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7 Stocks to Buy to Hedge Against Rising Oil Prices

Following the initial intrusion of the novel coronavirus pandemic and its resultant mitigation measures, most people looked forward to the time when the…

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This article was originally published by Investor Place

Following the initial intrusion of the novel coronavirus pandemic and its resultant mitigation measures, most people looked forward to the time when the crisis would become a chapter in a history book. While the SARS-CoV-2 virus remains a stubborn uninvited houseguest, it seems the worst of it is behind us. But that has created its own consequences, necessitating a deeper look at specific stocks to buy.

Primarily, as the vaccination rollout inspired a gradual relaxing of Covid-19 protocols, people stormed out of the home as retail revenge, or the desire to make up for lost time through aggressive purchases, took hold. Unfortunately, this also created a demand bottleneck as the sudden surge in consumer activity met an energy supply chain that was unable to address everyone’s needs. Thus, inflation-resistant stocks to buy soared in the process.

Even worse for those hoping for prices to cool down, it’s not entirely clear when underlying circumstances will normalize. For instance, facing incredible economic pressure and a low job approval rating, the Biden administration and five other nations recently “announced a coordinated effort to tap into their national oil stockpiles.” Hopefully, the measure will provide some relief. Or you can hedge energy costs with certain stocks to buy.

Honestly, it might be a conducive idea to consider a direct approach rather than to depend on government intervention to control rising oil prices. For one thing, tapping into the national stockpile is largely a one-off event. If broader pressures continue to mount, we don’t want to exhaust the reserves since they also carry foreign policy and national security implications. Therefore, hedging strategies with stocks to buy sounds more appealing.

Also, increased energy costs represent a global challenge. Indeed, what may be a positive action for one set of nations could be a detriment to another set. Further, Covid-19 spikes could create sharp ebbs and flows of demand and supply, posing more pricing issues. Again, investors may be better off actively hedging against the wild energy market with these stocks to buy.

  • Murphy USA (NYSE:MUSA)
  • Transocean (NYSE:RIG)
  • Franco-Nevada Corp (NYSE:FNV)
  • Peabody Energy (NYSE:BTU)
  • Southern Copper (NYSE:SCCO)
  • Archer Daniels Midland (NYSE:ADM)
  • Robinhood Markets (NASDAQ:HOOD)

Finally, another factor to consider is the winter season. Experts predict an unusually cold winter, not just in the U.S. but also in Europe. That could spike up demand for heating oil, which may impact the energy market broadly. Once again, hedging with stocks to buy seems an appropriate idea.

Stocks to Buy: Murphy USA (MUSA)

Murphy USA gas station and convenience store located on an out parcel of a Walmart SupercenterSource: Lawrence Glass / Shutterstock.com

Some stocks to buy like Murphy USA don’t require a convoluted thesis to appreciate. Instead, shares have soared under the simple axiom, if you can’t beat ‘em, join ‘em. With so many drivers feeling the pinch whenever they pull up to the gasoline station, the initial temptation is to rage at how the operators are gouging the public.

Once cooled off, however, buying shares of publicly traded retail gas stations seems an awfully enticing idea. Sure enough, MUSA stock has been one of the stronger performers, gaining over 44% on a year-to-date basis heading into the final session before Thanksgiving.

Admittedly, as I’ve mentioned in prior InvestorPlace articles, I’m not the biggest fan of buying into robust strength. Over the last six months, MUSA gained 36.5%, which is an unusually strong performance for the equity unit. Then again, it’s an unprecedented time in the world.

As well, I’m hesitant about declaring that oil prices will fall. People said that about used cars but their pricing has been incredibly resilient. Therefore, it might make sense to consider MUSA as one of your hedging stocks to buy.

Transocean (RIG)

oil rigs on water, representing high-risk stocks like RIGSource: Shutterstock.com

To say that Transocean has seen better days would be an almost criminal understatement. Prior to the 2008 financial meltdown and the ensuing Great Recession, shares of the offshore driller — one of the world’s largest — commanded a very healthy three-digit price tag. Today, RIG trades hands in single-digit territory and a low one at that.

Nevertheless, on a percentage basis, Transocean has represented one of the best stocks to buy over the trailing year, where RIG has gained over 60%. On a YTD basis, the performance is still quite respectable at nearly 41% up.

To be fair, at a price tag of a few cents over $3, RIG is speculative. Frankly, in any other circumstance, I probably wouldn’t mention the company (nor the underlying industry for the matter). However, times have changed and Transocean could benefit from favorable currents.

True, the trailing-12-month (TTM) revenue performance leaves much to be desired. However, an influx of issues ranging from colder weather to critical commodity crunches in various parts of the globe may help drive up oil prices, making RIG one of the speculative stocks to buy.

