Are you an environmentally friendly and socially responsible investor? If so, there’s an entire set of stocks to watch that specifically reflects that mindset. They’re called “ESG stocks” and they’re beginning to grow in popularity.
These are shares of companies that advance environmental, social, and governance initiatives within their respective industries and organizations contributing to a better world. It doesn’t matter if we’re talking about penny stocks or blue-chip stocks, the ESG wave is building.
Breaking Down ESG & Applying It To Small-Cap Stocks
An environmentally aware company focuses on things like climate change, renewable energy, and decreasing carbon footprints. Social responsibility takes into consideration things like employee culture—pay equality, training, benefits, ethical behavior, and astute customer service are all part of it. When we talk about governance, these are companies focused on corporate governance, such as how executives are compensated, are they treated fairly, transparency, voting rights, and diversity are all things you could consider as part of these companies.
These characteristics have been growing in popularity among the newest generation of investors, many of whom have entered the market via fast-growing brokers like Robinhood. And thanks to pandemic lockdowns, curiosity has driven a wave of interest in stocks. It has also pushed interest in things like penny stocks, for instance. If you look at some of the penny stock brokerage growth statistics for 2020, you’ll see far and away, Robinhood has become a favorite. Among these Robinhood traders, many of the Top 100 list on the platform are building exposure to ESG initiatives.
For instance, just this month, we saw a previous penny stock, Nio Inc. (NYSE: NIO) surge to new highs of over $54 a share. The company manufactures electric vehicles and to think it was one of the EV stocks under $5 at the start of the year doesn’t seem real. But it is. Nio isn’t the only ESG stock that has jumped and it won’t be the last either.
Small-Cap Stocks Surge With Growing Interest In ESG Companies
You can look for some of the big names when it comes to finding ESG stocks to buy right now. But for those who’ve seen how quickly the latest trend in EV penny stocks has accelerated, it seems fitting to look at some small-cap stocks in this ESG niche. While some are still penny stocks, others have graduated from the sub-$5 level.
Gevo Inc. (NASDAQ: GEVO), for instance, is one of the stocks under $5 that has experienced a significant jump during the third and fourth quarters. The company develops renewable chemicals and biofuels. Gevo’s entire model targets the reduction of greenhouse gas emissions with sustainable alternatives. The company uses low-carbon renewable resource-based carbohydrates as raw materials. While the company has made many strides to take advantage of this trend.
In August, Gevo saw a positive reaction in the market after announcing that it has exceeded $1.5 billion in long-term contracts after signing a deal with Trafigura, one of the world’s top commodity trading companies. The deal was set to support Trafigura’s plan to build a market for low-carbon fuels further extending the positive environmental impact of Gevo’s assets. The company also went further in October via a deal with TOTAL Cray Valley to develop a renewable isoamylene for TOTAL’s polymer division.
While shares are still down for the year, since the beginning of the third quarter, GEVO stock has nearly doubled.
Fuel Tech Inc.
Fuel Tech Inc. (NASDAQ: FTEK) is another one of the ESG penny stocks to watch on this list. The company provides solutions for controlling emissions, treating water in industrial applications, and optimizes combustion systems. While this is still a stock under $5, FTEK has made a significant move in the market since the start of the year. At one point this month, the penny stock reached a high of $2.58, which is considerable seeing as it was trading below $1 in January and even as low as $0.30 in March.
What should investors be watching with Fuel Tech right now? While it’s been a topsy-turvy year for most companies, Fuel Tech is looking ahead. The company recently reported its third quarter results and gave a business update discussing the outlook heading into 2021. While the company far exceeded estimates for both EPS and sales, it is important to pay attention to what management laid out for the coming months especially when we’re talking about ESG stocks.
"Within our Air Pollution Control (APC) business segment, we remain intensely focused on providing custom-engineered solutions that fulfill the unique needs of each of our customers, and expect the final decisions to be made on multiple projects by the end of the year which, if Fuel Tech's bids are selected, would increase backlog for 2021 and beyond by $10 to $15 million,” said President and CEO Vincent J. Arnone.
