 Rising diesel prices fueled by winter demand and tight supply present an opportunity for energy sector investments with strong growth... ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ |
| | Written by Jeffrey Neal Johnson 
Multiple factors, including forecasts for an extremely cold winter and rising natural gas prices, are driving a surge in diesel prices. The Department of Energy/Energy Information Administration (DOE/EIA) reported a $0.027 increase in the average retail diesel price, reaching $3.503 a gallon to close out 2024. This jump coincides with a rise in ultra-low sulfur diesel (ULSD) futures, which climbed $0.055 a gallon to settle at $2.2995, marking a 2.44% gain and the highest settlement since November 5th. Natural gas prices have also dramatically increased, with the price on the Chicago Mercantile Exchange (CME) rising almost 152% since March 26th. These price movements have significant implications for the transportation sector and the broader economy. As winter approaches and the demand for heating fuels increases, two companies are well-positioned to benefit from the rising tide of diesel prices. Why Diesel Prices Matter to Investors Diesel's role extends far beyond fueling trucks and heavy machinery. It is a critical component of the transportation, agricultural, and industrial sectors. Fluctuations in its price ripple throughout the economy. When diesel prices rise, transportation costs increase for businesses, impacting everything from shipping goods to operating farm equipment. These increased costs are often passed on to consumers in the form of higher prices for goods and services. For investors, understanding the dynamics of the diesel market is crucial, especially during periods of significant price movement. The current surge in diesel prices is particularly noteworthy given the relatively low U.S. inventories of non-jet distillates. As of December 20, 2024, these inventories stood at 116.5 million barrels, considerably lower than the five-year average (excluding 2020) of 125.4 million barrels. This combination of rising demand, driven by cold weather forecasts, and relatively low supply creates a favorable environment for energy companies. Higher demand for diesel translates to increased revenue and profitability for those involved in its production, refining, and distribution. Furthermore, the market is anticipating economic data releases, including China's PMI factory surveys and the U.S. ISM survey, which could provide further insights into global oil demand. These factors, combined with the potential for increased diesel demand as a substitute for natural gas in heating, create a compelling investment case for stocks in the energy sector. Chevron: A Prudent Investment in the Energy Sector Chevron Corporation (NYSE: CVX) is the second-largest integrated oil company in the United States and is a prime example of a company poised to benefit from the current market conditions. With a market capitalization of around $265 billion and operations spanning the globe, Chevron's diversified business model encompasses upstream and downstream segments. This vertical integration allows the company to capture value across the entire energy supply chain, from exploration and production to refining and marketing. Chevron is a Dividend Aristocrat with 37 years of consecutive dividend growth. The company recently announced a quarterly dividend of $1.63 per share. This announcement follows a strong third-quarter 2024 performance, with Chevron reporting earnings of $4.5 billion and a record cash flow from operations of $9.7 billion. These positive results, combined with a strong balance sheet, highlight Chevron's financial strength and its ability to provide investors with both capital appreciation and a steady income stream, with a current dividend yield of 4.40%. Chevron is focused on streamlining its operations and reducing costs. The company is targeting $2-3 billion of structural cost reductions by the end of 2026. Part of this initiative includes a planned restructuring charge of $0.7 to $0.9 billion after-tax in the fourth quarter of 2024. While these charges represent a short-term expense, they are expected to contribute to improved efficiency and profitability in the long run. Chevron is also actively optimizing its portfolio, as evidenced by the announced $6.5 billion sale of its Canadian assets. ExxonMobil: A Global Energy Leader Exxon Mobil Corporation (NYSE: XOM) is also one of the world's largest publicly traded international energy and petrochemical companies. The company creates another compelling investment opportunity in the current market environment. With a market capitalization of around $475 billion and operations spanning the globe, ExxonMobil is a major player in all aspects of the energy industry. Exxon Mobil’s earnings report for the third quarter of fiscal year 2024 (Q3 FY2024) revealed earnings of $8.6 billion, or $1.92 per share, demonstrating its continued financial strength. The company announced that it had achieved a record liquids production of 3.2 million barrels per day. Like Chevron, ExxonMobil is a Dividend Aristocrat, boasting 42 consecutive years of dividend increases. The company declared a fourth-quarter dividend of $0.99 per share, a rise of 4%. The current dividend yield of 3.66% provides investors with a reliable income stream. ExxonMobil is committed to returning value to shareholders and has a stated goal to repurchase over $19 billion of shares in 2024. ExxonMobil has demonstrated its commitment to rewarding shareholders through consistent dividend growth and share repurchases, further enhancing its appeal to investors. ExxonMobil is