One of Warren Buffett’s most famous quotes is, “Only when the tide goes out do you discover who’s been swimming naked.” In other words, when the entire stock market stops rising quickly, those who invested in low-quality names will get hit with huge losses. The market worries that tech and renewable energy stocks with high valuations are low-quality names. But long term, many will reward, not expose, their shareholders. Plug Power (NASDAQ:PLUG) stock is one such name.
Among the reasons why I still think Plug Power will be a big winner over the longer term are its very impressive partnerships that it continues to accumulate, along with likely aid from Washington, DC for hydrogen initiatives.
Support for such initiatives from the EU and South Korea should also boost Plug Power and PLUG stock over the longer term.
PLUG Stock and Partnerships
Plug Power’s latest impressive partnership deal is an alliance with British defense heavyweight BAE Systems (OTC:BAESY). The company announced the agreement April 29. The two companies intend to collaborate to develop “zero-emissions powertrains to heavy-duty transit bus manufacturers ” in North America, Plug Power stated.
Plug and BAE will combine “Plug Power’s ProGen fuel cell engines [with] BAE Systems’ smart electric drive systems, as well as provide hydrogen and refueling infrastructure” to bus makers, the companies explained. According to Yahoo Finance, BAE Systems’ 2020 revenue came in at $19.28 billion.
Among Plug Power’s other major partnership deals announced this year are alliances with major oil explorations services company Baker Hughes (NYSE:BKR), Brookfield Renewable (NYSE:BEP) which owns renewable energy assets. Others include South Korean conglomerate SK Group and European automaker Groupe Renault.
I’ve frequently cited support from the EU for hydrogen projects as a key positive catalyst for the shares. And I think it’s important to point out that the bloc’s backing for hydrogen continues to be extremely strong.
In fact, on April 13, Reuters reported that the EU is seeking “to produce, transport and market green hydrogen from renewable energy via electrolysis to replace ‘grey’ hydrogen from gas, and to substitute oil products across manufacturing industries and in heating and transport.” Also last month, the EU’s executive branch, the European Commission, stated that it wants to use hydrogen as a means of “decarbonising sectors that are not accessible to direct electrification.” The panel said it “wants to make the EU a pioneer in the use of hydrogen as an energy carrier.”
In the U.S., the Biden administration’s infrastructure plan includes money “for demonstration projects” involving green hydrogen. (The latter term refers to hydrogen produced using solar energy and/or wind energy). Additionally, the bill would fund “15 decarbonized hydrogen demonstration projects in economically distressed communities.”
Moreover, Democratic Senator Tom Carper, the chairman of the Senate Committee on Environment and Public Works, recently said, ““Not many people talk about hydrogen fueling stations, but for large trucks hydrogen could be really good.”
Given Carper’s statement, I think there’s at least a 65% chance that hydrogen fueling stations will get meaningful funding.
Turning to South Korea, the country is looking to launch “6.2 million fuel cell electric vehicles and..1200 refilling stations by 2040.” Given Plug Power’s extensive partnership with South Korean conglomerate SK Group, Plug is very well-positioned to exploit the government’s efforts to make the nation a hydrogen powerhouse.
The Bottom Line on PLUG Stock
Over the long run, Plug Power’s strong support will prevent it from ever causing shareholders to swim naked. Actually, I continue to believe that PLUG stock will ultimately be a tremendous winner.
On the date of publication, Larry Ramer held a long position in PLUG. He also held a long position in GE which owns shares of Baker Hughes.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.