Ocean Power Technologies
Harnessing energy from ocean waves. That is what Ocean Power Technologies (NASDAQ: OPTT) looks to accomplish. The company has enjoyed one of its best years in the market in 2020. Since January 2, shares of OPTT stock have climbed from around 90 cents to highs of $3.72 and currently sit around $2. The company’s subsea solutions have gained the most interest.
Ocean Power’s product, its PowerBuoy solutions platform, provides clean and reliable electric power. Furthermore, its Subsea Battery provides constant power for projects requiring electric power offshore. The company’s recent contracts with the Adams Communications & Engineering Technology and receipt of a DeepStar project award have helped validate its systems.
With Adams, Ocean Power’s PB3 PowerBuoy solution will be evaluated in support of the U.S. Navy’s Naval Postgraduate School’s Sea, Land, Air, Military Research Initiative. Furthermore, the DeepStar project award will see the company study the deployment and operational requirements of utilizing OPT's PB3 PowerBuoy to provide remotely controllable zero-carbon power for deepwater subsea oil production applications. Members of this DeepStar consortium include Chevron, Equinor, ExxonMobil, Occidental, Petrobras, Shell, and TOTAL among other energy names.
FuelCell Energy (NASDAQ: FCEL) is one of the ESG stocks recently graduating from penny stock levels in November. It’s also one of the top-performing fuel cell stocks. Since the start of 2020, FCEL stock has climbed from around $2 to highs this month of over $8.It’s also been compared to other companies within the sector, like previous penny stock Plug Power (NASDAQ: PLUG).
In the case of FuelCell, the ESG play on this stock stems from the company’s business model. FuelCell handles all aspects of fuel-cell production, sales, installation, etc. The company recently secured an $8 million contract with the US Department of Energy to support the design and manufacture of a SureSource electrolysis platform. This platform will be integrated into and utilized for nuclear power plant waste heat for reaching efficiencies of up to 100%. This funding is a major step for the company and further validation of its technology.
This month, hydrogen and fuel cell stocks have been running strong. A potential Biden presidency and general sector strength have helped drive momentum across the market. For FuelCell, the important thing to pay attention to is, similar to EV stocks, is the hype behind the move. FCEL stock has made a consistent move early in the year but during the last week, the penny stock went parabolic. So, the biggest question is whether or not FCEL can actually sustain trading levels above the $5 mark or not, in the short term.
VivoPower International (NASDAQ: VVPR) is another one of the former ESG penny stocks to skyrocket this year. This is a solar power and battery technology company, so the obvious focus on electric vehicle stocks has wrapped VVPR into the mix. At the beginning of the fourth quarter, the company acquired a controlling interest in Tembo 4x4 e-LV B.V. for $4.7 million. Tembo provides battery-electric and off-road vehicle solutions. This helped trigger the recent momentum that VVPR stock has seen. Shares even moved as high as $24.33.
Similar to many small-cap stocks, that parabolic move didn’t hold and, after announcing a $28.8 million financing, VVPR shares fell hard. It would appear that with a resurgence in EV excitement, the former penny stock is trading higher once again.
For those looking at this as one of the ESG stocks to watch right now, keep in mind that Vivo has more than just the EV play. Earlier this year the company’s subsidiary was also awarded a contract to finish all electrical works for the 39MWdc Molong Solar Farm in Australia. The project will generate enough energy to power nearly 11,000 homes avoiding more than 53,000 tons of CO2 per year.
Compared to Vivo, Sunworks Inc. (NASDAQ: SUNW) is more of a pure-play on solar power and with leading companies like JinkoSolar soaring this year, attention is on solar energy stocks as well. While JKS shares saw a near 300% move since the first trading day of the year, Sunworks rallied more than 570% at one point this year. In November, SUNW is still up more than 375% as the push for renewable energy investing has taken the market’s attention in the second half of the year.
Much of the anticipation early on had focused on the pending merger with The Peck Company. The tie up would effectively form one of the largest solar companies in the market. That deal was recently terminated due to not receiving enough support from Sunworks’ shareholders. This ended up becoming a positive catalyst for the company in light of the $10 million in solar project wins in Q3 as well as the two new contracts Sunworks signed in the first week of October. For those looking at ESG stocks right now, solar power has become one of the top energy niches to consider.
Neither the author of this post nor Pennystocks.com have a position or financial relationship with any of the stocks mentioned above.
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