focused on optimizing its operations and achieving structural cost savings. The company has already achieved $11.3 billion of cumulative structural cost savings and is on track to deliver a total of $15 billion in savings by the end of 2027. In 2025, the company will continue to prioritize high-return, low-cost-of-supply investments, with cash capital expenditures expected to be between $27 and $29 billion. A Strategic Winter Investment The current surge in diesel prices is being driven by a combination of seasonal demand and supply constraints, presenting a compelling investment opportunity in energy stocks. Chevron and ExxonMobil, with their strong financial positions, diversified operations, and commitment to dividend growth, are particularly well-positioned to benefit from this trend. As winter approaches and the demand for heating fuels intensifies, these companies are poised to see increased revenue and profitability. Chevron and ExxonMobil present attractive investment opportunities for those looking to benefit from the predicted winter price increase. Both companies provide a balance of income and growth potential with strategies that position them for continued success in the changing energy landscape. Their commitment to long-term value and investments in lower-carbon technologies make them suitable options for beginner to intermediate investors navigating the dynamic energy market. Adding these stocks to portfolios before the winter price surge could be a strategic move for potential profit.  Read This Story Online | |
| Written by Nathan Reiff 
Experts predict that the impact of climate change on everything from housing to public health will increase over time. A study by the Energy Policy Institute of the University of Chicago estimates that for every one degree Fahrenheit increase in average temperature, costs to the U.S. economy will increase by 0.7% of GDP. Investors looking to support companies working to mitigate the effects of climate change might turn to the principles of environmental, social, and governance (ESG) investing. These investors employ a set of criteria to determine whether a company's operations and goals meet a threshold for environmental responsibility, corporate citizenship, and sound governance. It's no surprise that metrics for ESG investing vary considerably depending on the investor. Indeed, some environment-conscious investors may not be especially interested in how well a potential target company performs on the social and governance components of a screen. For investors looking to simplify the process and target companies with a strong track record of positive environmental impact, three ETFs provide broad exposure: the iShares Climate Conscious & Transition MSCI USA ETF (NASDAQ: USCL), the Xtrackers MSCI USA Climate Action Equity ETF (NYSEARCA: USCA), and the SPDR MSCI USA Climate Paris Aligned ETF (NASDAQ: NZUS). As a bonus, all three have outperformed the S&P 500 in the year leading to January 2, 2025. iShares Climate Conscious & Transition MSCI USA ETF USCL is not a traditional ESG-focused ETF; rather, it seeks to invest in large- and mid-cap U.S. companies that are likely to benefit relative to their sector peers from a transition to a low-carbon economy. The fund searches for companies based on current emissions levels, emissions reduction targets, green business revenue, and similar measures. Thus, the companies may not specifically focus on ESG goals but rather are advantageously positioned to benefit from either a regulatory environment that discourages carbon emissions or a broader secular shift in that direction. In the year leading to January 2, 2025, USCL returned just over 27%. This outperformance of the broader market may be due at least in part to its focus on red-hot tech firms like NVIDIA Corp. (NASDAQ: NVDA) and Meta Platforms Inc. (NASDAQ: META). The fund also offers investors a very modest expense ratio of just 0.08% and a solid asset base of over $2.2 billion as of the date above. Xtrackers MSCI USA Climate Action Equity ETF USCA targets the MSCI USA Climate Action Index, a broad collection of companies leading in their respective sectors "in terms of their positioning and actions relative to a climate transition." While this language is somewhat vague, the index nonetheless strikes a strong balance between market capitalizations, momentum and value traits, and sectors. As of November 29, 2024, the index consisted of a combination of information technology (26%), financials (14%), consumer discretionary (13%), communication services (12%), and other sectors. The index underlying USCA also screens for companies based on MSCI's ESG Business Involvement metrics, ensuring that companies adhere to ESG principles. Considering the complexity of the portfolio construction, USCA is a bargain for investors with an expense ratio of 0.07%. The fund has returned 27.2% in the last year and has an asset base of just under $2.4 billion as of January 2, 2025. SPDR MSCI USA Climate Paris-Aligned ETF NZUS provides investors with a broad approach to investing based on climate ideals. It seeks to both increase exposure to sustainable investments as defined by the Taskforce on Climate-Related Financial Disclosures and the EU Paris-Aligned Benchmark—a set of company guidelines for governance, strategy, risk management, and other concerns related to climate—and to limit exposure to transition risks associated with climate change. A Paris-Aligned Benchmark aligns with the Paris Agreement, an international treaty aiming to limit global temperature increases. Like USCL and USCA, NZUS tends to be weighted toward major tech players, but it has a significant tilt toward large-cap names, while the funds above are more evenly split between large- and mid-cap companies. NZUS has a one-year return of 24.3%, just beating out the broader market in the last year. In comparison with the other funds on this list, its asset base is much smaller—NZUS has under $3 million in AUM as of January 2, 2025, and a considerably lower trading volume than its rivals. These factors may negatively impact liquidity and ease of trading for climate-focused investors. Read This Story Online | |
