This month’s Zacks Industry Rank opportunity comes to you via a small niche Energy industry -- Biofuels. I count just five small cap-sized firms in the industry.
Their shares are charging ahead, collectively. Year to date, biofuel returns are up a stellar 44%. The S&P 500 is up 9.6%. Over the last three years, these five biofuel stocks shot up 125%. In comparison, the S&P 500 index went up 58%.
Take a look at the stellar Biofuel share price outperformance vis-à-vis the S&P 500 index (in the chart below).
This week, I noted this set of five small cap stocks collectively stood at #14 out of 265 industries we rank. In fact, Biofuels has been a strong Zacks Industry Rank the last seven weeks, moving from #24 to as high as #10.
- What’s the underlying fundamental story?
- Around the world, plant crops have long been turned into biofuels.
- In the USA, ethanol production from corn has been huge in the Midwest.
In Brazil, large parts of sugarcane production have been turned into ethanol. The switch between putting sugar into ethanol -- and selling it as a raw commodity -- is used as a balancing process for the sugar industry.
But the new publicly listed Biofuel companies -- whose stocks are on the run the last three years -- are doing things in fresher areas. They are opening up entirely new production horizons and getting traders and investors excited.
- One firm produces diesel out of a range of biomass feedstocks.
- Another is operating wood pellet production plants.
- A third is using patented microbes (and making ethanol).
The three top Zacks Ranked Biofuel stocks—
(1) Renewable Energy (REGI - Free Report) : A Zacks #2 Rank stock. This is a $1B market cap company. The forward P/E at 13.16 is good. The Zacks Value score is A and the Zacks Growth score is A.
After a big price run-up from $16 in August, fueled by an earnings beat, shares are now at $27.
Renewable Energy Group, Inc. produces and sells biofuels and renewable chemicals in the U.S. It operates through Biomass-Based Diesel, Services, Renewable Chemicals, and Corporate and other segments.
It produces biomass-based diesel from a range of feedstocks, including inedible corn oil, used cooking oil, soybean oil, canola oil, and inedible animal fat.
(2) Enviva Partners (EVA - Free Report) : A #2 Zacks Rank stock. This is a decent sized company, with a $750M market capitalization. It actually pays nearly an 8.0% dividend. The Zacks Value score is A.
Shares price around $32.
Enviva Partners, LP is a master limited partnership, which owns and operates wood pellet production plants. It serves primarily in the United States and Europe.
Enviva Partners, LP is based in Bethesa, Maryland, United States.
(3) Aemetis : A #2 Zacks Rank stock. This is a very small company at $20M in market capitalization.
This is your classic penny stock. The shares are priced at $1.00. Shares priced as high as $2.40 in March 2018.
Aemetis, Inc. is an advanced fuels and renewable chemicals company. It produces renewable chemicals and fuels using patented microbes and processes. Aemetis owns and operates an ethanol animal feed plant in California to produce D5 Advanced Biofuels using the sorghum/biogas/CHP pathway.
The company also built, owns, and operates a renewable chemicals and advanced fuels production facility on the East Coast of India producing high quality, distilled biodiesel and refined glycerin for customers in Europe and Asia.
Aemetis, Inc. is headquartered in Cupertino, California.