6 Best Geothermal Stocks To Invest In

In this article, we discuss 6 of the best geothermal stocks to invest in.

The global energy market disruption in 2022 had a significant impact on the world’s efforts to transition to renewable energy and curtail carbon emissions. Renewable energy, along with sources such as wind, hydroelectric, and solar, has taken center stage in discussions that extend beyond just regular consumers. It is now a hot topic in business, investment, and financial circles. Gaining prominence as the swiftest-growing energy sector worldwide, renewable energy investments have achieved a new record in 2023, with the first half of the year experiencing unprecedented inflows. Data shows that during the six months ending in June 2023, global investments in renewable energy reached an impressive $358 billion, reflecting a robust annual growth of 22%. Consequently, numerous businesses and nations are committed to reaching the ambitious goal of achieving net-zero carbon emissions by 2050.

One such industry within the broader renewable energy sector that is gaining notice among investors is Geothermal. Geothermal energy is harnessed from the Earth’s subsurface heat, typically transported to the surface through water or steam. This energy source serves various purposes, including heating, cooling, and clean electricity generation. The generation of electricity through geothermal means is viable primarily in regions with active geothermal activity, with countries such as Iceland, El Salvador, New Zealand, Kenya, and the Philippines relying on geothermal energy to meet their electricity and heating needs.

In light of the urgent need to reduce reliance on Russian gas, policymakers and investors are giving growing attention to the previously niche geothermal energy sector, which forms a part of Europe’s energy landscape. According to research by Rystad Energy, the total installed capacity for geothermal heating is projected to surpass 6.2 GWt by 2030, marking a significant 58% increase from the current 3.9 GWt. This expansion in geothermal capacity is estimated to require an investment of approximately $7.4 billion. While geothermal technology has been available for many years, it may now be on the verge of becoming mainstream. Widespread adoption has been restricted due to its higher development costs compared to other energy sources, along with associated risks related to drilling success rates and subsurface conditions. Lately, however, an increasing number of newcomers have entered the geothermal market, with many originating from the oil and gas sector. These companies are actively pursuing pilot projects designed to address the challenges within the geothermal industry. In addition, the global geothermal industry generates a higher number of both direct and indirect employment opportunities compared to other renewable energy sources. It is estimated to create around 34 jobs per installed megawatt, surpassing the wind sector with 19 jobs and solar photovoltaic installations with 12 jobs for the same capacity.

Germany, a country that relied on Russian gas for over half its energy needs until recently, experienced a pivotal shift in mindset due to surging gas prices last year. Currently, geothermal energy serves merely 2 million out of the EU’s 100 million home heating systems, with a division between shallow geothermal systems connecting heat pumps to wells up to 500 meters deep and deep geothermal systems involving drilling as far as 5 kilometers below the surface. According to Philippe Dumas, the Secretary-General of the European Geothermal Energy Council (EGEC), the objective is to have geothermal energy contribute to a quarter of Europe’s energy requirements by the year 2030.

In that same vein, Kenya, presently standing as the eighth-largest consumer of geothermal power, leads the world in geothermal capacity under construction, aligned with its ambitious green energy targets. By 2030, Kenya aims to nearly double its geothermal power production, setting the stage for a remarkable transformation in its green energy landscape. Upon the successful conclusion of ongoing projects, Kenya is poised to secure the fourth position on the global list of geothermal power users, following closely behind the United States, Indonesia, and The Philippines. The nation’s ultimate objective is to generate more than half of its electricity from geothermal sources, signaling a significant shift towards sustainable energy practices.

Overall, in 2021, the global geothermal energy market was worth approximately $59.4 billion, and by 2022, it had grown to $62.65 billion. Projections indicate that the market will further expand and reach approximately $95.82 billion by 2029, with an expected compound annual growth rate (CAGR) of 6.3% during the forecast period. Investors looking to dive into and play the boom in the growing geothermal space can look towards some of the best geothermal stocks to invest in, which include the likes of Berkshire Hathaway Inc. (NYSE:BRK-B), Chevron Corporation (NYSE:CVX), and Chesapeake Energy Corporation (NASDAQ:CHK), among others listed below.

Photo by Mark Kuiper on Unsplash

Our Methodology

For our list of the best geothermal stocks to invest in, we have chosen the most noteworthy companies operating in the geothermal sector. The companies listed here either focus exclusively on geothermal energy or have made significant contributions, either directly or indirectly, to the industry. We have organized the list based on the hedge fund sentiment regarding these stocks, as determined from Insider Monkey’s database, which tracks 910 top-tier hedge funds as of the close of the second quarter of 2023.