| Written by Leo Miller 
After Google's parent, Alphabet (NASDAQ: GOOGL), announced a breakthrough in quantum computing with its Willow chip, stocks linked to quantum tech have soared. Rigetti Computing (NASDAQ: RGTI) has seen its value rise several times over in just a month. However, one company that has seen a less substantial rise is Skywater Technology (NASDAQ: SKYT). Shares are up around 61% in the past month as of the Jan. 2 close. The company’s business is more diversified than just quantum computing, which is why its value hasn’t seen the same meteoric rise. However, the company generates much more revenue than Rigetti. Yet, it trades for a fraction of its valuation. This begs the question: Is Skywater a more fairly valued quantum computing stock at this point that can benefit in the long term? Skywater: Working to Develop Next-Gen Semiconductors Skywater is a semiconductor manufacturer commonly referred to as a foundry. However, Skywater differentiates itself by focusing on developing future semiconductor technology. The company achieves its goals by uniquely funding the development of these technologies. Skywater uses what it calls its customer-funded CapEx model. Customers, through this model, provide upfront capital. It funds the development of its custom semiconductor solutions. This allows Skywater and its customers to share the risk of developing innovative technologies that may not have commercially viable applications for some time. The company's Advanced Technology Services (ATS) segment generates revenue through this co-development process. After development, Skywater’s goal is to transition into actually manufacturing and selling the product to its customers. Customers often help the company buy tools to produce these technologies. The company’s Tools segment generates revenue from this. Once Skywater sells the developed products, the revenue goes to its Wafer Services segment. In Q3, AST, Tools, and Wafer Services revenue accounted for 60%, 33%, and 7% of total revenue, respectively. The company’s $94 million in total revenue was a 31% increase from the previous year. However, Wafer Services revenue declined by 54% due to continued weakness in the industrial segment end market. Skywater: Rising Revenue and Positive Earnings Financially, Skywater is moving in the right direction. The company increased its adjusted gross margin by 190 basis points from Q3 2023. Additionally, it slightly increased its adjusted earnings before taxes, depreciation, and amortization (EBITDA) margin to just under 12%. Its adjusted EBITDA has been positive for nine straight quarters. It also had positive adjusted net income in the last two quarters. It is not expected that this will continue next quarter, as abnormally high tool revenue has contributed to this. Still, these are positive developments. Quantum Computing and Benefits of Skywater’s Business Model In the company’s annual report, it makes several mentions of its involvement in the quantum computing space. It initially started working with D-Wave (NYSE: QBTS) back in 2013. Since then, it has expanded its customer base in this market. It now includes many firms developing proprietary tech for quantum and supercomputing. D-Wave specializes in the quantum annealing approach to quantum computing. It also states it has worked on photon-based quantum computing. This is where its partnership with PsiQuantum comes in. PsiQuantum plans to develop its chips for quantum computing at Skywater's plant in Bloomington, Minnesota. However, the photonic quantum computing approach is different from the gate-based approach used in Google's Willow chip. This indicates that the technology is not as far along. However, the approach offers significant benefits over Google’s approach if it can become viable. This includes the fact that the chips can operate at room temperature. Meanwhile, Google must keep its chips at absolute zero temperature. This introduces substantial energy costs to maintain these extremely low temperatures. However, certain components of PsiQuantum’s systems still require cryogenic temperatures. Skywater has extensive experience in developing quantum computing technology using multiple approaches. This gives the company the ability to benefit long-term as technology develops. It is also generating significant revenue and adjusted profits. This could make it a more stable play than other quantum stocks, which barely have revenue. Additionally, the developmental nature of the company’s business may make its revenue streams less volatile than other foundries. For example, amid the slowdown in the chip industry aside from AI, Global Foundries (NASDAQ: GFS) has seen revenue fall substantially since 2023. Meanwhile, Skywater's revenues are rising. The next-gen nature of the technologies Skywater develops may mean customers are willing to keep paying, even in a slowdown. Although not a quantum pure play, Skywater is an interesting business with quantum upside. Its forward price-to-sales ratio is just over 2x, compared to Rigetti Computing’s 386x. Read This Story Online | Ever heard of the "60-Second Trade"?
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