Energy and commodity prices are rising disproportionately to wages, and no one knows how high they can rise. The sharp rise in electricity is raising food prices, and a significant increase can be a problem for low-income groups. Among the vital commodities whose prices affect everyone, we can include electricity, water and gas. Can investing in producers of these commodities be a good choice to compensate for the high rise in prices of these commodities?
Every price increase will ultimately be paid for by the consumer. Energy providers pass on wholesale prices and costs to end-user prices. But what is the reason for the increase? Supply and demand are affected by a number of factors that increase prices. Cold winters "put" pressure on energy supplies, air conditioning is used during the hot summer season, and there are dozens of such examples. With the rise in electricity prices comes the issue of investment in energy companies, which could be a potentially good form of "hedging" against rising prices in this segment.
From the American market, we can mention the company NRG Energy. The integrated energy company operates in the USA. It generates, sells and supplies electricity to 3.6 million domestic, industrial and commercial consumers. Electricity is produced using natural gas, coal, oil, solar, nuclear and battery storage. Prediction of future development looks positive. NRG Energy has completed the acquisition of Direct Energy for $3.6 billion this year. Another positive fact is that NRG Energy focuses on the production of clean energy in order to reduce greenhouse gas emissions and set a target of zero net emissions by 2050. Over the last year, the company's share price has risen by about 19%, and in the last 5 years even achieved a performance of up to 180%. *
NRG Energy Inc. performance development over the last 5 years. (Source: www.investing.com) *
Water is a source of life and can also be part of the investment portfolio. Stocks of this commodity are dwindling every year, and we see a shortage in many countries. Growing demand increases interest in water, its consumer price is also constantly rising. An interesting company when investing in individual shares may be the American Water Works. The company provides drinking water, wastewater and other water-related services in 46 states in the United States to approximately 15 million people. In five years, the value of its shares has risen by more than half. *
American Water Works performance development over the last 5 years. (Source: www.investing.com) *
Every continent already has to deal with water scarcity. Water consumption is growing at more than twice the rate globally. The increase in population is the main contributor to this growth. The challenge for several countries is therefore to provide sustainable water services, especially in arid areas.
Today, the gas sector is ready for a significant recovery, as it stagnated during the pandemic. The gas industry has suffered as a result of blockades around the world and the closure of many factories. With the coming winter, the demand for this commodity increases. Among the companies we can mention in particular ConocoPhillips, Ovintiv, Exxon Mobil Corporation, Chevron Corporation and Devon Energy Corporation. Natural gas futures in the U.S. have risen above $5 per million British thermal units since November 15. Ovintiv Inc. is engaged in the exploration, development, production and marketing of natural gas, oil and natural gas liquids. The energy company has seen a significant increase in the last year. In 2021, the share price of this company grew by about 180%, but in the long run we have seen a decrease of about 35% in the last 5 years.
Ovintiv Inc. performance development over the last 5 years. (Source: www.investing.com) *
[*] Past performance is no guarantee of future results
The content of this material constitutes marketing communication and should not be considered as any type of investment advice and/or investment research and/or a solicitation for any transactions. This material was prepared for informational/educational purposes only and does not imply an obligation to perform investment transactions nor does it guarantee or predict future performance. BCM Begin Capital Markets Cy Ltd and its relevant persons including affiliates, agents, directors, or employees do not guarantee the accuracy, validity, timeliness, or completeness of any information/data provided by third parties and assume no liability for any loss arising from any investment made based on the said information/data. Past performance is no guarantee of future results.
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