15 promising stocks in 5 sectors to play supply chain woes, inflation

Oil stocks have stalled after leading the market in 2022, but the same economics driving oil higher could mean big gains in these sectors.

Russia’s invasion of Ukraine and the resulting bans and sanctions on Russian oil imports by the West sent global oil prices skyrocketing to levels not seen in eight years. And they came at a time when US inflation was hitting a four-decade high, partly due to supply-chain issues. Oil stocks, which were already coming off a year of market-leading returns, benefited nicely. But oil prices are now back under $100 a barrel and stocks in the oil sector have leveled off. They’ve actually been some of the worst-performers over the past week. That’s also a sector some investors choose to avoid.
Experts say global supply constraints and rising prices aren’t going away anytime soon. And while oil stocks could surge again, here are 5 promising stocks in five sectors driven by similar economics that investors should consider as alternatives to oil stocks..

1. Electric Vehicles

Even with oil dropping below $100 a barrel, fuel prices remain high. And rising gas prices are driving up electric vehicle (EV) sales.
Costs at the pump are on average $4.32 per gallon across the US, up from $2.86 a year ago, according to data from AAA. In much of Europe, gas prices are well above $5 per gallon. The same is true in China. Demand for EVs across China, Europe and the US have been soaring in recent years, and high oil prices could be another catalyst that accelerates the adoption of EVs.
EV sales in China more than doubled from 1.2 million registrations in 2020 to 3.4 million in 2021, according to the International Energy Agency (IEA). EV registrations in Europe climbed from 1.4 million in 2020 to 2.3 million in 2021, while the US only saw a jump from 300,000 registrations in 2020 to 700,000 in 2021.
A 2020 Consumer Reports study found that the average EV owner spends 60% less on fuel compared to vehicle owners with internal combustion engines. High gas prices coupled with more plentiful and more affordable EV options could provide some tailwinds for EV stocks.
Watch these stocks:
NIO (NIO)

• Performance over one year: -66%
• Analysts’ opinion: 1 Strong Buy, 2 Buys, 5 Holds
• Analysts’ consensus recommendation: 1.8 (Buy)
• Analysts’ consensus 12-month price target: $50.43
• Potential return: 238%

General Motors (GM)

• Performance over one year: -26%
• Analysts’ opinion: 2 Strong Buys, 7 Buys, 13 Holds, 2 Underperforms
• Analysts’ consensus recommendation: 1.9 (Buy)
• Analysts’ consensus 12-month price target: $74
• Potential return: 76%

Tesla (TSLA)

• Performance over one year: 18.5%
• Analysts’ opinion: 4 Strong Buys, 4 Buys, 8 Holds, 6 Underperforms, 1 Sell
• Analysts’ consensus recommendation: 2.6 (Hold)
• Analysts’ consensus 12-month price target: $959.30
• Potential return: 20%

For more information, check out our guide to investing in EV stocks.

2. Alternative energy

While oil stocks have been leading the energy sector and much of the market for the past year, stocks of alternative energy companies surged with Russia’s invasion of Ukraine. Just as rising oil prices could accelerate the transition to EVs, the Ukraine crisis could spur clean-energy transition at a faster pace.
In 2021, Russia was the largest natural gas-exporting country in the world, the second-largest crude oil and condensates-exporting country and the third-largest coal-exporting country, according to the US Energy Information Administration (EIA). Importantly, the crisis in Ukraine has shown just how dependent Europe is on Russian fossil fuels. The European Union (EU) imported 45% of its total gas imports from Russia in 2021.
Fossil fuels are hard to quit, but Russia’s ability to hold the oil markets hostage makes the case for alternative energy sources more compelling. While investors in alternative energy stocks should expect short-term volatility as current events continue to unfold, the future for alternative energy stocks could prove brighter than expected.
Watch these stocks:
Vistra (VST)

• Performance over one year: 31%
• Analysts’ opinion: 3 Strong Buys, 2 Buys, 2 Holds
• Analysts’ consensus recommendation: 1.7 (Buy)
• Analysts’ consensus 12-month price target: $28.70
• Potential return: 27%

Enphase Energy (ENPH)

• Performance over one year: 8%
• Analysts’ opinion: 1 Strong Buy, 2 Buys, 4 Holds
• Analysts’ consensus recommendation: 2.1 (Buy)
• Analysts’ consensus 12-month price target: $221.88
• Potential return: 25%

Sunrun (RUN)

• Performance over one year: -49%
• Analysts’ opinion: 3 Strong Buys, 3 Buys, 1 Hold
• Analysts’ consensus recommendation: 2.2 (Buy)
• Analysts’ consensus 12-month price target: $48.89
• Potential return: 67%

For more information, check out our guide to investing in renewables.

