The latest CPI data from January 2022 shows yet more inflation concern in the stock market today. Figures were released premarket on Thursday, showing January prices were higher by 7.5% than 1-year ago. This is the most significant jump since 1982, and consumers have felt the burn. It was also higher than what analysts had expected for the CPI read.
Whether it’s higher prices at the grocery store or sky-high rent, it’s apparent that costs have gone up more than what many have expected. As a result, shares across the broader markets sold off in anticipation that the US Federal Reserve will have to get more aggressive in its approach.
What’s more, the likelihood of even more abrupt tightening could be called for if CPI figures continue rising faster than expected. Much of the inflationary bump came from autos, appliances, and household furniture.
James Knightley, the chief international economist at ING, told the Wall Street Journal, “This is not encouraging news for the Fed in its battle to get inflation heading back towards the 2% target…Rate hikes will do nothing to resolve supply chain strains and worker shortages, but they can contribute to taking some of the steam out of the economy and allow demand and supply to start moving towards a better balance, at the expense of weaker growth.”
Thanks to this CPI surprise, traders are back in “stock market crash” mode. So does this mean it’s time to run for the hills, or are there places to look for safety? I’ll leave that up to you, but with that said, there are several industries to watch and a handful of penny stocks jumping after the latest CPI data release.
Penny Stocks To Buy [or avoid]
- Gevo Inc. (NASDAQ: GEVO)
- Gran Tierra Energy Inc. (NYSE: GTE)
- Transocean Limited (NYSE: RIG)
- FuelCell Energy Inc. (NASDAQ: FCEL)
- Southwestern Energy (NYSE: SWN)
Gevo Inc. (NASDAQ: GEVO)
Energy stocks are a likely candidate when it comes to higher inflationary environments. But in 2022, the energy sector includes far more than your average oil and gas company. Gevo Inc. is a clear example of that, with shares popping off this week.
Yesterday we discussed GEVO alongside Enphase Energy (NASDAQ: ENPH) after it reported earnings. This helped spark attention in alternative and renewable energy names. Gevo, in particular, is coming into February on a high note following its latest renewable hydrocarbon supply deal with Komar Americas. This deal was for 45 million gallons per year of renewable, energy-dense liquid hydrocarbons valued at as much as $2.8 billion in gross revenue. Gevo will produce these from its Net-Zero facility, Net-Zero 2.
Read More About GEVO: 4 Hot Energy Penny Stocks To Watch As ENPH Stock Surges On Earnings
If GEVO stock is on your list right now, keep February 24th in mind. This is when the renewable energy company reports earnings.
Gran Tierra Energy Inc. (NYSE: GTE)
Another one of the energy penny stocks we’ve discussed frequently is Gran Tierra. In its case, the company is on the more traditional side of the energy sector. Despite only trading around $1, GTE stock is far from underperforming based on the last few months. In fact, since last August, shares have climbed from lows of $0.44 to highs of over $1.10 this month.
With energy prices jumping higher, the broader sector has benefited. Gran Tierra recently reported year-end reserve results for 2021, which has also helped boost sentiment. It added 14.3 MMBOE of PDP reserves and 11.9 MMBOE of 1P reserves and said 100% of reserves additions were oil. Gary Guidry, President and Chief Executive Officer of Gran Tierra, explained, “With 94 Proved plus Probable Undeveloped future drilling locations, Gran Tierra is well-positioned to continue to grow the Company’s production in 2022 and beyond.”
Right now, analyst sentiment is mixed. Royal Bank of Canada, for example, has a Sector Perform on the stock and a C$1.50 target. Meanwhile, Scotiabank’s Sector Perform rating is paired with a C$1.35 target. Whether or not these are met in the near term is yet to be seen. However, in light of recent energy sector conditions, GTE could be one of the penny stocks to watch right now.
Transocean Limited (NYSE: RIG)
Sticking with the trend in energy penny stocks, Transocean shares have been on the rise since the start of 2022. This week is no different as RIG stock continues testing higher levels. Transocean provides offshore contract drilling for oil and gas wells. Specializing in higher-demand sectors of the drilling business, deepwater and harsh environment services are the company’s forte.
One of the critical catalysts outside of sector sentiment helping RIG stock is speculation on its upcoming earnings this month. The company reports on the 22nd as the market will likely look for a turnaround from its previous quarter. Transocean missed on earnings per share and sales estimates in the third quarter.
One of the underpinnings of speculation came from President and Chief Executive Officer Jeremy Thigpen and his comments regarding Transocean’s outlook. “We grow increasingly encouraged as we observe continuously improving market fundamentals and the resulting strength exhibited in oil prices. With tightening utilization for high-specification ultra-deepwater and harsh environment assets, and longer tender durations across multiple markets, dayrates are steadily increasing, which bodes well for the offshore drilling industry, and Transocean.”
With this backdrop, RIG stock could be one of the energy names to watch heading into the second half of the month.
FuelCell Energy Inc. (NASDAQ: FCEL)
Like Gevo, FuelCell Energy is another alternative fuel stock to watch today. Shares have steadily risen for the better part of the last two weeks. FCEL stock remained in rebound mode following a late-year sell-off in 20201 that took it back into the penny stock range. On a longer-term scale, the stock has been in a perpetual sell-off for the better part of the last year, thanks to reopening uncertainty and questions about the future funding or lack thereof for green/alternative energy projects by governments.
The company provides decarbonizing power and hydrogen in its fuel cell platforms. Last week the company issued its first sustainability report and reaffirmed its ESG commitments. FuelCell management also discussed advancing its goal of achieving Net Zero emissions by 2030.
Other than an upcoming investor day later this quarter, FCEL stock has also fallen into the “short squeeze stocks” trend we’ve seen among retail traders. According to data from Fintel.IO, the current short float percentage sits at nearly 20%. With the investor day scheduled for March 16th, there’s still plenty of time for the market to digest sector sentiment and the overall economic outlook on inflation.
Southwestern Energy (NYSE: SWN)
Finally, Southwestern Energy rounds out this list of penny stocks to watch following January’s CPI data. The company is a U.S. natural gas and natural gas liquids producer. Its projects are located in some of the most high-profile shale basins. Late last year, Southwestern extended its reach with a new acquisition. The company purchased GEP Haynesville.
“The transaction adds significant high-return locations to our development inventory while expanding access to premium Gulf Coast markets,” explained Bill Way, Southwestern Energy President, and Chief Executive Officer.
This acquisition and related guidance is expected to be expanded upon in its upcoming earnings report. If SWN stock is on your radar, February 25th is when the next round of results come out. In its Q3 update, the company beat estimates on earnings per share and sales. The performance also enticed some analysts to shift their outlook on the company. Goldman Sachs, for example, reinstated Southwestern Energy with a $5.25 price target earlier this quarter. The firm also has a Neutral rating.
Penny Stocks & Inflation
Whether you’re looking for a hedge against inflation or a way to make money from a high CPI readout, penny stocks are well-known for volatility. In most cases, broader trends tend to come secondary to individual stock moves. In general, no matter what other sectors or stocks are doing, research is the most important step to take before deciding what could be the best penny stocks to buy right now.