Best Ideas To Participate In The Green Movement

Back in 2017, I coined the phrase ”Green Movement” and over the year in my column on ShareCafe, I specifically focused on several stocks that would benefit from the world going green. This included everything from electric vehicle penetration, renewable energy, and even the move towards organic products. 2017 ended up being a great year for the “Green Movement”.

It appears that trend is returning again as lithium stocks have started to rally, rare earth prices are appreciating and consumers are becoming more sensitive to the nasty ingredients in their foods and consumer products.

My three favourite plays on this theme longer-term are Lynas Corp (LYC), BWX (BWX), however, in the short-term, the lithium players are experiencing a mini-revival that provides the potential for the quick trader to make some quick profits.

When I look at Lynas I immediately think of these key points as to why I think it’s a must-have in any portfolio:

1) They are the only meaningful rare earth producer outside China and therefore is a very strategic asset
2) Wesfarmers made a bid a $2.25 and clearly after all their due diligence clearly saw an enormous opportunity over the long-term
3) If the world is truly going electric then the requirement for rare earths, not just in cars, but also in charging networks is enormous. Add to this wind and solar and the long-term demand is significant
4) Re-read 1) to 3)

The prices in rare earths are beginning to lift once more as shown below.

No surprise then that the Lynas share price is breaking out on the long-term weekly charts as fresh new multi-year highs come into focus. A repeat of that 2017 year-long rally looks to be upon us once again.

BWX on the other hand is riding the wave of retail consumers turning to natural and organic products with respect to skincare and wellness products. They have their own natural brands focused on skincare but also own the online Nourished Life green beauty store, so are capturing the broader push to all natural products – not just their brands. With the recent $50 million capital raising, the portfolio brands BWX currently holds could be set to expand even further.

BWX was the subject of a takeover from private equity at much higher prices several years ago and I find it hard not to believe that they are still attractive considering the size and growth of the natural and organic beauty market. It certainly is a massive growth market forecasted to reach US$54 billion in 2027 from the current US$36 billion. The M&A activity in this space is very aggressive and the big players like L’Oreal continue to jockey for position.

The European Union recently banned the use of 1300 different chemicals in cosmetics. This truly reflects the underlying push we are seeing for a more sustainable, ethically sourced, and natural society. Unfortunately, there are few ways to gain exposure to this trend or sector other than BWX, so it is why it remains a long-term favourite.

The trend in the share price is one that is still basing but I think once it can clear $4.40/4.80 it could really stage a rally similar to that seen in many of the other retailers. It might not have the explosive nature of your lithium and rare earth plays but given the industry and global backdrop its likely to be a lot less volatile and arguably more sustainable. After all, once you green you never go back.

About Greg Tolpigin

Greg Tolpigin has over 20 years of experience as a proprietary trader and high-level strategist for the major investment banks including Citigroup, Bankers Trust and Macquarie Bank.

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