For decades now, we have heard about the hydrogen sector’s immense disruptive potential in replacing the internal combustion engine. However, due to several technical and cost-related issues, the sector has failed to make that breakthrough. For the first time, though, it seems that world governments are seriously pushing for sustainability and exploring a variety of cleaner alternatives. That said, hydrogen stands out from the pack because it is arguably the cleanest form of fuel — emitting only water vapor. Hence, it pushes hydrogen stocks into the spotlight for investors looking to cash-in on the upcoming energy transition.
Moreover, the European Union recently announced its ambitious hydrogen strategy this summer, following several other nations’ footsteps. On a bullish note, the Bank of America talked about how the hydrogen marketplace could reach a whopping $11 trillion by 2050. It notes that hydrogen could play a vital role in fighting climate change and fulfilling most of our energy needs.
Thus, the sector has turned on the afterburners, and it is the right time for investors to add the best hydrogen stocks to their portfolios. With that in mind, here are three that are ruling the roost at this time:
Now, let’s dive in and take a closer look at each.
Hydrogen Stocks to Buy: Air Products & Chemicals (APD)
Air Products and Chemicals is not exactly a hydrogen pureplay, but is a name that could become synonymous with the sector in time. It is a chemical company, which is in the business of providing industrial gases and related equipment to utilize them. It is operating in roughly 50 countries, supplying to more than 30 industries. And despite the energy sector’s weaknesses, APD stock’s 12-month return is at a healthy 16%.
Moreover, the company recently announced its very first mega-scale hydrogen project located in Saudi Arabia. According to the company, the project is 100 times larger than any previous hydrogen project. The project’s total cost is expected to be $7 billion including its distribution infrastructure, and will produce 650 tons of green hydrogen from electrolysis.
Needless to say, the project has immense potential and will provide massive tail-winds for future growth. And with a market capitalization of nearly $60 billion and millions in its cash, its hard to bet against the company is taking this project past the finish line.
Ballard Power Systems (BLDP)
Ballard Power Systems is one of the leading providers of hydrogen fuel-cell technology. The company has been investing heavily in its production capacity and its competencies to capture much of the growth in the sector. Therefore, investors are currently giving it a lot of leeway despite a sketchy earnings performance in the past few years. As a result, BLDP stock’s 12-month return is at a colossal 221%.
One of the company’s key growth drivers in the near-term is its joint venture with the China-based Weichai Power Group. In turn, Weichai provides Ballard with fuel cell modules that are fitted into its vehicles. Weichai’s factory will produce up to 17,000 modules annually from 2021.
In the meantime, Ballard has been investing heavily in its Vancouver facility to produce these fuel cell modules domestically potentially. The company has raised $325 million in 2020 through at-the-market (ATM) equity offerings. Additionally, it also has a strong cash position, enabling it to fund its endeavors organically.
Hydrogen Stocks to Buy: Cummins (CMI)
Cummins is a U.S.-based company that produces a broad range of power solutions, including diesel, natural gas and electric powertrain components. Though it has been working on hydrogen development for several years, it still forms a relatively small part of its business. However, in the past couple of years, it has been seriously ramping up its hydrogen capabilities. With a strong earnings track record and financial positioning, CMI stock yielded a healthy 23% return in the past 12 months.
Furthermore, Cummins hydrogen and fuel cell business fall under the new power segment. This year, the segment grew 100% in the third quarter, generating revenues worth $18 million. Last year, the company acquired Canadian hydrogen fuel cell company Hydrogenics to expand its hydrogen capabilities. The company has recently highlighted plans to take its electrolyzer revenues to approximately $400 million by 2025. Moreover, it is also working with Navistar (NYSE:NAV) to produce a hydrogen-powered Class 8 truck.
So, with several developments in the hydrogen sphere, expect Cummins to become a significant force in the industry.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.