Oil prices have been the topic of discussion for the month of March, and for good reason, inflating gasoline has hurt many consumers’ pockets.
But, it’s not the only energy segment that could see long-term growth prospects. Let’s look at renewable and nuclear options too, and what stocks could be top picks.
This article was originally written by MyWallSt. Read more insights from the MyWallSt team here.
Which is the fastest-growing energy sector?
The renewable energy market is currently valued at $880bn but it is expected to grow at a compound annual growth rate (CAGR) of 8.4% until 2030 and will be worth just under $2trn by then.
Nuclear energy has a current valuation of $35bn as a market, but it’s expected to grow almost ten times over in the next eight years to roughly $300bn. Some optimists believe that nuclear will be worth several trillion dollars over the course of the next few decades.
Lastly, there’s oil. Big Oil is by far and away the largest commodity, valued at roughly $2.1trn last year by IBISWorld. While oil demand is expected to slow in the long-term as the world shifts to alternative resources, the market is still growing steadily for now.
Occidental Petroleum Corporation
Two of the world’s most well-known investors, Carl Icahn and Warren Buffett, were at odds over this energy pick during March. While Icahn unloaded his stake, Buffett happily bought up the shares increasing Berkshire Hathaway’s stake in Occidental Petroleum [OXY] by more than 100% and continuing to add on, with its total now close to $7bn.
Income generated before tax just from oil and gas amounted to $2.1bn just in the fourth quarter, and the business increased its total oil reserves to approximately 3.5 billion barrels in the same period. This was up significantly up from 2.9 billion in the quarter before, and the company was opportunistic to take advantage of favourable pricing at the time.
Rio Tinto Group
Rio Tinto Group [RIO] is a sure-fire way to get exposure to the nuclear energy segment. Its core operations involve the mining of uranium, the element which is then used to generate nuclear power. Its underlying metrics fired on all cylinders in 2021; net cash from operations grew 60% to $25bn, free cash flow increased 88% to $17.6bn, and profit after tax grew 116% to $21bn.
If you’re looking for a more ESG friendly energy play, look no further than SolarEdge [SEDG]. The company supplies the products and services to power smart homes and commercial units with solar panels and monitoring systems, as well as the charging infrastructure for electric vehicles. It focuses on two renewable energy sources — solar and electrification — which the company believes will replace fossil fuel use cases over time.
From 2014 to 2021, the company went from being the 10th largest player in the inverter market to the company with the largest market share now. Revenue was close to topping $2bn in 2021, and over the last four years, total sales for SolarEdge have had a 26.5% compound annual growth rate (CAGR).
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