Why Gevo ($GEVO) is an ESG Penny Stock Worth Watching
Young people care about the environment and this leads to more ESG (environmental social governance) investing decisions. GEVO is really a good example of this, ticker $GEVO.
- Gevo, Inc. is a renewable chemicals and advanced biofuels company headquartered in unincorporated Douglas County, Colorado in the Denver-Aurora metropolitan area.
- The company develops bio-based alternatives to petroleum-based products using a combination of biotechnology and classical chemistry.
- Gevo stock more than tripled in value in response to news that the company had secured “a binding Renewable Hydrocarbons Purchase and Sale Agreement” with commodity trading company Trafigura Trading LLC to begin supplying the latter with 25 million gallons per year (MGPY) of corn based renewable hydrocarbons, including both “low-carbon premium gasoline” and “sustainable aviation fuel,” in 2023.
- It’s the company’s largest contract to date.
Gevo’s stock price was in the penny stock range of $0.60 this summer and was indeed ripe for plucking. Recently its price spiked to $1.82 on August 20th, 2020 and did an offering at $1.30.
ESG stocks in the penny stock world are pretty rare but with Robinhood investors primed to get onboard, it’s really, I think, a great long-term opportunity. ESG, Environmental, Social, and Corporate Governance, refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business.
As young people who care about the environment, we want our dollars (inherited or otherwise) to have a positive impact on the planet.
At near $1.50 barchart considers it a sell. For me it’s a buy just under $1.00. HC Wainwright & Co considers it a buy, with a mid-range price target of $3.50. But by no means will it go up that high any time soon.
Why is this a breakthrough for the company? Gevo called the Trafigura deal “our largest single contract to date,” and added that it will lift the company to an expected $1.5 billion in annual revenue once sales begin.
The pandemic marks the break between the old world and new world of the energy sector. The EV sector is in a furious buying bullish bubble, but the future of alt fuel is not that great, although hydrogen is promising. Check out their website here. The future of the energy sector is at a pretty intense crossroads. This is a company that’s part of the new wave yet has been around for 15 years so they know what they are doing.
Gevo likely has a future as a leading renewable chemicals and advanced biofuels company. They are involved in delivering low carbon sustainable fuels and chemicals.
- CO2, THE greenhouse gas is our renewable carbon source. We know it’s possible to replace the non-sustainable, greenhouse gas generating fossil carbon-based chemicals and fuels used all across the world today with renewable carbon alternatives. Their technologies make it possible.
- They want to diversify their sustainability model: fuels for cars, airplanes, trucks, small engines, boats and ships. They want to replace the carbon source for major packaging plastics like polyester and polypropylene. Done right, they enable production of protein that helps feed the world. With sustainable farming, they can help farmers capture CO2 in the soil, improving soil quality.
I like their bold vision, and I find it appealing to invest in such a vision. So this stock has an it-factor of the ESG angle. Whether the business model will be viable is another question in the long term. They have over 50 employees in the Denver area. So what do they do? They primarily use low-carbon renewable-resource-based carbohydrates as raw materials and are developing renewable electricity and renewable natural gas for use in production processes.
A good entry point is in the $.90 to $1.00 area. To get in higher than that is considered risky, I think. Getting into stocks in the hype cycle is nearly always a bad idea as you won’t see massive gains at this multiple, relative to other penny stocks.
It’s easily one of the best ESG penny stocks with a potentially bright future in 2020. Their balance sheet is not impressive. Their August direct offering was for $50 million at $1.30, which was pretty merciful for investors but might actually overvalue the company. It’s likely worth considerably less than $1 today, even though the price is inflated currently at around $1.50.
- You can read what people are saying about it on $GEVO stocktwits here.
- Read what they are saying on Yahoo Finance here.
Would you invest in this stock? It went from $0.55 to $1.82 on the good news. Sure, but think carefully about your entry and exit points.
The stock price jumped after Gevo announced it exceeded $1.5 billion in long-term revenue contracts with the signing of Trafigura. Under the contract Trafigura is expected to take delivery of 25MPGY of renewable hydrocarbons, of which the majority is expected to be low-carbon premium gasoline with a smaller portion of the volume for sustainable aviation fuel (SAF), starting in 2023.
ESG as a movement will impact the future of investing. I think of this more as an investment than a decent trading position. Gevo was founded in 2005 and is starting to show some maturity as a business. Still, to buy a company based on a contract that will start in three years is a bit silly. Though it does make the future more viable.
- Stay up to date on Gevo’s news releases here.
- While it’s likely not a great buy at the $1.50 range it could develop into a decent position if you get in low enough.
For the future of investing, as more Millennials and GenZ inherit money and enter investing, ESG stocks will only become more important as a major value shift as oil is further disrupted with a pivot into EVs, green technology, hydrogen and alternative fuel sources.