In this article, we discuss 10 best ethanol stocks to buy now.
The increasing emphasis on the use of environmentally friendly products has resulted in a rise in demand for ethanol over the past few years. Ethanol, mainly derived from crops such as sugar, wheat, and corn, can be added to crude products in order to reduce their overall carbon emissions, thus reducing pollution. The price for ethanol is rising as countries shift focus towards the energy transition in the wake of global warming policy initiatives. In the short-term, a poor start to the new corn marketing year and high prices are weighing on the ethanol sector.
According to a recent study, the global ethanol market will rise at a compound annual growth rate of nearly 5% over the next five years to reach $129 billion in value by 2027. Some of the best ethanol stocks expected to benefit from this boom include Constellation Brands, Inc. (NYSE:STZ), Valero Energy Corporation (NYSE:VLO), and Archer-Daniels-Midland Company (NYSE:ADM). The US remains the largest producer of ethanol because of the ease of availability of raw materials that are required for production.
Besides the US, the market in South America is expected to witness considerable growth in the coming years, driven by the presence of several large scale producers of ethanol in the region. The ethanol market is broadly divided into two important ethanol products, synthetic ethanol and bioethanol. The raw materials required for production include kernels and starchy crops biomass, lignocellulosic biomass, Algal biomass, and industrial waste carbon dioxide, in addition to petroleum derived chemicals.
Ethanol Industry Outlook for 2022-2023
Some of the major industries that make use of ethanol include transportation, energy, and the chemical sectors. Corn-based ethanol production in the US has fallen to unusually low levels in the past few weeks, per data released by the Department of Energy in the country. In the short-term energy outlook, the Energy Information Administration reduced the 2022-23 ethanol outlook to 5.325 billion bushels, slightly below the 5.33 billion estimated for 2021-22. This accounts for 37% of total 2022-23 US corn use, the highest share in four years.
According to the government, US ethanol production will average just a little over 1.01 million barrels per day in 2022, down from the August forecast of 1.02 million barrels per day. Presently, the agency forecasts that ethanol production will average 1 million barrels per day in 2023. For context, ethanol production averaged 980,000 barrels per day in 2021. On a quarterly basis, ethanol production is expected to average 1.01 million barrels per day during the third quarter of 2022, increasing to 1.02 million barrels per day in the fourth quarter.
In 2023, ethanol production is expected to average 1 million barrels per day in the first and second quarters, falling to 990,000 in the third quarter, and expanding to 1.02 million barrels per day in the fourth quarter. Fuel ethanol blending is expected to average 910,000 barrels per day in 2022, expanding to 920,000 barrels per day in 2023. Recent traffic trends suggest that fuel demand may be improving, but a subpar US corn crop could disrupt the ethanol industry, especially if harvest results are worse than expected, per news agency Reuters.
Our Methodology
The companies that operate in the ethanol sector were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Best Ethanol Stocks To Buy Now
10. Aemetis, Inc. (NASDAQ:AMTX)
Number of Hedge Fund Holders: 5
Aemetis, Inc. (NASDAQ:AMTX) operates as a renewable natural gas and renewable fuels company in North America and India. It is one of the premier ethanol stocks to invest in. The company recently announced that it had been awarded $7 billion worth of sustainable aviation fuel (SAF) and renewable diesel (RD) supply contracts with 10 airlines. The agreements cover a total of 916 gallons of blended SAF, and come after a contract of 450 million gallons of RD with a major travel stop chain.
On June 13, Credit Suisse analyst Manav Gupta maintained an Outperform rating on Aemetis, Inc. (NASDAQ:AMTX) stock and lowered the price target to $27 from $35, noting that based on revised guidance, only 8 out of 10 new dairies of the firm would likely be online by the year-end.
At the end of the second quarter of 2022, 5 hedge funds in the database of Insider Monkey held stakes worth $12.6 million in Aemetis, Inc. (NASDAQ:AMTX), compared to 9 in the preceding quarter worth $34.7 million.
Just like Constellation Brands, Inc. (NYSE:STZ), Valero Energy Corporation (NYSE:VLO), and Archer-Daniels-Midland Company (NYSE:ADM), Aemetis, Inc. (NASDAQ:AMTX) is one of the best ethanol stocks to buy now.
