Gevo Inc (NASDAQ: GEVO) has been an interesting stock to watch as of late. After a massive pop earlier this year, the stock has been tapering off its gains. However, if you’re thinking about betting against the company, you’re missing out on a huge opportunity.
Here’s what you need to know:
What Is Gevo?
Gevo is a clean energy company, but not the traditional clean energy company that you think about when you think about the space. The company has no interest in producing solar panels wind turbines. There’s no interest in generating electricity either.
Instead, the company is focused on replacing fossil fuels with renewable fuels.
To do so, Gevo has spent years developing and perfecting a process to turn renewable feedstocks like waste wood and other things we would consider to be garbage, into isobutanol. This isobutanol is then used to develop aviation and offroad fuels.
In fact, Gevo fuels are already being used in commercial aircraft.
However, with a recent announcement from the company, we learned that it’s not only looking at the transportation sector as an opportunity, it’s looking into natural gas for the heating of homes and other uses.
In fact, Gevo recently announced a renewable natural gas project, and that it has issued bonds to fund the project. With the renewable natural gas product, the company will be extracting natural gas from cow manure, resulting in yet another renewable product.
The Market Has Gone Short
After sending the stock screaming for the top earlier this year, the stock market seems to have gone short on the stock. In fact, at the moment, the stock trades with short interest of more than 20%.
So, why have investors gone short?
Well, there’s a bit to it. Gevo is in a growth stage, which is a painful reality for many. The company has signed agreements surrounding the sale of billions of dollars worth of its sustainable aviation fuel. However, to meet the demand set forth by those agreements, the company is having to spend massive amounts of money to build out its infrastructure.
The big spending at the company is ultimately leading to losses, which is scaring investors; but that’s not always a bad thing.
Take a look at the early days of Amazon.com. Everyone said Jeff Bezos was a lunatic on a spending spree as he built out his infrastructure to become the leading force in the e-commerce space. When Bezos’ goals came to fruition, there were plenty of people with feet in their mouths.
That’s likely to be the case for Gevo.
Yes, the company is spending money by the wheel barrel full, but that spending is a necessary evil, and will set the stage for tremendous growth ahead.
There Couldn’t Be A Better Time To Consider Investing
While fear is high, GEVO stock is back to trading at a discount. While this makes sense considering investor fears surrounding the money being spent at the company, it makes absolutely no sense when considering the change in tides in the energy sector.
President Joe Biden and his cohorts in Washington D.C. have long been proponents of clean energy, and considering their control over the nation’s capital, big changes are likely coming down the line in the United States energy and transportation sectors.
At the moment, investors are focusing on those creating solar panels or setting up wind energy farms. On the transportation side, it’s all about electric vehicles, but that won’t be the end all be all.
There will be significant demand for clean, renewable fuels.
For example, I live in a rural area where an electric vehicle simply doesn’t make sense. In my area, if I had an electric vehicle, the only place I would be able to charge it is at home. If I wanted to take a long distance trip, I would have absolutely no place to charge my vehicle when the batteries started to die, and would be forced to tow my vehicle home.
That’s not the only issue with EVs either.
Ultimately, filling a line of batteries takes quite a bit more time than filling a gas tank. Who wants to wait hours to be able to drive their vehicle?
Sure, EVs are fun, and popular at that, but they aren’t practical for everyone. As a result, renewable fuels will become increasingly important, and in the renewable, clean-burning fuels game, there’s no other company that has even gotten close to the accomplishments of Gevo.
Get Ready For A Short Squeeze
As mentioned above, the stock market seems to have gone short on Gevo. In fact, the stock is trading with a short interest of more than 20%. When stocks with heavy short interest suddenly get the attention of the retail investing community, upward movement can force those who hold short positions to buy shares to cover, sending the price of the stock for significant gains, and I believe GEVO stock is a great target for that kind of movement.
Ultimately, we’re talking about a company that’s making big moves in the clean energy sector. At the same time, hedge funds are attacking the company with short positions, robbing retail investors of their hard-earned money.
As the members of the Wall Street Bets Reddit have proven, retail investors are getting tired of hedge funds playing with the market at their expense, and are starting to fight back. Well, I’m expecting a war to be waged in the relatively near term surrounding GEVO that could send the stock for gains in multiples.
The Bottom Line
In the short term, Gevo is an attractive stock considering the potential for a significant short squeeze that could send the stock on gains in multiples. In the long term, the stock will be hard to ignore as there is no other company that has come even close to its renewable fuels capabilities. All told, don’t count GEVO stock out just yet.