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Biodiesel Stocks: Will Investors Keep Ignoring Biodiesel's Revival?
9/21/2011 1:20:00 PM
(Article by Becca Lipman. List compiled by Eben Esterhuizen, CFA. Data sourced from Fidelity.)
A renewal of federal tax credit and renewable energy mandates are bringing back to life more than 52 idle Biodiesel plants in the United States. That represents over a quarter of the plants in the industry.
Biofuels boomed in 2005 when it was blended at 5% with diesel fuel sold at pumps in 20 states. "U.S. output expanded eightfold from 2004 to 2008, peaking at 691 million gallons annually," according to LA Times. State incentives including tax credits served as a catalyst for the industry.
Biodiesel output fell 54% after incentive programs and production was scaled back. But production quickly turned back around after Congress restored tax credits in December for one year and the EPA established higher biodiesel blending mandates.
"The industry's trade group, the National Biodiesel Board, last month reported that U.S. production was headed toward a record year after three consecutive months of record output." About half of the U.S biodiesel production is still derived from soy oil.
Yet the future of biodiesel remains uncertain. Many still-idle factories are now for sale, opening the industry's floodgates for opportunities in new management, partnerships, and company takeovers. Challenging questions also remain about the industry's sustainability without federal and state tax incentives. Without them, the cost of biodiesel will likely surge.
For now however, business appears to be booming.
So, which biofuel stocks are expected to see the biggest upside? To investigate, we collected data on institutional money flows, and identified a list of biofuel stocks that have seen significant institutional buying during the current quarter.
Big money managers seem to think the industry's rebound presents an attractive buying opportunity in the stocks mentioned below--do you agree?
Analyze These Ideas (Tools Will Open In A New Window)
1. Amyris Biotechnologies Inc. (AMRS): Amyris, Inc., an integrated renewable products company, offers renewable compounds for a variety of markets. Net institutional purchases in the current quarter at 4.3M shares, which represents about 25.79% of the company's float of 16.67M shares.