Why Renewable Energy Group Inc's Shares Dropped

Why Renewable Energy Group Inc's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biofuels maker Renewable Energy Group Inc dropped 15% today after the company was downgraded by an analyst.

So what: The stock was downgraded to a hold rating by Canaccord Genuity, which sparked the sell-off today. The driver of the downgrade was the Environmental Protection Agency's announcement on Friday that it was proposing a reduction in ethanol required in the U.S. fuel supply.

Now what: The U.S. is using less gasoline, which means that if the EPA's renewable fuel target was kept constant it would make up a higher percentage of the country's gasoline blend. So, the EPA reduced its target for renewable fuels, which would reduce demand for Renewable Energy Group and its competitors. I think there are better ways to play renewable energy, particularly ones that don't require as much government intervention, which is why I'll stay out of this drop today.

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Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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