I’m not going to call it a meme since it tends to upset some folks. However, it can’t be denied that Clean Energy Fuels (NASDAQ:CLNE) stock has picked up a lot of chatter on social media forums lately.
Fundamentally, investors have the right idea. As a “transitional” energy firm, CLNE stock stands in between the dirty past of exclusively combustion-based vehicles and the potentially all-electric future.
Still, relevance alone didn’t spare shares of Clean Energy from volatility. Over the previous five weeks, the company’s largest stakeholder has been trimming exposure to the tune of approximately 4.06 million shares.
Last Thursday, management disclosed that this shareholder unloaded another 1.25 million shares. No matter how you look at it, this is a clear sign of no confidence. And naturally, ordinary shareholders took evasive action on CLNE stock.
It’s an important lesson about following meme stocks — or meme-ish stocks — too closely with your money. Don’t get trapped in the creative narratives that these social media folks weave: no investment is immune from downside price action.
Nevertheless, the overriding narrative is that, according to Clean Energy’s website, “Renewable natural gas (RNG) is the only fuel available for heavy-duty vehicles that can have carbon-negative emissions.”
Further, RNG arguably offers a much more feasible path to commercial viability.
Here, the underlying process for CLNE stock is incredibly innovative.
First, the company collects methane gas through various sources, including landfills, farms and wastewater treatment plants.
Second, it converts the raw material into usable biomethane.
Third, the national natural gas pipeline system distributes said biomethane.
And finally, the renewable fuel reaches RNG fueling stations.
Most importantly for CLNE stock and its upside narrative, RNG does not impose nearly the magnitude of infrastructural overhaul that electric vehicles, specifically big rigs require. Instead, RNG leverages infrastructure that already exists.
CLNE Stock Benefits From Outside Fundamentals Too
Another factor to keep in mind is that the RNG process that Clean Energy Fuels specializes in addresses environmental issues in non-transportation-related segments.
For instance, while it might sound like a strange topic, farm animals emit enough methane gas to compound the climate change crisis. That’s not a conspiracy; that’s according to the University of California, Davis.
With Clean Energy’s capture and extraction process, the company provides a twofer for the environment and the economy. It takes methane that would otherwise collect in the atmosphere and converts it to ultraclean transportation. And not just any kind of transportation but the big rig kind — the platform that pollutes far more than consumer vehicles.
If that’s not a fundamental argument for CLNE stock, I don’t know what is.
Of course, the transportation industry really wants to give full-electric commercial trucks a shot. Though research is conflicting — some experts say it’s economically and ecologically unfeasible while others are excited about the potential — one thing is clear: manufacturers eagerly push for electric big rig production.
Still, I wouldn’t necessarily give up on CLNE stock due to the electric threat. That’s because the underlying company benefits from a surprising (and cynical) catalyst: the labor force.
As you may have heard, the North American trucking industry has a driver shortage. In reality, the problem is much more nuanced.
It’s not so much that there aren’t drivers but rather, they want better pay and working conditions. Also, retention at big trucking firms is very low, which means companies must constantly train new drivers. Of course, that gets very expensive.
Regardless, the bottom line is that not enough qualified drivers are available, and that advantages CLNE stock. Why? Again, Clean Energy doesn’t require a massive infrastructure overhaul whereas going electric does. In uncertain economic times, fleet operators would rather stick with what they know or with technology that doesn’t require too much of an initial investment.
Approach With Caution
This isn’t to say that CLNE stock is a no-brainer. If I’m being honest, the revenue trend both on a year-to-year or quarter-to-quarter comparison isn’t exactly standing out to me.
Plus, let’s go back to the biggest shareholder deal. If your top backer is backing out, that’s seemingly akin to Jimmy Conway trying to convince Karen Hill in Goodfellas to go into that dark building with those strange men.
Thanks, but no thanks.
Still, if you have a tolerance for risk, CLNE stock has an intriguing narrative. It’s a transitional play in the energy evolution and better yet, it’s a transition that works. That’s a lot better than an aspirational play that doesn’t.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.