6. Polaris Renewable Energy Inc. (OTC:RAMPF)

Number of Hedge Fund Holders: N/A

Formerly known as Polaris Infrastructure, Polaris Renewable Energy Inc. (OTC:RAMPF) was founded in 1984 and is headquartered in Toronto, Canada. The company specializes in acquiring and advancing renewable energy initiatives in Latin America. Polaris Renewable Energy Inc. (OTC:RAMPF) manages a 72 MW net geothermal facility located in Nicaragua, in addition to operating hydroelectric facilities and solar projects. The firm’s latest quarterly dividend of $0.15 per share was paid on August 25.

Earlier this year, Polaris Renewable Energy Inc. (OTC:RAMPF) revealed the signing of a Power Purchase Agreement (PPA) in the Dominican Republic for Canoa II. The Canoa II solar project is situated next to the already functioning 25MW Canoa I, which the company acquired in July 2022, also in the Dominican Republic.

Similar to Berkshire Hathaway Inc. (NYSE:BRK-B), Chevron Corporation (NYSE:CVX), and Chesapeake Energy Corporation (NASDAQ:CHK), Polaris Renewable Energy Inc. (OTC:RAMPF) is one of the best geothermal stocks for investors looking to dabble in the growing industry.

5. Ormat Technologies, Inc. (NYSE:ORA)

Number of Hedge Fund Holders: 19

Ormat Technologies, Inc. (NYSE:ORA) stands as a prominent worldwide supplier of renewable energy solutions, with expertise in the creation, production, and implementation of geothermal power plants and recovered energy generation (REG) systems. Conducting business in multiple countries, including the United States, Indonesia, Kenya, Turkey, Chile, Guadeloupe, Guatemala, Ethiopia, New Zealand, and Honduras, its operations are divided into three key segments: Electricity, Product, and Energy Storage.

On October 23, Ormat Technologies, Inc. (NYSE:ORA) revealed its agreement to purchase a 150 MW portfolio from Enel Green Power North America, a subsidiary of Enel SpA. The portfolio comprises two contracted geothermal power plants, one triple hybrid geothermal-solar PV-solar thermal power plant, two solar assets, and two greenfield development assets, with the total transaction valued at $271 million.

According to Insider Monkey’s data, 19 hedge funds were bullish on Ormat Technologies, Inc. (NYSE:ORA) at the end of June 2023, with combined stakes worth $205.5 million, compared to 24 funds in the prior quarter worth $273.17 million. Ian Simm’s Impax Asset Management is the largest stakeholder of the company, with more than 2 million shares worth approximately $164.34 million.

Like Berkshire Hathaway Inc. (NYSE:BRK-B), Chevron Corporation (NYSE:CVX), and Chesapeake Energy Corporation (NASDAQ:CHK), Ormat Technologies, Inc. (NYSE:ORA) stands as one of the best geothermal stocks to consider.

4. Baker Hughes Company (NASDAQ:BKR)

Number of Hedge Fund Holders: 34

Baker Hughes Company (NASDAQ:BKR), a corporation established under Delaware General Corporation Law and situated in Houston, ranks among the globe’s leading oil field services enterprises. The company delivers an array of offerings for oil well drilling, formation assessment, completion, production, and reservoir advisory services. As mentioned previously in this article, Baker Hughes Company (NASDAQ:BKR) is one such oil and gas company that is making forays into the geothermal sector.

On October 13, Baker Hughes Company (NASDAQ:BKR) concluded the test well for the geothermal energy consortium, Wells2Watts. This well will function as a foundation for simulating geothermal flow testing, hastening technological progress, and facilitating the adoption of geothermal energy as a dependable and continuous energy source.

At the end of Q2 2023, 34 hedge funds were eager on Baker Hughes Company (NYSE:BKR) and disclosed positions worth $626.37 million in the company. As of June 30, Steve Cohen’s Point72 Asset Management is the top investor in the company with a position worth $153.8 million.

ClearBridge Mid Cap Growth Strategy made the following comment about Baker Hughes Company (NASDAQ:BKR) in its Q4 2022 investor letter:

“We established a new position in Baker Hughes Company (NASDAQ:BKR), in the energy sector, which provides technological support and services to energy and industrial companies including oilfield services, oilfield equipment, turbomachinery and process solutions and digital solutions. We believe management’s focus on capital discipline has helped streamline their strategic focus and placed greater emphasis on improving cash generation and returns. Additionally, Baker Hughes’ overwhelming market share in the gas turbine and compression business creates a long-term growth runway due to the global buildout of renewable energy projects and rising liquefied natural gas capital expenditures.”