9. REX American Resources Corporation (NYSE:REX)
Number of Hedge Fund Holders: 5
REX American Resources Corporation (NYSE:REX) produces and sells ethanol in the United States. It is one of the top ethanol stocks to invest in. The company looks well positioned to benefit from an uptick in US ethanol demand caused by tightening gasoline supplies. The company trades close to book value, with 40% of the share quote backed by direct cash holdings. The company is based in Ohio and was founded in 1980. It was formerly known as REX Stores Corporation.
On August 30, REX American Resources Corporation (NYSE:REX) posted earnings for the second quarter of 2022, reporting earnings per share of $0.63, beating estimates by $0.03. The revenue over the period was $240 million, up over 22% year-on-year.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in REX American Resources Corporation (NYSE:REX), with 347,205 shares worth more than $29 million.
8. Alto Ingredients, Inc. (NASDAQ:ALTO)
Number of Hedge Fund Holders: 11
Alto Ingredients, Inc. (NASDAQ:ALTO) produces and markets specialty alcohols and essential ingredients in the United States. The firm is among the best ethanol stocks to invest in. The shares of the firm have jumped recently after reports that the board of directors had authorized a share purchase program for up to $50 million of its common stock with an initial purchase authorization of $10 million. Alto Ingredients, Inc. (NASDAQ:ALTO) is based in Illinois and was founded in 2003. It was formerly known as Pacific Ethanol.
On August 8, Alto Ingredients, Inc. (NASDAQ:ALTO) posted earnings for the second quarter of 2022, reporting earnings per share of $0.29, beating estimates by $0.26. The revenue for the period was $362 million, up over 21% year-on-year.
At the end of the second quarter of 2022, 11 hedge funds in the database of Insider Monkey held stakes worth $16.8 million in Alto Ingredients, Inc. (NASDAQ:ALTO), compared to 14 in the previous quarter worth $36 million.
7. Methanex Corporation (NASDAQ:MEOH)
Number of Hedge Fund Holders: 15
Methanex Corporation (NASDAQ:MEOH) produces and supplies methanol in North America, the Asia Pacific, Europe, and South America. On July 27, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $1.16 and a revenue of $1.1 billion, up over 6% compared to the revenue over the same period last year. The firm is based in Canada and was founded in 1968. It owns and manages a fleet of approximately 30 ocean-going vessels.
On September 26, Scotiabank analyst Ben Isaacson upgraded Methanex Corporation (NASDAQ:MEOH) to Outperform from Sector Perform with a $46 price target, noting that the selloff in the stock was sharp and largely unwarranted.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm 40 North Management is a leading shareholder in Methanex Corporation (NASDAQ:MEOH), with 2.2 million shares worth more than $83 million.
6. The Andersons, Inc. (NASDAQ:ANDE)
Number of Hedge Fund Holders: 15
The Andersons, Inc. (NASDAQ:ANDE) is an agriculture company that operates in trade, renewables, and plant nutrient sectors globally. The firm features on the list of best ethanol stocks to invest in. The firm is slowly building a dividend profile. Over the past twenty-four years, it has consistently paid a dividend to shareholders. These payments have also registered growth in the past fifteen years. On August 19, the firm declared a quarterly dividend of $0.18 per share, in line with previous. The forward yield was 1.86%.
The renewables segment of The Andersons, Inc. (NASDAQ:ANDE) markets ethanol and bi-products, as well as facility operations, risk management, and ethanol marketing services to the ethanol plants it invests in and operates.
At the end of the second quarter of 2022, 15 hedge funds in the database of Insider Monkey held stakes worth $39.5 million in The Andersons, Inc. (NASDAQ:ANDE), compared to 16 in the previous quarter worth $53.8 million.
In addition to Constellation Brands, Inc. (NYSE:STZ), Valero Energy Corporation (NYSE:VLO), and Archer-Daniels-Midland Company (NYSE:ADM), The Andersons, Inc. (NASDAQ:ANDE) is one of the best ethanol stocks to buy now.
5. Green Plains Inc. (NASDAQ:GPRE)
Number of Hedge Fund Holders: 22
Green Plains Inc. (NASDAQ:GPRE) produces, markets, and distributes ethanol in the United States and internationally. It is one of the premier ethanol stocks to invest in. On July 2, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $0.73, beating market estimates by $0.58. The revenue over the period was $1.01 billion, up over 39% compared to the revenue over the same period last year and beating analyst estimates by $80 million. The firm is based in Nebraska and was founded in 2004.
