5 Best Biofuel Stocks in 2022
As energy prices have climbed, investors are taking a closer look at different types of alternative energy. Of course, many people jump to renewables such as wind and solar. They grab a lot of headlines. Although, the biofuel stocks below could be good to consider as well.
With fewer people interested in biofuels, this might present better value investing opportunities. And there are many advances happening in this industry. On top of that, the government continues to push for biofuels.
To start, let’s take a look at the biofuel industry as a whole. Next, we’ll dive into some of the best biofuel companies to invest in. You’ll find company highlights that helped these stocks make this list…
Investing in Biofuel
With renewable feedstocks such as sugar crops, we can produce biofuels. Two of the most common are ethanol and biodiesel. As a result, the energy source is more sustainable than fossil fuels. And of course, there are some tradeoffs for producing biofuels, such as additional land and water use. Although, it’s still useful to add to our sources of energy production.
As we’ve seen huge advancements in farming yields, we can produce more food than we need to eat. Supply chains have come a long way as well. And advances in biofuel production continue to improve the efficiency…
First generation biofuels usually come from edible biomass (sugars, starches, etc.). It’s often a direct tradeoff with our food supply. But going to second generation biofuels has less impact on our food supply. This energy production comes from non-food crops and waste biomass.
And going one step further, third generation biofuels are further removed from food production. They primarily use algae as a feedstock. Algae can produce biomass faster and on reduced land surface. This has some huge benefits but there are still many technical challenges to overcome. Nonetheless, it’s improving each year thanks to both private and public investment…
To speed up biofuel innovation, government incentives are playing a part. Recently, in a move to help reduce gas prices, the Environmental Protection Agency (EPA) increased the amount of ethanol that must be blended into gas in the U.S. And these moves continue to support some of the best biofuel companies…
Best Biofuel Stocks
- Archer-Daniels-Midland (NYSE: ADM)
- Bunge (NYSE: BG)
- Darling Ingredients (NYSE: DAR)
- Green Plains (Nasdaq: GPRE)
- Gevo (Nasdaq: GEVO)
Archer-Daniels-Midland is the largest company on this list of biofuel stocks. It’s a huge agriculture company that spans around the globe. And this helps it provide feedstocks for creating biofuels. ADM produces biodiesel from vegetable oils in the EU, Brazil, Canada and in the U.S.
Although it’s not a direct play into investing in biofuels, ADM is one of the more reliable companies. It also continues to reward investors with bigger dividends each year. And its payout ratio is low. So, the company should be able to continue increasing it in the years ahead.
Bunge is another huge agriculture company. It’s also built an impressive supply chain that delivers from farm-to-consumer. And with this vertical integration, it’s also focused on energy production and consumption…
In 2021, Bunge announced a partnership with Chevron (NYSE: CVX). This joint venture will help meet the demand for renewable fuels. Bunge has also partnered with BP (NYSE: BP) in the past to build a leading company in the low carbon ethanol, sugar and bioelectricity market in Brazil.
To see more food stocks, check out this list of the best agriculture stocks. There are many good reasons to invest in these companies. For example, they can pass along inflation costs to their customers.
Darling Ingredients is a smaller biofuel stock than the previous two. Although, it gives some more direct exposure into the renewable energy production. The company is based in Texas, but has more than 200 processing plants around the world.
Darling Ingredients focuses on reducing food waste. It creates the key ingredient for renewable diesel from used cooking oil and meat by-products. And as more companies set sustainability goals, Darling Ingredients can lend a hand. This should help push sales higher in the years ahead.
Green Plains is a leading ag-tech company that’s based in Omaha, Nebraska. It’s one of the largest ethanol fuel producers in North America. It has more than 10 biorefineries throughout the U.S. It also processes roughly 300 million bushels of corn each year.
Founded in 2004, Green Plains has grown quickly to become one of the best biofuel companies. And this makes it a top biofuel stock to consider buying. According to the USDA, every gallon of biofuel reduces greenhouse gas emissions by 46% compared to a gallon of gasoline.
Gevo is the smallest company on this list. It comes with more risk, but also direct exposure to advanced biofuels. The company works with renewable chemicals to create bio-based alternative fuels.
Gevo is helping to commercialize the next generation of renewable gasoline, as well as diesel and jet fuel. The company recently bought land for a new Net-Zero 1 facility. It expects to produce 55 million gallons per year of sustainable aviation fuel. And since Aviation is a big contributor to CO2 emission, Gevo should see strong demand for its renewable jet fuels in the years ahead.
Investing Beyond Biofuel Stocks
The best biofuel stocks might be a great addition to your portfolio. Although, there are many factors to consider. And it’s good to do you own due diligence. When it comes to investing, it’s not a one size fits all…
When buying into many different stocks, you can also limit risk. And there are many investment opportunities out there today. But the best investments come and go. The markets are always moving and these investment newsletters can help you stay up-to-date.
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About Brian Kehm
Brian Kehm double majored in finance and accounting at Iowa State University. After graduating, he went to work for a cryptocurrency company in Beijing. Upon returning to the U.S., he started working with financial publishers and also passed the CFA exams. When Brian isn’t researching and sharing ideas online, you can usually find him rock climbing or exploring the great outdoors.