Stocks to Buy: Franco-Nevada Corp (FNV)

precious metals stocks Close up lump of gold mine on wooden tableSource: Shutterstock

While mining firms exposed to precious metals may be an obvious play to combat energy price inflation, that doesn’t necessarily condemn the idea to ineffectiveness. Look, we’re in a market environment where retail investors flooded into cryptocurrencies to hedge against the devaluation of the dollar. Frankly, precious commodities — you know, the stuff you can hold in your hands — present a more palatable investment thesis regarding inflation protection.

While you could put your money into physical bullion, for those that want to stay in the equities market, you can instead look at companies like Franco-Nevada Corp. What I like about FNV is that it’s a diversified royalty and streaming firm. In a nutshell, the corporation provides funding to metals producers and in return, get a cut of the proceeds, either through a percentage of revenue (royalty) or actual metals (streaming).

In this manner, FNV is less exposed to the wildness and vagaries of the precious metal mining business. As well, the company’s cash flow is more predictable since the royalty or streaming terms are spelled out ahead of time.

If you’re for a solid mixture of profitability and stability in your inflation-hedging stocks to buy, FNV fits the bill.

Peabody Energy (BTU)

A man holds coal in his hands over a pile of more coalSource: Shutterstock

Easily the riskiest company on this list of stocks to buy, there’s a chance that Peabody Energy could drop lower. So, I’m going to need you to do yourself a favor. Only invest a small portion of your speculation funds in BTU.

But then, why am I mentioning Peabody, which is the largest private-sector coal company in the world? After all, coal is a rather anachronistic commodity in light of various energy sources that we use today. Also, former President Trump attempted to make coal great again. I’m going to give credit to the man, he’s incredibly charismatic. But even his dynamic personality couldn’t breathe life into the coal market.

Well, it turns out that coal is a catalyst for rising oil prices throughout the world. According to the Wall Street Journal, a coal shortage that imposed an energy crisis in China is “rippling beyond its borders, threatening to disrupt supply chains and farming in countries that rely on its exports of a chemical used in fertilizer and diesel exhaust systems.”

Additionally, the shortage is also driving up demand for hydrocarbons, particularly with the anticipated winter freeze. Thus, BTU could see another leg higher.

Stocks to Buy: Southern Copper (SCCO)

Piece of copper set against black backgroundSource: Coldmoon Photoproject/Shutterstock.com

Since prices of almost anything of value are going up, Southern Copper — a mining firm that specializes in the namesake commodity — represents one of the most viable stocks to buy under the present inflationary environment. In fact, several areas across the U.S. have reported thieves stealing copper, causing great inconveniences to their associated communities.

While it’s not the most encouraging thought, copper vandalism will probably increase over the years. That’s because the metal is an important component of advanced technologies, such as electric vehicles. Further, the wind and solar energy industries account for about 60% of copper demand. Since modern society is in no hurry to reverse the sustainability trend, the price of copper seems to have an inevitable direction — up.

Also, should lofty gasoline prices become a permanent fixture, consumers will likely purchase more EVs. In turn, that would drive up copper demand, along with other critical materials. Thus, on a longer-term basis, SCCO is one of the best stocks to buy if you can’t stand the pain at the pump.

Archer Daniels Midland (ADM)

Archer-Daniels-Midland (ADM) logo on sign at office campusSource: Katherine Welles / Shutterstock.com

As a food-processing company, Archer Daniels Midland arguably offers a case for stocks to buy whether you’re talking about an inflationary environment or a deflationary one. Although humankind has developed incredible technologies (especially in recent years), we still need the basics. Therefore, ADM has a permanent relevance that relatively few companies can touch.

It’s not just pretty words either. In the first three quarters of this year, Archer Daniels Midland has already generated $62.2 billion in revenue. This tally puts it only 3.4% below that of the full year’s sales result for 2020. It also means that ADM only needs a very modest performance in the fourth quarter to produce a blistering performance compared to what we’ve seen over the past 6 years.

Better yet, Archer Daniels is aligning its business with contemporary consumer trends. For instance, plant-based meat has become very popular, especially during the food supply chain crisis of 2020. Moreover, the Covid-19 pandemic exposed the cruel treatment of animals raised for protein. This might convince more people to take the plant-based plunge, which should bolster ADM stock.

Stocks to Buy: Robinhood Markets (HOOD)

A magnifying glass zooms in on the website for Robinhood (HOOD).Source: dennizn / Shutterstock.com

This is going to be a strange idea so bear with me for a second. Back when the pandemic first sent worker bees to their living rooms, millions of Americans found themselves with extra time on their hands. Rather than sitting in a car stuck in traffic, quite a few turned their hand to the equities market, forcing the WSJ to opine that everyone’s a day trader now.