The ethanol segment of Green Plains Inc. (NASDAQ:GPRE) produces and sells ethanol, including industrial-grade alcohol, distiller grains, and ultra-high protein and corn oil. The agribusiness segment engages in the grain procurement, handling, and storage activities.
At the end of the second quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $172 million in Green Plains Inc. (NASDAQ:GPRE), compared to 20 in the previous quarter worth $252 million.
4. Comstock Resources, Inc. (NYSE:CRK)
Number of Hedge Fund Holders: 25
Comstock Resources, Inc. (NYSE:CRK) is an independent energy company engaged in the acquisition, exploration, development, and production of oil and natural gas primarily in North Louisiana and East Texas. It is one of the top ethanol stocks to invest in. On August 1, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $1.00, beating market estimates by $0.05. The revenue over the period was $946 million, up over 175% compared to the revenue over the same period last year, beating estimates by $318 million.
On September 21, Citi analyst Paul Diamond maintained a Buy rating on Comstock Resources, Inc. (NYSE:CRK) stock and raised the price target to $24 from $17, noting that there was improving clarity surrounding the operational landscape for the firm into 2023.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Comstock Resources, Inc. (NYSE:CRK), with 4.1 million shares worth more than $49.9 million.
3. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 42
Archer-Daniels-Midland Company (NYSE:ADM) procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients worldwide. The firm is among the best ethanol stocks to invest in. On August 17, the company announced that it had entered into a strategic partnership with animal-free dairy company New Culture to ramp up development and commercialization of alternative dairy products. The partners will work towards joint product development and commercialization.
On August 12, Wolfe Research analyst Sam Margolin initiated coverage of Archer Daniels-Midland Company (NYSE:ADM) stock with an Outperform rating and a $117 price target, noting that the share offered highly competitive dividend growth through the nutrition segment.
Among the hedge funds being tracked by Insider Monkey, Virginia-based firm Markel Gayner Asset Management is a leading shareholder in Archer-Daniels-Midland Company (NYSE:ADM), with 1.5 million shares worth more than $113.5 million.
In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Archer-Daniels-Midland Company (NYSE:ADM) was one of them. Here is what the fund said:
“Archer-Daniels-Midland Company (NYSE:ADM) is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
2. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 43
Valero Energy Corporation (NYSE:VLO) manufactures, markets, and sells transportation fuels and petrochemical products. The company is one of the most prominent ethanol stocks to invest in. Valero Energy Corporation (NYSE:VLO) has been one of the biggest beneficiaries of the oil reserve releases of the US government, taking nearly half the crude offered, an analysis of Department of Energy data by news agency Reuters shows. It is based in Texas and was founded in 1980. Valero Energy Corporation (NYSE:VLO) was formerly known as Valero Refining and Marketing Company.
On August 24, Piper Sandler analyst Ryan Todd maintained an Overweight rating on Valero Energy Corporation (NYSE:VLO) stock and raised the price target to $150 from $142, highlighting an increasingly constructive outlook for the renewable diesel and biodiesel market.
At the end of the second quarter of 2022, 43 hedge funds in the database of Insider Monkey held stakes worth $759.8 million in Valero Energy Corporation (NYSE:VLO), compared to 47 the preceding quarter worth $438 million.
1. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 44
Constellation Brands, Inc. (NYSE:STZ) produces, imports, markets, and sells beer, wine, and spirits. The firm features on the list of best ethanol stocks to invest in. The company recently announced that it had partnered with beverage giant Coca-Cola to launch the Fresca Mixed line of vodka spritz as part of its spirits-based, ready-to-drink (RTD) cocktails in the U.S. The RTD market is expected to grow to $43.6 billion over the next five years, up from $26.4 billion in 2021.
On September 15, JPMorgan analyst Andrea Teixeira maintained an Overweight rating on Constellation Brands, Inc. (NYSE:STZ) stock and raised the price target to $287 from $263, highlighting that the beer setup was largely favorable in the second quarter.
At the end of the second quarter of 2022, 44 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Constellation Brands, Inc. (NYSE:STZ), compared to 41 in the preceding quarter worth $982 million.
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Disclosure. None. 10 Best Ethanol Stocks To Buy Now is originally published on Insider Monkey.
