The Global X Hydrogen ETF (NASDAQ:HYDR) invests in hydrogen stocks benefiting from the advancement of the global hydrogen industry. Launched in July 2021, the ETF traded close to $30 within four months of going public. Since then, HYDR has lost nearly 80% of its value despite the excellent growth opportunities in the hydrogen energy industry.
“Forecasts suggest the global hydrogen fuel cell vehicle market could grow more than 75% from 2021 to 2026, approaching $31 billion in value and highlighting just one of many growth opportunities for the theme,” states the ETF’s website.
However, if you listened to the Daily Journal (NASDAQ:DJCO) shareholder meeting in February 2021, you would have understood the hydrogen industry’s difficulties.
Charlie Munger, the company’s Chairman, was asked a question about hydrogen and the future of transportation.
“I don’t think I’ve got any great insight about hydrogen,” Munger stated in 2021. “But I do think having a whole system to sell hydrogen is difficult. On the other hand, the buses in Los Angeles work on natural gas. All the buses. And it has saved Los Angeles a fortune because gas is so much cheaper than gasoline.”
So, there you have it: a short synopsis of the pros and cons of investing in hydrogen by the brilliant lawyer.
If you’re a believer, here are three hydrogen stocks to buy from HYDR.
Bloom Energy (BE)
Bloom Energy (NYSE:BE) is the largest holding in HYDR with a 14.27% weighting.
The manufacturer of solid oxide fuel cells for producing electricity on-site hasn’t delivered for shareholders over the past year, down 43%, with a five-year return of -24%. The promise of hydrogen energy in 2021 sent BE stock over $40, only to fall back over the next 33 months.
Bloom reported Q3 2023 results on Nov. 8. The good news was that its revenue was $400.3 million, 36.9% higher than a year ago and 8.4% clear of the analyst estimate. The bad news was that it lost 80 cents, 20 times worse than the consensus estimate and more than double its loss a year earlier.
The best news from the quarterly report: Bloom reaffirmed its revenue goal for 2023 of $1.45 billion at the midpoint of its guidance. It also expects its non-GAAP gross and operating margins to be positive for the year.
InvestorPlace’s Thomas Yeung recently mentioned that fuel-cell-powered ships could be the wave of the future. If Munger’s observation is worth anything, converting the shipping industry to hydrogen might be easier said than done.
I guess we’ll see.
Air Products and Chemicals (APD)
Air Products and Chemicals (NYSE:APD) accounts for 2.94% of HYDR, making it one of the smaller holdings in the portfolio.
On Nov. 6, the company announced it would build, own, and operate a state-of-the-art carbon capture and carbon dioxide (CO2) treatment facility at its hydrogen production plant in the Netherlands. The plant will produce “blue” hydrogen to be used at Exxon Mobil’s (NYSE:XOM) Rotterdam refinery.
Later, it announced a strategic partnership with Chengzhi Shareholding Co. Ltd. The initial commercial-scale hydrogen fueling station in Changshu City, Jiangsu province, is designed to service city buses and heavy-duty trucks in logistics in the region. Clients include Budweiser China, Nestle China, and many others. It will deliver hydrogen fuel to the companies’ fuel cell trucks.
Air Products has over 60 years of hydrogen experience. While companies like Bloom are trying to hit home runs with their products, APD is fine supporting the hydrogen industry in any way it can.
On Nov. 13, the company said it expects to earn $12.95 a share at the midpoint of its guidance for 2023, less than 21x earnings and the lowest P/E ratio since 2016.
Hyster-Yale Materials (HY)
Hyster-Yale Materials (NYSE:HY) is the third-smallest holding in HYDR, with a weighting of just 0.41%.
I can remember when people first got excited about Plug Power (NASDAQ:PLUG) because of its fuel cell products to power forklifts, the lifeblood of the distribution and logistics industry.
But rather than go with PLUG, I’m opting for Hyster-Yale, whose hydrogen fuel cell-powered forklifts are powered by Nuvera fuel cells, which just happened to be acquired by Hyster-Yale in December 2014. It’s been selling these products under the Hyster and Yale brands ever since.
I will never forget Hyster-Yale because it was once part of a much larger, discombobulated conglomerate, Nacco Industries (NYSE:NC), until it was spun off in September 2012. Shareholders got one HY share for every NC share held. Five years later, Nacco’s Hamilton Beach Brands (NYSE:HBB) was spun off on a 1-for-1 basis.
None of the three stocks has performed well over the past five years.
However, Hyster-Yale’s business is doing exceptionally well in 2023. Its revenues were $3.09 billion through the first nine months, 20.6% higher than a year earlier. On the bottom line, it had an operating profit of $160.0 million, a considerable turnaround from an operating loss of $58.9 million.
Cash flow will improve in 2023. It’s expected to improve more in 2024, with its Americas segment delivering most of the positive results.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