Since the great pivot to the investment sector, many people received a real-world education about high finance. Out of nowhere, people are paying significant attention to the market, consulting with others on social media about which stocks to buy to hedge against the latest threat, this time being inflation.

Obviously, the platform undergirding Robinhood Markets has dominated the news cycle for its gamified interface and legions of young traders. Thus, in a way, Robinhood may be the best place to park your money if you fear a loss of purchasing power.

That’s because a large demographic will facilitate their hedging activities via the online broker. By having equity in HOOD, you’re not betting on the outcome but rather selling tickets to the game.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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Fresnillo (OTCMKTS:FNLPF) Rating Lowered to Sector Perform at Royal Bank of Canada

Fresnillo (OTCMKTS:FNLPF) was downgraded by stock analysts at Royal Bank of Canada from an “outperform” rating to a “sector perform” rating in…

Fresnillo (OTCMKTS:FNLPF) was downgraded by stock analysts at Royal Bank of Canada from an “outperform” rating to a “sector perform” rating in a research note issued to investors on Thursday, The Fly reports.

Several other equities research analysts have also issued reports on the company. Scotiabank reaffirmed a “sector perform” rating on shares of Fresnillo in a research report on Wednesday, October 13th. Jefferies Financial Group lowered Fresnillo from a “buy” rating to a “hold” rating in a research report on Thursday. Zacks Investment Research lowered Fresnillo from a “buy” rating to a “hold” rating in a research report on Wednesday, January 19th. Morgan Stanley reaffirmed an “equal weight” rating on shares of Fresnillo in a research report on Wednesday, September 29th. Finally, JPMorgan Chase & Co. reaffirmed a “neutral” rating on shares of Fresnillo in a research report on Thursday, October 28th. Nine equities research analysts have rated the stock with a hold rating and one has assigned a buy rating to the stock. Based on data from MarketBeat.com, the company currently has an average rating of “Hold” and an average price target of $13.00.

OTCMKTS FNLPF opened at $8.60 on Thursday. The business has a fifty day simple moving average of $11.53 and a 200 day simple moving average of $11.51. Fresnillo has a 12 month low of $8.36 and a 12 month high of $16.14. The company has a debt-to-equity ratio of 0.31, a current ratio of 4.98 and a quick ratio of 4.11.

Fresnillo Company Profile

Fresnillo Plc is a holding company, which engages in the production of gold and silver. It operates through the following segments: Fresnillo, Saucito, Cienega, Herradura, Soledad-Dipolos, Noche Buena, and San Julia. The Fresnillo, and Saucito segments are located in the state of Zacatecas, an underground silver mine.

Recommended Story: How can investors invest in the S&P/TSX Index?

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UK SMEs join forces to drive energy storage innovation

Sodium-ion battery module meets artificial intelligence at testbed to drive technologies to market.
The post UK SMEs join forces to drive energy storage…

Sodium-ion battery module meets artificial intelligence at testbed to drive technologies to market

A trio of SMEs have joined forces to accelerate to market innovations in energy storage.

AMTE Power, Brill Power and Starke Energy are collaborating at a commercial-scale testbed at Harwell Campus in Oxfordshire, England.

They aim to prove three new technologies at a battery energy storage system to be integrated with a solar array operated by the Science and Engineering Facilities Council (STFC) at Harwell Science and Innovation Campus.

AMTE Power develops new battery cell technologies; Brill Power is a spin-out from the University of Oxford which develops intelligent battery management and control technology; and Starke Energy uses artificial intelligence to optimise batteries.

First time deployment
The testbed will demonstrate AMTE’s sodium-ion battery module using Brill Power’s technology and Starke’s energy management system, which links stored energy into the electricity grid and markets.

This is the first time that these technologies are being deployed in a commercially relevant project.

Emma Southwell-Sander from the STFC and manager of the EnergyTec Cluster at Harwell Campus said the project “is a prime example of how Harwell’s EnergyTec cluster is facilitating access to young innovative businesses to a wealth of resources to supercharge their route to market”.

Emma Southwell-Sander

The energy storage system at Harwell is expected to be operational from March and will is intended to run for a minimum of 12 months.

As a benchmark, in the project’s first phase, AMTE Power will deploy lithium-ion cells before switching to use the company’s sodium-ion cell technology in the second demonstration phase of the project.

AMTE’s director of business development John Fox said: “The ability to test our new products in a commercial operating environment is invaluable. Having access to the Harwell site will accelerate the time to market for our new energy storage products.”

Network resilience
Sodium-ion batteries offer an alternative to lithium-ion in those markets where cost is more important than weight or performance: particularly energy storage, network resilience and energy in remote locations. Improvements in competitiveness of energy storage technologies will accelerate the uptake of small-scale renewable sources of electricity generation.

