I say often that the move towards 100% renewables and 100% electric vehicles will take a lot longer than the politicians and activists are telling you. The obstacles to an immediate 100% renewable world are pretty much impossible to overcome without causing long-lasting inflation and reducing global standards of living.
Having said that, the focus on renewable energy, electric vehicles, and sustainability is going to happen. The companies that start positioning themselves to profit from that growth now will be among the big winners of the next decade.
And there's one company among them that could be the biggest winner of all, because it has its hands in so many different industries that are pivoting to renewables.
In fact, this firm has its hands in just about every modern industry sector imaginable. It produces chemicals that are used in an incredibly wide range of products, including electronics, batteries, electric vehicles, agricultural fertilizers and pesticides, both traditional and renewable energy generation tech, and durable construction products that last longer and require fewer resources for maintenance.
And to serve all its varied clients, the company has developed a unique global production process that gives it a significant competitive advantage over its competitors and some of the best profit margins in its industry.
There's a perfect storm of factors that make this stock a no-brainer must-buy: powerful tailwinds from social and economic trends, their commitment to getting a head start on the growth sectors of the future, 6.5% dividend yield that's about to pay out, and an extremely low buy-in price.
Read on for the ticker...
Invest in One of the World's Oldest Multinationals
BASF SE (OTCMKTS: BASFY) is a German chemical company that's been around since 1865. Its operations are fully global, and they regularly sell their products to 90,000 clients worldwide in, as I indicated above, just about every industry on the planet.
But its longevity doesn't mean it's stuck in the past. Actually, it's been pivoting to address the concerns of the next few decades much faster than a number of its more contemporary peers.
An excellent example of this commitment is its recent deal with Henkel AG, the European consumer goods company. The two companies have agreed to replace fossil carbon feedstock with renewable feedstock for most products in Henkel's European Laundry and Home Care and Beauty Care businesses over the next four years. It is estimated that this move will eliminate 200,000 tons of CO2 emissions over four years.
Last month, BASF also reaffirmed its goals to reduce its carbon emissions by 25% by 2030 and reach net-zero emissions globally by 2050. BASF executives also committed to having 100% renewable power at its facilities around the world.
Along with this commitment, it announced an agreement to secure land for its future cathode active materials and recycling site in Quebec, Canada. This facility will give it access to electric vehicle manufacturers in North America.
But it's also actively working to help other businesses meet their renewable energy goals. BASF has developed a Net Zero Accelerator unit that focuses on developing products for renewable energy projects like solar and wind farms and carbon alternatives like hydrogen. This unit also focuses on developing more energy-efficient heat pumps for both residential and commercial use.
So basically, BASF is "double-dipping" on the move toward renewables. It will benefit from changing its own operations, but it will also stand to make money by helping its clients make the shift as well.
While all this future-proofing signals good things to come for its bottom line, BASF isn't just taking the long view. It's making plenty of profit plays in the here and now, as well.
What BASF Is up to Right Now
BASF has developed an interesting production strategy called Verblund that gives it an advantage over its competitors. Because it has so many product lines, it locates plants on campuses worldwide that can house over 100 different facilities. This allows it to have oil and gas delivered by pipelines instead of far more expensive truck delivery.
It can use steam created by one manufacturing process to provide energy for other plants on the campus.
Although most revenue comes from Europe today, BASF plans to focus more on the faster-growing markets in Asia. To support this, it is building a Verblund site in Zhanjiang, in the southern Chinese province of Guangdong, and adding to its existing site in Nanjing, China.
I also expect BASF to be a big player in global agricultural markets. It's been in the seed business since 2018, and that should be a steady growth business as well, given that global food demand will continue to rise.
If the war in Ukraine disrupts grain supplies, demand for its agricultural products could see accelerated demand.
Best of all is the fact that BASF management is committed to its dividend. The yield is already at 6.5%, and management hopes to raise the payout every year. It also has a stock buyback plan that allows for the repurchase of 91 million shares, or about 10% of the company, by the end of 2023.
The dividend is paid annually, and the ex-dividend date is coming up quickly. You have to buy shares before May 2, 2022, to get the $0.933 payout on May 16th.
With the shares trading at just eight times earnings and less than seven times operating cash flow, it makes sense to go ahead and buy the shares today.
The company is worth about 50% more than its trading for right now, and its long-term future is bright, so lock in today's low price and collect the fat dividend coming next month.
Investors would be wise to learn from BASF's lesson here - often, the biggest returns come from getting in on the next big thing before anyone else does.
I'm talking about quantum computing, which replaces the "ones and zeros" of binary bits with qubits, which can be both 0 and 1 at the same time. Without getting too deep in the technical weeds, it means that quantum computers can crunch data hundreds of millions of times faster than traditional machines, and work on problems we previously thought were impossible.
This is probably going to make your PC obsolete. But there's good news - experts project this sector could bring in $8 trillion in new wealth in 2022 and beyond. Investors who get in on this game-changing tech now have the best chance for huge potential returns.
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.