Hydrogen Stocks : Category contains stocks of publicly traded companies in the United States that sell hydrogen fuel cells, associated renewable energy technology, and hydrogen gas.
While the theme has returned 173 percent since the end of 2019, compared to around 32 percent for the S&P 500.
It has underperformed dramatically this year, down by about 4% year to begin, compared to the S&P 500, which has returned 14 percent.
Is the recent underperformance a favourable entry point into this futuristic subject for investors? We believe so for several reasons.
While typical renewable energy sources like solar and wind are employed in power generation and transportation, hydrogen is projected to be critical in helping to decarbonize sectors like aviation, shipping, and heavy industries like steel and cement.
Due to cost and weight limits, these industries aren’t well adapted to switch to battery-based technologies, and hydrogen could play a significant role in these fields.
According to investment firm UBS, hydrogen might account for 10% of global energy consumption by 2050, with potential investments in the field reaching $1 trillion.
Regulatory support for the industry is also expected to grow. The Biden Administration has vowed to cut greenhouse gas emissions in half by 2030 compared to 2005 levels, increasing the urgency to invest in such technology.
Furthermore, when politicians finalise the provisions of the US infrastructure plan, futuristic energy industries like renewables and hydrogen are likely to benefit.
Cummins, an industrial firm best known for its engines and power generation equipment, and Air Products and Chemicals, a company that offers gases and chemicals for industrial uses, have been the greatest performers within our theme, with their stocks growing by almost 9% apiece.
First Solar, on the other hand, has had the worst year-to-date performance, with its stock down 21%. For a complete list of stocks in the category, see our Hydrogen Economy Stocks theme.
Why Are Hydrogen Stocks Underperforming
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The stocks of U.S.-based companies that sell hydrogen fuel cells, associated renewable energy technology, and supply hydrogen gas are down around 3% year to date in our Hydrogen Economy Stocks theme.
In comparison, the S&P 500 has gained about 10% in the same time span. As a result of decreased Covid-19 cases and rising bond yields, growth and futuristic themes have lost part of their lustre.
Cummins, an industrial business best known for its engines and power generation equipment, has been the greatest performer in our subject, with a year-to-date gain of roughly 15%.
FuelCell Energy FCEL -6 percent, on the other hand, has had the poorest year-to-date performance, with its shares down nearly 17 percent. However, we believe that there are a few significant factors that will drive these firms’ performance in the future.
President Joe Biden said this week at a virtual climate summit that the United States will reduce greenhouse gas emissions by 50 percent to 52 percent below 2005 levels by 2030.
The United States has likewise committed to becoming carbon neutral by 2050. While the process of decarbonizing transportation and electricity continues, with passenger electric vehicles and renewable energy sources like solar and wind gaining traction, hydrogen is expected to play a larger role in decarbonizing highly polluting heavy industries like steel, cement, and fertiliser production, shipping, and long-haul trucking.
Regulatory tailwinds might help propel hydrogen stocks in the medium term, despite the fact that hydrogen technology is a long-term gamble with investments in the field still being limited compared to the broader energy business.
Why Are Hydrogen Stocks Underperforming
Our Hydrogen Economy Stocks category contains stocks of publicly traded companies in the United States that sell hydrogen fuel cells, associated renewable energy technology, and hydrogen gas.
Since the end of 2019, the theme has returned 190 percent, compared to around 28 percent for the S& P 500. However, the theme has underperformed this year, down around 1% year to date, as rising bond yields have taken some of the lustre off high-growth sectors. Over the same time span, the S& P has increased by 10%.
Cummins, an industrial business best known for its engines and power generation equipment, has been the greatest performer in our subject, with a year-to-date gain of roughly 15%.
First Solar and Bloom Energy BE -7.6 percent, on the other hand, have been among the worst performers, with year-to-date declines of roughly -20 percent and -16 percent, respectively. Is now a good time for investors to get into the hydrogen area because of the recent pullback?
