How to Invest in Biofuels
Biofuels generally include a number of fuels that are created in some manner from renewable energy sources or biomass. Many biofuels are made from other commodities, such as sugar, starch, and vegetable oil.
Biofuels are not commodities in the traditional sense, most notably because the lack the fungibility that allows for large scale trading and integration into global financial markets. But these resources are intertwined with more traditional commodities such as crude oil and natural gas because interest in renewable fuel sources in increasing.
Because the biofuels market is young and still developing at a rapid pace, options for investing in these resources are limited. There are, however, a few choices for interested investors, including an ETN linked to a biofuels index.
Ways to Invest in Biofuels
There are 2 ways to invest in Biofuels: ETFs and Stocks. Click on the tabs below to learn more about each alternative.
What are Biofuels ETFs?
Investors looking to establish exposure to biofuels are able to do so while enjoying all the benefits of the exchange-traded structure. The ELEMENTS MLCX Biofuels Index ETN (FUE) is linked to an index that serves as a benchmark for the biofuels sector. The index comprises futures contracts on physical commodities that are either biofuels themselves or feedstock commonly used in the production of biofuels.
Investors should note that FUE will not provide exposure to spot prices, but rather deliver returns available from a futures-based strategy. Also, it should be noted that this product is an ETN, and as such the credit risk of the issuing institution should be considered.
How to Buy Biofuels Stocks
There are several companies that are engaged both directly and indirectly in the production of biofuels of involved in furthering the usage of biofuels as a source of energy. Investors who believe that biofuel usage will increase considerably may want to take a closer look at these companies, as their stock prices should perform well if usage of this fuel source increases.
Many biofuels companies are privately held, but there are a handful of public companies engaged in various aspects of this industry as well. These include Better Biodiesel (BBDS.OB), Earth Biofuels (EBOF.OB), NewGen Technologies (NWGN.OB), and Bunge Ltd (BG).