High interest rates seem to be plaguing many sectors of the economy. The electric vehicle space perhaps received the most coverage, but several renewable energy sectors are reeling from elevated rates. The hydrogen sector is one of them. Not only are there many startups firms in the space, but for more established firms, creating viable forms of hydrogen energy is immensely capital intensive. Of course, capital intensive is just another way to say debt intensive. This explains why investors have soured on hydrogen stocks since last year. As interest rates remain elevated, it will be harder to finance new hydrogen projects in the future.
Fortunately, not everything is doom and gloom. Rates may stay elevated for longer but there most likely will be at least one rate by the end of 2024, which could brighten the future of certain capital-intensive industries.
In order to prepare for hydrogen’s bright future, below are 3 hydrogen stocks to consider buying in April.
Linde (LIN)
Linde (NASDAQ:LIN) is a German chemicals and industrial gas company. The combination of these two end-markets has allowed Linde to seamlessly developed a solid hydrogen energy business. Hydrogen atoms are needed in large quantities throughout the chemicals industry. Having a business involved with chemicals leave a company with a significant amount of hydrogen that it could eventually repurpose for clean energy uses.
Obtaining hydrogen through industrial processes is usually referred to as “gray hydrogen,” and many experts and advocates see it as less clean than green hydrogen. Linde has been working on increasing its green hydrogen exposure. As I have reported in prior articles on LIN, the industrial giant confirmed it would invest between $7 to $9 billion in clean energy projects over the next few years. Moreover, LIN’s Brazilian subsidiary announced the construction of an additional green hydrogen plant in the southeast region of Brazil.
Wall Street also seems pretty pleased with Linde’s outlook. The stock has 20 “Strong Buy” or “Buy” ratings from 20 of the 28 Wall Street analysts covering the industrial stock.
ITM Power (ITMPF)
For investors looking for some volatility, ITM Power (OTCMKTS:ITMPF) is the next hydrogen stock on our list and it trades below $1.
ITM manufacturers proton exchange membrane (PEM) electrolysers in the United Kingdom and sells them to countries across the globe. The firm’s current list of hydrogen products include TRIDENT, an PEM electrolysers stack technology, NEPTUNE, a 2MW electrolyser for small to mid-size projects, and POSEIDON, a 20 MW module for larger scale hydrogen projects.
Due to the macroeconomic headwinds the hydrogen sector had to face in 2023, ITM Power saw its revenues decline that year. In particular, revenues fell more than 7% to $5.23 million from $5.63 million in 2022. With market conditions becoming favorable in the future, investors should expect growth to pick up in the near and medium terms as well.
In late March, ITM continued to make important strides in increasing its market share. In partnership with Japanese firm Sumitomo, ITM completed the installation of its PEM NEPTUNE electrolyzer for Tokyo Gas (OTCMKTS:TKGSY). More projects like this will help ITM to grow its business and prove its value.
Global X Hydrogen ETF (HYDR)
For those seeking a broad exposure to the burgeoning hydrogen sector, it’s hard not to recommend an exchange-traded fund (ETF). The ETF to make this list is Global X Hydrogen ETF (NASDAQ:HYDR). This ETF trades at around $5/share with an AUM of $54 million. Moreover, the ETF has invested in 28 stocks of companies operating across various hydrogen sub-verticals, including production, fuel cells, and integration.
To balance risk, HYDR has made investments in both growth and value stocks across diversified market capitalization. In other words, HYDR holds everything from Bloom Energy (NYSE:BE) and Ballard Power Systems (NASDAQ:BLDP) to Linde and Cummins (NYSE:CMI).
HYDR has fallen more than 27% YTD but given how far shares have tumbled, now could be a good time to contemplate an investment.
On the date of publication, Tyrik Torres 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.