3. Precious metals

Palladium, nickel and aluminum prices have all been rising amid concerns of supply disruptions brought on by the war in Ukraine.
According to Reuters, Russia is the world’s largest supplier of palladium with a 40% market share. The country also accounts for 10% of global nickel supply and 6% of aluminum supplies.
Following Russia’s invasion, palladium prices jumped 26% to 10-month highs, while nickel prices skyrocketed 85% to over $48,000 per ton. Aluminum prices surged to 13% to a record high of $3,849 a ton.
Metals markets have already been reacting to Russia’s invasion of Ukraine, but continued geopolitical tensions and sanctions on trade with major metals producers in Russia could further squeeze aluminum, copper and nickel prices.
Watch these stocks:
Rio Tinto (RIO)

• Performance over one year: -8%
• Analysts’ opinion: 4 Strong Buys, 1 Buy, 1 Hold
• Analysts’ consensus recommendation: 2.0 (Buy)
• Analysts’ consensus 12-month price target: $85
• Potential return: 17%

Alcoa (AA)

• Performance over one year: 138%
• Analysts’ opinion: 3 Strong Buys, 6 Buys, 5 Holds
• Analysts’ consensus recommendation: 2.0 (Buy)
• Analysts’ consensus 12-month price target: $79.36
• Potential return: 5%

Sibanye Stillwater (SBSW)

• Performance over one year: -12%
• Analysts’ opinion: 1 Strong Buy, 5 Buys, 1 Hold
• Analysts’ consensus recommendation:
• Analysts’ consensus 12-month price target: $22.16
• Potential return: 30%

For more information on metals stocks, check out our guide to investing in the materials sector.

4. Timber

Russia is one of the world’s largest exporters of timber, and the country recently announced it would cut off forestry products like timber from countries that are imposing sanctions and embargoes against Russia.
Russia exported 15 million cubic meters of logs in 2020, accounting for almost 12% of globally traded roundwood, according to forestry industry consultants Margules Groome. In the US, roughly 10% of hardwood plywood imports come from Russia.
Rising lumber prices are, perhaps, most apparent in the white-hot housing market. These prices are adding to the cost of both building new homes and remodeling older ones. The National Association of Home Builders estimated the threefold price jump in the fourth quarter of 2021 added more than $18,600 to the price of a newly built home. It also added nearly $7,300 to the market value of the average new multifamily home, which translates into households paying $67 a month more to rent a new apartment.
Russia exports enough timber that a ban should have a material impact on the global market. Lumber prices are already high, but they could continue to climb if less lumber is available on the market.
Watch these stocks and ETFs:
UFP Industries (UFPI)

• Performance over one year: 21%
• Analysts’ opinion: 2 Strong Buys, 1 Hold
• Analysts’ consensus recommendation: 2.0 (Buy)
• Analysts’ consensus 12-month price target: $99.83
• Potential return: 14%

West Fraser Timber (WFG)

• Performance over one year: 45%
• Analysts’ opinion: 1 Buy
• Analysts’ consensus recommendation: 2.0 (Buy)
• Analysts’ consensus 12-month price target: $119
• Potential return: 25.5%

iShares Global Timber & Forestry ETF (WOOD)

• Tracks the S&P Global Timber & Forestry Index
• Top 3 holdings:

1. West Fraser Timber: 9.56%
2. Svenska Cellulosa Class B: 9.09%
3. Rayonier REIT (RYN): 9.05%

For more information on timber stocks, check out our guide to investing in the materials sector.

5. Agriculture

Last Friday, Russia announced it was imposing export bans on over 200 products until the end of 2022. This includes wheat, fertilizer and other agricultural products. The anticipation of supply shortages has sent prices of these commodities soaring.
For instance, Russia is the world’s largest wheat supplier. Together with Ukraine, the two countries exported more than a quarter of the world’s wheat in 2019, according to the Observatory of Economic Complexity.
With the supply of wheat threatened, prices soared to nearly $13 per bushel last week, its highest level ever.
Investors have been piling into the Teucrium Wheat Fund (WEAT), the world’s largest wheat exchange traded fund (ETF), to gain exposure to soaring grain prices. The price of the fund has leapt by 39% since February 24, when Russia invaded Ukraine.
Russia is also the world’s largest supplier of fertilizer, and stocks of companies that manufacture and distribute fertilizer have seen share prices soar in the past few weeks. If these export bans remain in place, investors should expect stocks in this sector to remain volatile for some time.
Watch these stocks and ETFs:
Nutrien (NTR)

• Performance over one year: 61.5%
• Analysts’ opinion: 1 Strong Buy, 6 Buys, 5 Holds
• Analysts’ consensus recommendation: 2.1 (Buy)
• Analysts’ consensus 12-month price target: $95.34
• Potential return: 2%

Teucrium Wheat Fund (WEAT)

• Tracks the Teucrium Wheat Index
• Performance over one year: 60%
• Expense ratio: 1.14%

VanEck Agribusiness ETF (MOO)

• Tracks the MVIS Global Agribusiness Index
• Top 3 holdings:

1. Deere & Co (DE): 8.23%
2. Bayer Ag: 7.94%
3. Nutrien: 7.88%

Final thoughts

Supply chain woes and disruptions appear to be sticking around for the near term, and investors in affected markets could see volatility play in their favor. Keep in mind some of these concerns are tied to the conflict in Ukraine, which could change conditions quickly.
At the time of publication, Matt Miczulski owned shares of GM, TSLA and RUN.

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