Two green/ energy transition stock ideas

[MarkARK]

My two stock ideas for the green energy transition are Spire Global and Ramaco Resources, both listed in New York. An investor for over two decades, I have almost given up on U.K. companies, and am finding more and more that interesting opportunities lie overseas. I use Hargreaves Lansdown online share trading, which works just as easily for New York as it does for London with the added bonus of not having to be up at 7:30am for announcements. I hope you find these ideas worth reading about.


Spire Global is a “space” company that has a large constellation of listening satellites providing data to governments and companies involved in such things as agriculture, shipping and aviation. It is rapidly growing, and has over 800 customers, including NASA and the (U.S.) National Oceanic and Atmospheric Administration. Spire says it uses data “to predict environmental change and take action.” Use case examples include shipping companies and airlines using Spire’s weather data to optimise routes. I first came across Spire as a holding in U.K. listed Seraphim Space Investment Trust, which I looked at but have avoided buying into. It is really the only large scale operator of “listening” satellites, ie gathering radio frequency data rather than, say, using images.

Spire’s listing came from a merger with a SPAC (special purpose acquisition company) and the share price has tumbled really quite dramatically over the past two years. The company is loss making, burning cash (currently $50m cash against market cap $100m) and took on debt, which of course seemed like a good idea at the time, not so much now. Over the same period speculative investments, especially SPAC investments have fallen out of favour. As far as I can tell, many SPACs are total rubbish.

If Spire sounds like something to avoid like the plague, unlike many other such SPAC listings, many of which are not generating or growing revenue much at all, revenue here has been growing very quickly: ARR (annual recurring revenue) currently sits at $103m - note higher than the market cap - after growing around 35% year on year, and customer numbers are growing fast. More importantly, the company has reiterated guidance this week, in Q3 results, that operating cash flow should turn positive in the next quarter. Assuming that happens, it seems reasonable to think the shares might re-rate upwards sharply as fears of equity dilutions subside. Additionally, once the company has been cash generative for a few quarters they hope to renegotiate the debt, which should bring the interest rate down. The company is relatively under-researched so, if this all still sounds way too speculative, I would have thought there will be opportunities to watch and see what happens before investing in a, by then, hopefully self sustaining and growing business.


My second share idea is Ramaco Resources, a mining company based in the USA producing metallurgic coal for the steel making industry. Currently producing around 4m tons of annual sales, Ramaco aims to grow this output to approx 6.5m tons in the medium term. The A shares, rising this week off the back of better than expected Q3 results, currently trade on an undemanding PE around 8, and have a yield of just under 3%.

The more interesting side to Ramaco though is that, with the help of AI models and the (U.S.) National Energy Technology Laboratory, they recently discovered substantial rare earth mineral deposits, specifically neodymium, praseodymium, dysprosium and terbium, in the coal seams. In May they announced, “Following 18 months of extensive core drilling, and independent chemical analysis, NETL researchers and Ramaco now believe that the Brook Mine property contains perhaps the largest unconventional deposit of REEs discovered in the United States.” This story was picked up by the Wall Street Journal recently and the suggestion is that rare earths might be found more widely in coal seams. Apart from being potentially mind blowing for ESG investors who, by and large, want to avoid coal investments, with these new discoveries the company has the potential to become a key player in the energy transition. And I don’t think these discoveries are factored into the share price at all.


FWIW I own shares in both these companies. I bought Spire far too early and am underwater. I bought Ramaco this week following the WSJ article and am up about 20%.

[UncleEbenezer]

Thanks for sharing your thoughts - and welcome to Fooldom (or should I say folly)?

I won't be investing in a coal miner no matter what interesting news is coming out. As for the space company, your description sounds something akin to a Swiss startup I hold through crowdfunding and mentioned in my "startups" post to this board. Maybe I'll take a look.

[MarkARK]

Thanks for replying UncleE. Have been reading lemonfool on and off for years. Just thought this might be interesting, if a bit different.

I think Ramaco coal is used to make wind turbines, among other things, but I do understand why people are reluctant.