A Stock To Play Europe’s Energy Crisis

Don’t Mess With An Italian’s Morning Coffee 

We’ll detail just how bad Europe’s energy crisis is in a minute, along with a stock you might consider to play it. But first, they’re not taking the soaring cost of all things fuel laying down in Europe. 

Definitely not in Italy. 

That’s a cappuccino and pastry from an institution called Bar San Calisto in Rome’s old school Trastevere neighborhood. 

With inflation – particularly the cost of energy – driving up the price of just about everything across Europe, including Italy, you can still get that very same cup of espresso and milk for one euro. A cup of coffee alone. Even cheaper. Just 90 cents! 

A 20-minute walk away, at Bar Fratelli Capone in the Testaccio neighborhood, you’ll pay only 80 cents. The most expensive coffee in Rome right now – 1.50 euro at Sant Eustachio cafe in a more touristy area of the city near the Pantheon. That’s up from 1.30 euro prior to August.  

That’s a far cry from the typical $4.00-$5.00 you’ll pay for a cappuccino in most US cities. Yet, Italians still want proof that the tiny price increase they’ve seen is justified. 

A consumer group in Rome is petitioning to have cafes make a copy of their energy bills visible to customers to show justification of these price increases. 

Gotta love it. 

Maybe they’ll also ask for proof of the rising cost of flour. Because the price of a cornetto (croissant in Italian) might also start to increase. It’s typically under a euro at most Roman cafes, however some say they might have no choice but to increase prices in the near future. 

Mama mia! 

Italy isn’t the only European country feeling the energy-induced inflation crunch. Scroll with us as The Juice shows you the unbelievable data from Germany alongside a stock you might want to consider as a play on the energy crisis. 

Energy 

A Stock To Play Europe’s Energy Crisis

Key Takeaways:

• If you’ve held energy stocks over the last year, you’ve done well for yourself. 
• The top names in the sector might continue to perform well. 
• The Juice brings another name into the mix as a potential play on Europe’s energy woes. 

Source: Google Finance

As the top five energy ETFs in The Juice’s proprietary Trackstar database of the tickers investors search for most illustrates, the sector has been on fire over the last year. 

The increasing cost of fuel has been nothing but good news for the names that most frequently populate the top holdings of these ETFs – companies such as Exxon Mobil (XOM) and Chevron (CVX), up about 75% and 65%, respectively, over the last year. 

The most searched for international energy ETF – the iShares Global Energy ETF (IXC) – has also performed well, returning 53% over the last year and 35% year-to-date. Its top two holdings – you guessed it – XOM and CVX, followed by other multinational energy conglomerates, such as Shell (SHEL) and ConocoPhillips (COP), up 36% and 97%, respectively, since this time last year. 

Going beyond the big names, let’s consider another interesting play. 

Europe’s Energy Crisis

Europe is experiencing nothing less than an energy crisis. 

While the story about coffee in Italy might make you chuckle, it’s no joke across the continent, thanks to the war in Ukraine, a persistent heatwave in many parts of Europe, and the general inflationary environment. 

• In the UK, analysts expect energy bills to increase to somewhere between 3,500 and 6,000 pounds (that’s between 4,136 and 7,090 euros) per year. On the low end, that’s a roughly 80% increase from October. 
• Spain is taxing hugely profitable energy companies while cutting the taxes consumers pay on their energy bills. Earlier this month, the government mandated that businesses cannot run their AC lower than 80 degrees Fahrenheit. 
• In Germany, electricity prices have increased 720% year-to-date. 

Source: Twitter 

One Way To Play It

Enphase Energy (ENPH) has been on a solid tear over the last year. It is also generating significant interest in Trackstar with nearly 100,000 searches in the last month. 

Source: Google Finance 

The company produces chips and systems that propel solar energy storage solutions for residences and businesses. 

Consider this tidbit from Enphase’s Q2/2022 earnings release:

Our revenue in Europe for the second quarter of 2022 increased 69%, compared to the first quarter of 2022, led by strong growth in the Netherlands and Germany. Homeowners want self-consumption as the region not only faces rising energy prices but also a growing demand for home electrification driven by EVs and natural gas shortages. We expect to introduce IQ Batteries in more European countries during the second half of 2022.

Those additional countries include Spain, Italy, and Portugal, where Enphase is setting up operations. The company not only benefits from demand in renewable energy in Europe, but in the US as well, where Enphase operates in 22 states. 

The Bottom Line: With no end in sight to the Russia-Ukraine conflict, don’t expect energy prices to come down – in any meaningful way – anytime soon. Add to this that China has yet to fully recover and reopen from COVID. Once the shutdowns stop for good, demand there will likely increase. 

There are times when it makes sense to buy stocks and ETFs on strength. Even when they trade at or around their 52-week highs. This might be one of those times.