Although increasing yields and higher immunisation rates in the United States create a compelling case for investors to return to cyclical and value equities, we believe the hydrogen space could gain from regulatory tailwinds in the longer run. With the passage of the Covid-19 stimulus bill in early March, Democratic lawmakers in the House and Senate (albeit by a thin margin) are likely to focus on climate-related concerns, which are a crucial component of Vice President Joe Biden’s agenda.
Hydrogen Economy Stocks To Watch As Biden Administration Takes Over
While the hydrogen economy, or the process of creating hydrogen and using it as a fuel to replace fossil fuels, is still mostly a concept with little commercial momentum, this could change now that climate change is at the forefront of incoming President Joe Biden’s agenda.
Hydrogen has the potential to considerably reduce carbon emissions because it can be used not just for transportation and power generation – two key focal areas of current renewable initiatives – but also for heating and industrial applications like cement and steel making.
Since early January, our subject of Hydrogen Economy Stocks, which comprises stocks of U.S.-listed companies that sell hydrogen fuel cells, renewable energy technology, and hydrogen gas, has risen by nearly 26%.
(For a more extensive look at how these companies fit into the hydrogen space, read our update below.) A significant percentage of the advances occurred on Tuesday.
When the US Department of Energy’s Office of Fossil Energy announced intentions to invest $160 million in improving fossil-based hydrogen production, transportation, storage, and utilisation.
Although the money is limited, it is likely to give investors confidence that the government would support the hydrogen industry in the long run.
Bloom, Cummins, First Solar: Stocks To Play The Hydrogen Economy
Low interest rates, improving economic conditions, and the election of Democrat Joe Biden to the presidency – who has suggested spending up to $2 trillion on combating climate change – have all boosted interest in renewable energy equities this year.
While solar and electric vehicle stocks have been the most prominent winners, the concept of the “hydrogen economy,” or the use of hydrogen as a fuel for transportation and other energy needs in place of fossil fuels, appears to have piqued investors’ curiosity.
Hydrogen is significantly cleaner to burn than petroleum-based fuels, and it may be made from water and energy or hydrogen-rich gases like methane.
Hydrogen is also seen as a way to store extra renewable energy because it may be used to power an electrolysis process that transforms water to hydrogen.
The stocks of U.S.-based companies that sell fuel cells, renewable energy equipment, and hydrogen gas are included in our Hydrogen Economy Stocks category.
The companies in our topic are described in more detail below, along with how they fit into the larger picture of the Hydrogen Economy.
Bloom Energy sells Bloom Energy Servers BE -7.6% solid oxide fuel cell generators that run on natural gas or biogas and are powered by an electrochemical technique rather than combustion. The company is also working on hydrogen fuel cells, which run solely on hydrogen gas. Year-to-date, the stock is up 245 percent.
FuelCell Energy (NASDAQ NDAQ -2.5 percent : FCEL) develops and produces carbonate and solid oxide fuel cells that run on hydrogen-rich fuels like natural gas and biogas. In addition, the corporation owns and manages more than 50 fuel cell power facilities around the world. Year-to-date, the stock is up 229 percent.
One of the world’s major producers of hydrogen is Air Products and Chemicals (NYSE: APD), a corporation that supplies gases and chemicals for industrial purposes.
Earlier this year, the business announced intentions to build a large hydrogen factory in Saudi Arabia using 4 Gigawatts of renewable energy. Year to date, the stock has gained 14%.
First Solar is the largest solar panel manufacturer in the United States. Solar players could benefit from the hydrogen economy as hydrogen can be manufactured from water using solar-generated electricity through an electrolysis process.
Due to the intermittent nature of solar power production and supply-demand mismatches, extra electricity might be “stored” in hydrogen. Year-to-date, the stock is up 55 percent.
Cummins (NYSE: CMI) has been working on hydrogen-based technology for nearly two decades, and is best known for its engines and power production equipment. Last year, the company bought Hydrogenics, a major hydrogen fuel cell startup in Canada. Year to date, the stock has gained 23%.
What if you’d rather have a more well-balanced portfolio? Here’s a high-quality portfolio that has outperformed the market, returning over 100% since 2016, compared to 55% for the S& P 500.
It has consistently outperformed the larger market year after year, thanks to companies with robust sales growth, excellent earnings, plenty of cash, and low risk.
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