Clean energy, electric vehicles, agriculture and health sectors tipped for strong future growth

Rebecca Le MayNCA NewsWire
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Camera IconNot Supplied Credit: istock

Aussies looking to invest their cash into stocks to get rich in the New Year may want to consider these sectors.

OMG chief executive Ivan Tchourilov said the years ahead were all about clean and renewable energy and electric vehicles.

“One of the most significant global themes that has been unfolding significantly – especially in the last 12-24 months – is the reduction of CO2 emissions and what companies can be doing to combat the ever-growing fear of global warming,” Mr Tchourilov told NCA NewsWire.

“New technology is being released at a rate of knots, and pressure is mounting on larger companies to adopt technology that assists them in reducing their carbon footprint and essentially work towards offsetting their net emissions.

“Since 2017, over $35bn has been invested in clean energy technology and initiatives from government and private investment in Australia alone, and this is just the tip of the iceberg.”

Fortescue Metals Group’s recent annual general meeting showed a fair few of its investors who had clearly stuck with the miner to keep riding that iron ore train were unimpressed by its new Fortescue Future Industries division, which aims to produce zero-emission green hydrogen from 100 per cent renewable sources.

But there are also plenty who like its ambitious plans and FFI was top of Mr Tchourilov’s list for those wanting green exposure.

He pointed to lithium miners Orocobre, Syrah Resources and Iconic Rare Earths for investors wanting to get on the booming EV market, noting the ASX isn’t home to any EV manufacturers such as US-listed Tesla.

Lithium stocks are buoyant due to the commodity's use in electric vehicle batteries.
Camera IconLithium stocks are buoyant due to the commodity’s use in electric vehicle batteries. Supplied by Bryah Resources. Credit: NCA NewsWire

“Investors can still get exposure to the sector without having to look overseas,” Mr Tchourilov said.

“Orocobre, Syrah Resources and Iconic Rare Earths are a few leading lithium producers whose share prices have all been direct beneficiaries from the wave of investment pouring into the space in recent months, with momentum gathering steam heading into 2022 and beyond.”

Agriculture is another sector to consider, given it will be harder to feed the world amid climate change and as populations grow – from about 7.9 billion currently to a forecast near 10 billion by 2050.

According to the World Bank, agriculture-driven growth, poverty reduction and food security are at risk, with climate change threatening to cut crop yields, especially in the world’s most food-insecure regions.

It also points out agriculture, forestry and land use change are responsible for about 25 per cent of greenhouse gas emissions, so mitigation is part of the solution.

Enter crop protection product manufacturer Nufarm, which sells chemicals to combat pests, diseases and weeds, and also grows a cover crop that effectively sequesters carbon from the air to improve soil health.

Wilsons’ equity research team says the outlook for Nufarm is robust, with improved seasonal conditions in key grain producing regions resulting in strong demand for crop protection.

Its Nuseed subsidiary intends this financial year to expand planting of Carinata grain, described as a biofuel feedstock capable of replacing petroleum fuels with a substantial reduction in greenhouse gas emissions.

OMG chief executive Ivan Tchourilov.
Camera IconOMG chief executive Ivan Tchourilov says the future is all about clean and renewable energy, and electric vehicles. Credit: NCA NewsWire

Wilsons warns, however, that Nufarm is being pressured by increasing costs of raw materials, and global logistics and supply chain challenges. There are also “regulatory headwinds in Europe”.

Citi agrees Nufarm is a goer, saying it expects the company will increase earnings in Europe and North America this financial year, supported by a continued positive fundamental outlook across both geographies.

S&P Global Ratings last week upgraded Nufarm’s credit rating to ‘BB’, citing continued improvement in its working capital management and strong trading performance across all operating regions, particularly Europe.

Another sector worth considering is health, with the Covid-19 pandemic throwing into stark relief just how important it is.

In a recent report, Morningstar said the Delta outbreak in Australia had mostly benefited pathology providers Sonic and Healius, with coronavirus testing elevated throughout the September quarter.

But as vaccination rates increased, pandemic-induced demand for Ansell’s single-use gloves and Fisher & Paykel’s hospital hardware were normalising, while CSL’s plasma collections were recovering to pre-pandemic levels, it noted.

“The path forward may be volatile, particularly with new variants, but we still expect that long-term demand for healthcare will prove to be relatively inelastic,” Morningstar said.

The key is to find a stock that isn’t too expensive and hang on for the long-term.

“We continue to see limited buying opportunities in healthcare,” Morningstar said.

“Over half of our healthcare coverage strikes us as overvalued.

“We are forecasting near-term margins for the sector to be broadly under pressure due to higher freight and safety costs, supply chain disruption, and the return of marketing and R&D spend.”

Pharmacy network Sigma and burns treatment company Avita are Morningstar’s favoured picks in the sector.

Originally published as Clean energy, electric vehicles, agriculture and health sectors tipped for strong future growth

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