With the global transition away from fossil fuels underway, a host of technologies are emerging that offer the potential to reduce the amount of greenhouse gases released into the atmosphere.
Green hydrogen is one of them, making investing in this nascent industry anything but hot air.
Unlike most of the hydrogen produced today, which is made with natural gas or coal in factories powered by fossil-fuel-generated electricity, green hydrogen is made with renewably produced electricity.
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That electricity splits water into hydrogen and oxygen in a process that uses a tool called an electrolyzer. Later, using a hydrogen fuel cell, that energy can be transformed back into electricity to power transportation and industrial processes.
The green hydrogen industry is in transition, says Christopher Day, founder and CEO of Day Global Advisors.
There has been a lot of hype over the past few years that pushed valuations up, he says. As they have come down, “now would be a good time” for those looking to invest long term.
With that in mind, here’s a look at some green hydrogen stocks and ETFs that could eventually power up a portfolio:
| Green Hydrogen Stock/ETF | % off 52-week high as of Nov. 10 |
| Bloom Energy Corp. (ticker: BE) | -60% |
| Panasonic Holdings Corp. (OTC: PCRFY) | -28% |
| FuelCell Energy Inc. (FCEL) | -79% |
| Plug Power Inc. (PLUG) | -82% |
| Direxion Hydrogen ETF (HJEN) | -35% |
| Global X Hydrogen ETF (HYDR) | -59% |
Bloom Energy Corp. (BE)
This company makes fuel cell power generation systems that can run on hydrogen, biogas and natural gas, and it is one of Day’s blue-chip green hydrogen picks.
For those looking to build a green hydrogen portfolio of individual stocks, he recommends having a core of established companies like Bloom and “sprinkling in” more speculative plays.
Bloom’s technology can be adopted for utilities and the transportation industry, giving it an edge in two sectors that are facing pressure to decarbonize.
In addition to making fuel cells, Bloom also makes electrolyzers, so it’s involved in the twin pillars of the green hydrogen space.
Panasonic Holdings Corp. (OTC: PCRFY)
This Japanese multinational electronics company isn’t a pure play on green hydrogen, but its fuel cell generators promise to power small-scale commercial facilities. They can also be scaled up by connecting multiple units.
The company also has an energy management system that can control a decentralized power operation that combines hydrogen fuel cells with solar panels and lithium-based battery storage.
Panasonic is focused on its automotive battery business, entering into discussions with Subaru Corp. (OTC: FUJHY) and Mazda Motor Corp. (OTC: MZDAY) about supplying batteries for electric vehicles.
But rather than ignore the company because it’s not a pure play, investors may want to consider its battery business as a hedge against any potential downturn in its hydrogen fuel cell business.
“It has a lot of potential as the technology evolves,” says Day, who considers Panasonic a more speculative play than Bloom Energy.
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FuelCell Energy Inc. (FCEL)
Day considers this manufacturer of fuel cell energy platforms a more speculative play than Panasonic. At the same time, it could be primed for possible outperformance, he says.
The company’s power plants help utilities and other power producers add clean power generation that doesn’t depend on whether the wind is blowing or the sun is shining. Customers have included Dominion Energy Inc. (D), Avangrid Inc. (AGR) and Southern Co. (SO).
Shares have been beaten down, dropping 62.9% so far this year as of Nov. 10, but that might offer a bargain.
Beyond the appreciation FuelCell’s shares might see as the company goes about its normal business and demand for its products increases, Day says an acquisition is also possible. If a larger green hydrogen company or a private equity firm made an offer for the company, it would likely be at a premium to wherever its shares are trading at the time.
Plug Power Inc. (PLUG)
Among pure-play green hydrogen companies, Plug Power has been considered a blue-chip stock, but lately it’s been throwing up some red flags for investors. The company issued a “going concern” warning in its third-quarter report that sent its stock plummeting 41% on Nov. 10. Plug Power now needs a giant cash infusion to fund its operations.
The statement led some analysts to downgrade the stock, and about 45% of analysts still rate the stock a “buy” compared with 65% before the warning. Investors should monitor developments with Plug closely before committing to an investment.
Because it makes both electrolyzers and hydrogen fuel cells, the company is positioned favorably to take advantage of the growing demand for hydrogen in transportation. But it’s run into challenges related to inflation and supply chain issues.
Day points out that hydrogen-powered vehicles can cover longer distances than automobiles powered by lithium-based batteries
. That would offer substantial competition for the current generation of electric vehicles because range anxiety is a big turnoff for some potential buyers.
With demand increasing for electric vehicles, lithium is expected to be in short supply in coming years, meaning that higher prices and scarcity could also make hydrogen-based transportation more appealing. Because hydrogen is a good way to store electric energy over long periods, it can also serve as a competitor to lithium-based batteries for grid-scale energy storage.
If Plug is somehow able to right the ship, it could be selling at fire-sale prices now. But investors should approach this one with extra caution at this point.
Direxion Hydrogen ETF (HJEN)
Investors who want to put some money into the green hydrogen sector but may be leery of picking individual stocks can consider a number of exchange-traded funds, or ETFs
, in the space.
These funds package multiple stocks under a single ticker symbol, allowing investors a way to hedge against risks, especially in a niche market like green hydrogen, which is populated by small companies.
HJEN contains companies involved in hydrogen generation and production, storage and supply, batteries and fuel cells, systems and solutions, and membranes and catalysts.
The fund’s top holdings include legacy hydrogen business L’Air Liquide SA (OTC: AIQUY) and major fossil fuel producers Shell PLC (SHEL) and BP PLC (BP), so it may not be for every investor who’s looking for exposure to greener energy companies.
But these firms are taking steps in the green hydrogen economy, and their size may help cushion the fund against volatility.
HJEN has an expense ratio of 0.45%, or $45 per year for every $10,000 invested.
Global X Hydrogen ETF (HYDR)
The Global X Hydrogen ETF is diversified by jurisdiction and industry, with the fund’s literature noting that the shift to renewable energy isn’t just happening in a single sector or region.
Most of its holdings are in the industrials sector, but it also has a smattering of holdings in the consumer discretionary, materials and information technology sectors. Its largest single country weighting is with U.S. holdings, followed by Britain, Norway, Canada and others.
The common denominator is that the companies “stand to benefit from the advancement of the global hydrogen industry,” the fund’s literature says.
That includes companies involved in hydrogen production, integrating hydrogen into energy systems, and making fuel cells, electrolyzers and other technologies related to using hydrogen as an energy source.
The fund has an expense ratio of 0.5%.
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6 Best Green Hydrogen Stocks and ETFs to Buy Now originally appeared on usnews.com
Update 11/13/23: This story was previously published at an earlier date and has been updated with new information.
