There isn’t a thread for Neste here yet, so let’s start one
Are there any owners or investors here considering buying in?
Years ago, Neste took a bold stance in favor of renewable energy, and now those massive investments are reflected in the share price and investors’ pockets: the stock has increased tenfold from its 2011 lows, and the return over the last five years is over +400%, making it one of the most profitable stocks on the exchange in recent years.
At Neste, they are still working long-term on an important mission: fighting climate change. The company’s means for this are lower emissions through renewable fuels—not a perfectly “clean” solution, but a practical one. Big problems, big business opportunities?
Neste’s oil refining side is chugging along steadily, but renewable products have been a total hit. And while one might think that in “basic industry” competitors would soon close the gap on outsized returns, there seem to be no signs of this. Investors don’t seem to be worried about Neste’s P/B multiple of over 3x, and a high return on equity (ROE) seems to be set in stone for the coming years. Neste has indeed been churning out ~20% ROE in recent years, and forecasts suggest it will continue to do so in the future, placing it among the better companies on the stock exchange. Even the analyst tips their hat to the company:
In the coming years, the company’s earnings are expected to grow more moderately, with a dividend yield of +3%. As long as renewables keep grinding out that kind of profit and competitors can’t catch up, this certainly isn’t a bad case. What do the members here think?
I don’t follow the actions of competitors in the renewable products sector very closely, but as I understand it, Neste’s product is excellent, and the expansion of its raw material base has been a great success. In this respect, I don’t think it’s obvious that competitors could simply replicate Neste’s success recipe quickly (developing their own technology, investing in it, and building a waste-based supply chain takes time). On the other hand, investments made only now carry both regulatory risk (the permanence of subsidies/obligations) and technological risk (electricity/gas as a competitor) far into the future. Of course, the entry of competitors into the market could hit Neste in two ways if competition both depresses end-product prices and raises waste raw material prices, but then again, competitors must also consider these factors when contemplating investment. In the longer term, other bio-based products are also an interesting business area.
I was personally involved in the case from 2011-2017, but I took my profits when several risks appeared on the horizon (US border tax plans, regulatory risk on both sides of the Atlantic, dollar weakening). Ultimately, the risks did not materialize, and the company’s own performance has been stellar, so warm congratulations to the entire Neste team, including the owners! However, the valuation is currently at such a level that I wish Neste all the best, but I will be watching the situation from the sidelines.
There is no clear-cut price. Predicting the margins of renewable products has proven to be quite tricky, so I probably can’t do better than the analysts who follow the company for a living. Of course, a share price drop without cause could generate interest, but that would be true for many other companies too
Advances in other renewable products (aviation fuels, materials, chemicals) would likely increase enthusiasm to become an owner again. Biodiesel for transport alone is susceptible to regulatory risk and, in the longer term, to the development of other carbon-free transport solutions, even though waste-based production and the growing sale of the product under its own brand dilute these risks in my view. More end-use applications would (at least in my vision) provide better opportunities for production optimization and protection against market disruptions affecting a single sector.
It’s funny how the state owner gets a lot of criticism, but I’ve NEVER heard the state praised for intelligent, consistent, and long-term ownership, even though there are examples of this: Sampo, Neste, Fortum, Kemira, what else?
If some commentator were to explain what the goals were when the state’s investment decision was made back then, how many “shitty state companies” would turn out to be smart strategic investments from the perspective of security of supply or the development of Finnish society.
Has Neste completely gotten rid of the impact of crude oil prices? Now oil is collapsing, and so are refined products, so the pricing power of bio-refined products will be tested. Diesel may not perform well in the future, and demand is insufficient. All subsidies also seem to be disappearing. Palm oil is still in use, and there isn’t enough bacon grease for more than part of the production.
The investment in Singapore will further increase the share of renewables, which is a good direction.
However, as an investor, I’m concerned that the insider trading has been exclusively on the selling side for over a year. Is the belief in the future fading?
GMT CAPITAL CORP opened a short position in early December, which is most likely over 20% in the red. I’m surprised it hasn’t been closed a long time ago. Or maybe it has been actively traded to raise the average price, but correcting such a large price increase with such a large position does not seem possible.
Experiences from Neste’s Annual General Meeting? Messukeskus (Exhibition Centre) is a familiar venue, though. I happen to be on paternity leave exactly during the meeting and am considering attending with my child, who is under one year old. Can a minor also be appointed as an assistant, or are children otherwise welcome? Of course, I’ll take them out of the room if they get restless…
Of course, the car tax must be removed to get modern cars on Finnish roads.
In the same vein, the tax-free mileage allowance can be lowered to 35 cents/km, matching the costs of a modern car!!
This would reduce the unnecessary driving kilometers of greedy people at work; it wouldn’t be worth driving around for greetings and causing employers high costs from driving and lost work time.
These tricks would be a step towards both cost-effectiveness and environmental friendliness!
Neste’s job would be to settle for less with biodiesel; the price difference is still too big to pay for saving the world alone.
Why isn’t renewable diesel hyped more? Let’s buy well-equipped and affordable newer diesels imported from Central Europe from Kamux and fill them with Neste’s renewable diesel. No need for new electric cars. According to the link below, the fuel’s lifecycle emissions are smaller than those of current electricity. What about the manufacturing of electric cars and batteries? Local climate harms are also smaller than with traditional diesel. What am I not understanding?
ST-1 Anttonen seemed to present at the future of motoring and mobility seminar (can be found on YouTube) that there are indeed limits to the growth of Neste My Diesel.
However, that shouldn’t limit the company’s growth, as Neste clearly has the potential to be The King of Renewables, the King. In addition, Finland is such a small country that Neste could even change the direction of this country.
Norway’s Equinor / Statoil, not entirely comparable, of course, but the Norwegians drill for oil as far away as Brazil. Equinor’s revenue growth in 2018 was over 25% in dollars. Neste grew significantly less than that, even though its revenue is clearly smaller. Equinor paid $11 billion in income tax. In addition, the Norwegian state, with its 2/3 ownership, also collects a dividend pot.
In some Donald Trump book, it said, Think Big, Talk Bigger. Someone should carry these books to Neste’s headquarters.
I was about to panic today and sell my position (32.5% of my portfolio).
It’s been shaking so badly downwards these past few weeks, but it’s still in the black. But it seems to be holding its own well and there’s still a way to go to the peaks, so I guess I’ll just see this card through calmly.
I can well imagine that this will stay in my portfolio for a longer time, as I originally thought. I was just wondering if I should take it out for a walk now…
I’m looking to cash out at the earliest on January 27, 2024, as that will mark 10 years since the purchase. I bought it on January 27, 2014, for 4.44. I’m thinking of using the acquisition cost presumption, and Neste pays a nice dividend when I compare it to the purchase price. Have a great rest of your hot day!
Well said. Of course, the spring dividends are missing from that personal yield, and the autumn ones will be coming soon enough. So you just have to be patient and enjoy the steady and growing dividends. It would be better not to stare at the stock prices too much…
It all depends on your investment plan (stop-loss and price target). An important short-term support level is found at 29.37, which is the bottom of the daily EQ. After that, we look towards 27.95. But if your time horizon is in years, then your stop-loss is probably further down.
So, Neste has some leading products from the past…
As the climate campaign progresses, Neste will face problems.
However, not everyone believes that fueling a truck with diesel off-station will make driving emission-free, nonsense.