In addition to Berkshire Hathaway Inc. (NYSE:BRK-B), Chevron Corporation (NYSE:CVX), and Chesapeake Energy Corporation (NASDAQ:CHK) Baker Hughes Company (NASDAQ:BKR) is one of the best geothermal stocks to invest in.

3. Chesapeake Energy Corporation (NASDAQ:CHK)

Number of Hedge Fund Holders: 44 

Established in 1989, Chesapeake Energy Corporation (NASDAQ:CHK) specializes in the exploration and sustainable development of prominent assets within three major U.S. oil and gas regions: the Eagle Ford, Haynesville, and Marcellus Shales. The company is headquartered in Oklahoma City, a city often considered the largest “small town” in the industry, and it serves as the hub for significant natural gas and oil enterprises.

In a move towards a cleaner energy future, Chesapeake Energy Corporation (NASDAQ:CHK) announced on October 3 that it is collaborating with Eavor, a prominent geothermal technology-focused energy company, to initiate a feasibility study to evaluate the potential of geothermal energy at Joint Base San Antonio. This partnership is an outcome of the efforts by Chesapeake’s New Energy Ventures (NEV) team, established recently to assess new technologies and alternative energy solutions in pursuit of the company’s net-zero objectives.

By the end of this year’s second quarter, 44 out of the 910 hedge funds polled by Insider Monkey had held a stake in Chesapeake Energy Corporation (NASDAQ:CHK). Out of these, the largest shareholder is Howard Marks’ Oaktree Capital Management since it owns $615 million worth of shares.

2. Chevron Corporation (NYSE:CVX)

Number of Hedge Fund Holders: 73

Chevron Corporation (NYSE:CVX) is a prominent American multinational energy company with a primary focus on the oil and gas industry. Emerging as the second-largest direct descendant of Standard Oil, it was initially established as the Standard Oil Company of California. The company’s headquarters are situated in San Ramon, California, and it maintains operations across over 180 countries worldwide. The company collaborates with innovators, entrepreneurs, industry pioneers, and governmental entities to investigate opportunities, foster growth, and expand promising new technologies in the field of geothermal energy. Chevron Corporation (NYSE:CVX) established a joint venture with Baseload Capital to explore opportunities in the United States, with the initial project slated for launch in Nevada this year. Additionally, it is in collaboration with Mitsui Oil Exploration Co. Ltd to pilot an innovative geothermal technology in Japan. Furthermore, the energy giant has partnered with Pertamina, Indonesia’s largest energy company, to investigate the feasibility of powering a green hydrogen plant using geothermal energy.

As of October 26, the firm offers a quarterly dividend of $1.51 per share, yielding 3.93%. Impressively, the company has consistently increased its dividends for the last 36 years, benefiting its shareholders.

By the end of this year’s second quarter, 73 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Chevron Corporation (NYSE:CVX). Out of these, the firm’s biggest investor is Warren Buffett’s Berkshire Hathaway since it owns 123.12 million shares that are worth $19.37 billion.

The London Company Large Cap Strategy made the following comment about Chevron Corporation (NYSE:CVX) in its first quarter 2023 investor letter:

“Initiated: Chevron Corporation (NYSE:CVX) – CVX is an integrated energy and chemical producer. Its upstream segment explores for, produces, processes and transfers energy products. Its downstream segment refines and markets these products in addition to industrial plastics and fuel and lubricant additives. Among the major oil companies, CVX is the most levered to oil and gas production; it has one of the most successful exploration programs and among the best production profiles. CVX also has less exposure to the downstream business, which provides an above-peer operating margin profile and supports CVX’s return on invested capital. CVX has one of the strongest balance sheets in the oil industry with net debt/EBITDA of just 0.1x. The combination of its low cost positioning and strong balance sheet gives us greater confidence in downside protection despite its ties to a volatile commodity. We’re attracted to management’s rational approach to capital allocation, with consideration for the full cycle. In terms of capital allocation, CVX just announced a $75B share repurchase plan, and it pays a healthy 3.5% dividend. We have owned CVX in the past and it is the only Energy exposure in the Large Cap portfolio.”

1. Berkshire Hathaway Inc. (NYSE:BRK-B)

Number of Hedge Fund Holders: 109

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Disclosure: None. 6 Best Geothermal Stocks To Invest In is originally published on Insider Monkey.