerous scenario: Firms whose products are more competitive in a high-energy price environment and which boast diversified global businesses tied to growing economies. One such company is JinkoSolar (NYSE: JKS), a Chinese solar company that stands to benefit from environmental mandates in its home country and is actively expanding in the US and Japan.

JinkoSolar is a standout among its peers in China. The company has avoided the pitfalls of many of its competitors, namely over-leveraging its balance sheet, such as Yingli Green Energy  (NYSE: YGE) with $3 billion in debt, or missing debt payments at various times last year, such as Suntech Power (OTC: STPFQ) and LDK Solar (NYSE: LDK).

JinkoSolar’s strong financials and conservative management have also allowed the firm to expand beyond its borders more effectively than its competitors (see Chart A). Many analysts argue that JinkoSolar’s decision to not over-expand into Europe and major advances in the high-margin Japanese market have allowed the firm to be profitable, while many of its rivals have suffered losses because of their dependence on China’s subsidies.  

Chart A: Chinese Solar Developer JinkoSolar is Better Than All the Rest

Created with Y Charts

 
JinkoSolar is best positioned to benefit from China’s new renewable largesse, given its financial strength and diversification. Of course, new government mandates have floated all solar company boats in China. Many struggling Chinese solar companies have seen their stock prices increase as investors have taken renewed interest.

But some of these firms that are JinkoSolar’s peers are so badly run that investors should be cautious. Many international energy experts say that China’s solar mandates are too ambitious, which means that some firms won’t be able to adequately commercialize the opportunity.

China has a target of installing 14.5 gigawatts (GW) of solar generating capacity this year, close to Finland’s entire power capacity. Of that, China expects 8GW from so-called distributed solar, which includes rooftop panels and other small installations. The aim is to redress an imbalance caused by a glut of large solar farms in China’s vast western region, where there is plenty of sunshine but not enough infrastructure to harness and transmit the power to the densely populated south and east.

A Year of Breakaway Performance

JinkoSolar posted a fourth-quarter profit, as revenue and margins increased amid tumbling expenses. The improved performance is largely attributed to its expansion into Asia and the US and out of economically sluggish Western Europe. Total solar product shipments for the quarter rose 94 percent to 586.3 megawatts from the year-ago period.

“As we steadily gain market share in important markets such as the US and Japan, we also maintain our established advantages in China, Europe and South Africa, making our geographic mix more balanced and sustainable,” Chief Executive Kangping Chen said on the earnings conference call.

JinkoSolar has also branched out from making solar panels to developing solar projects. JinkoSolar projects total solar module shipments to be between 2.3 gigawatts and 2.5 gigawatts for 2014, up from the nearly 2 gigawatts in shipments last year.

JinkoSolar reported fourth-quarter earnings of $27.1 million, or earnings per share (EPS) of $0.24 on a diluted basis, equivalent to $0.96 per American Depositary Share (ADS), because each ADS equals four ordinary shares. Adjusted to exclude one-time items, the company earned $0.32 per diluted share, or $1.28 an ADS. It was JinkoSolar’s third-consecutive quarter of profits. Excluding certain items, the latest period’s profit was CNY1.95 ($0.32). Revenue rose 87 percent to CNY2.19 billion ($361.4 million).

Total operating expenses fell 64 percent to CNY278.5 million ($46 million), driven by large non-cash charges in the year-ago period. Gross margin widened to 24.7 percent from 3.8 percent. Solar module shipments for the quarter were 533.3 megawatts, above the company’s projection of 500 MW to 530 MW. JinkoSolar is a buy up to 45.