02 December 2021
Hydrogen companies offer ample investment opportunities
Green hydrogen is not yet an immediately profitable investment, but energy companies developing hydrogen (technology) offer a propitious investment for the future. Technological innovation can provide investors in hydrogen companies with high returns on the back of share price increases. In addition, they are funding a promising technology in renewable energy.
• Many hydrogen companies are not yet making a profit on green hydrogen - this is a long-term investment.
• Investors contribute to the development of a promising renewable energy.
• It is wise to spread the risk over several companies and/or renewable energy types.
• In the long term, the profit potential is high.
Many investments in hydrogen
Experts are convinced that green hydrogen - hydrogen generated from sustainable energy - will play a significant role in tackling the climate problem. Other sustainable forms of energy cannot alone fill the gap left by fossil fuels. Green hydrogen is therefore badly needed. Major government investments will flow to companies developing (green) hydrogen, which offers equity investors opportunities with these companies.
The key to success lies in the technological development required to render green hydrogen profitable. Companies achieving this will have a successful business model, though there is still some way to go. Such profits lie very much in the future. Green hydrogen is currently still too expensive, partly because it is generated using relatively expensive sustainable energy. Nevertheless, falling production costs, technological innovation and a global commitment to sustainability now make hydrogen very interesting for investors. Green hydrogen also offers the prospect of achieving a zero-carbon global economy by 2050.
Which hydrogen companies?
It is a challenging decision to determine what are good or bad hydrogen stocks. Ultimately, all that matters is whether a company can develop the right technology and can earn from it. For example, Bill Gates has invested in the Israeli H2Pro, but it is impossible to predict whether this company will be the best investment. Perhaps other companies have better technology or can more effectively apply that technology and convert it into a lucrative business model.
Interesting hydrogen companies in which to invest
FuelCell Energy focuses on the development of hydrogen fuel cells for heavy industry. As such, the company is active in production and storage. Competitor Plug Power is working on hydrogen fuel cell systems that can replace conventional batteries. Together with competitor Ballard Power, the company focuses on smaller applications, such as powering forklift trucks or electric buses. Another fast-growing player, Bloom, is attracting attention thanks to its blending of hydrogen with biogas and natural gas to generate renewable electricity for business customers.
Share prices under pressure this year
The stock prices of many of these companies have soared in recent years. This year, prices have taken a hit, partly because investors focused on companies that lagged during the covid-19 pandemic and on company profitability. For example, Plug Power shares rose from around $4 in June 2020 to $75 in January 2021. But since then, the share price has fallen sharply. However, the promise for the future remains excellent, so this could be an exciting entry point.
Hydrogen is a long-term investment
Investors should be aware that hydrogen shares are a long-term investment and that it is difficult to predict the winners. Therefore, it is wise to invest in many hydrogen companies with diverse activities through a fund or so-called ETF (exchange traded fund) that follows the price development of a fixed number of companies. Diversification provides a more solid investment. Investors also looking for short-term returns are better off investing in a mix of energy investments via a fund such as the Future Energy Fund.
Diversified investments in FutureEnergyFund
FutureEnergyFund is a bond investment that yields 7.5% interest per year. This interest stems from investments in German wind turbines and solar parks by management company WindShareFund. In addition, nine percent of the investments is directly invested in shares of companies working on developing green hydrogen technology. This energy investment mix provides a maximum interest bonus of 12%. Thus the fund offers a well-diversified, sustainable investment for investors who want not only a financial return but also a green return.
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