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The commercialisation of sodium-ion technology lags behind Li-ion but offers significant advantages that makes it suited as a solution for static energy storage applications; it uses earth-abundant elements, has long cycle life and intrinsic safety advantages.

Brill Power’s battery intelligence technology will be deployed to ensure optimal battery usage, lifetime, performance, and safety. Real-world data and operating parameters will be collected, which will support further optimisation of the technologies deployed in the demonstrator.

Brill launched its first battery management system last year, which is supported by its proprietary battery monitoring and analytics software platform.

“Brill Power’s battery intelligence technology can improve all aspects of advanced battery systems, including performance, cost of ownership, reliability and safety,” said the company’s chief executive Christoph Birkl.

“This testbed will enable us to integrate our technology with other cutting-edge battery innovations and collect real-world data on a commercially relevant site”.

Optimise storage

Starke Energy’s energy management system will integrate the battery system with the local energy network at Harwell.

Using artificial intelligence, it learns how much energy is being produced by renewable sources, and how much is being used to optimise the storage and release of energy across a network of connected intelligent batteries.

Exclusive industry insight: Not all storage solutions are created equal

The project is part of the Interreg North-West Europe STEPS programme that is supporting 40 businesses through, in its first phase, a competitive product enhancement voucher programme – valued at €12.5k each.

AMTE, Brill and Starke were all awarded first phase vouchers in March 2021 and each have benefited from support from Cambridge Cleantech, the UK’s longest-standing membership organisation for the cleantech sector, and the Faraday Institution, the UK’s independent institute for electrochemical energy storage R&D, market analysis and early-stage commercialisation.

This has included tailored testing, introductions to potential end-users and market knowledge to strengthen the competitiveness of their products.

Faraday Institution chief executive Professor Pam Thomas said the energy storage project was “another example of the Faraday Institution acting as convener for partnerships between UK industry, academia and funding organisations as a route to commercialise breakthrough science and engineering to maximise economic value”.

Sam Goodall, head of international projects at Cambridge Cleantech added that the three SMEs “have technologies that can revolutionise the energy storage sector, from AMTE’s Na-ion batteries which remove the need for mineral extraction, Brill Power who make batteries last longer and be more efficient, and Starke’s energy management system which helps optimise the use of the energy and how it is sold together based on AI and IoT”.

The post UK SMEs join forces to drive energy storage innovation appeared first on Power Engineering International.


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Alamos Gold: Haywood Lowers Target To $12.75 Following 2022 Guidance

Last week, Alamos Gold Inc. (TSX: AGI) reported its fourth quarter and full-year production results, as well as their 2022
The post Alamos Gold: Haywood…

Last week, Alamos Gold Inc. (TSX: AGI) reported its fourth quarter and full-year production results, as well as their 2022 to 2024 production estimates.

For the fourth quarter, Alamos Gold produced 112,500 ounces of gold, bringing the full year 2021 production to 457,200 ounces, which was the lower range of guidance. Costs have not yet been finalized but the company says that it is expected to be consistent with their guidance.

The company also provided 2022 guidance, which included expected gold production of 440,000 to 480,000 ounces. Cash costs are expected to be between $875 to $925 per ounce and all-in sustaining costs are to be between $1,190 to $1,240 per ounce. Total capital expenditures will be between $305 and $345 million, while exploration is expected to cost $27 million for 2022.

For the longer run, the company expects these numbers to grow to 460,000 to 500,000 ounces of gold in 2024, with cash costs of $650 to $750 per ounce and $950 to $1,050 of all-in sustaining costs per ounce.

Currently Alamos Gold currently has 13 analysts covering the stock with an average 12-month price target of C$12.46, or a 36% upside to the current stock price. Out of the 13 analysts, 1 has a strong buy rating, 6 have buy ratings, 5 have holds and 1 analyst has a sell rating. The street high sits at C$17.50 or a 91% upside to the current stock. While the lowest price target sits at C$9.98.

In Haywood Capital Markets’ note, they reiterate their buy rating but lower their 12-month price target from C$15 to C$12.75, saying, “lower production and higher costs for 2022,” and that inflation is finally starting to impact the production costs.

For the fourth quarter and full-year production numbers, they came in line with Haywood’s estimates although they note that the full-year production numbers came in the lower half of guidance.

For the companies three-year guidance, Haywood expected 2022 production to be 485,000 ounces, below their high-end figure. While cash costs were expected to be $785 per ounce, lower than their guided number. This is the same for all-in sustaining costs as Haywood expected it to be $1,055 per ounce. Haywood says that this cost increase in 2022, “is due to industry-wide cost inflation as well as temporary higher costs at Mulatos.”

Below you can see Haywood’s estimates versus the company’s guidance.


Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

The post Alamos Gold: Haywood Lowers Target To $12.75 Following 2022 Guidance appeared first on the deep dive.



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