When the Space Shuttle flew years ago its engine burned oxygen and hydrogen. As it rose into space its exhaust was water! Today we are seeing a rethinking of hydrogen as a fuel. It is abundant and, when burned, it does not produce any greenhouse gas. There are companies currently working on the use of hydrogen as a fuel. It is commercially available by extracting from natural gas, oil or coal and by electrolysis of water. Are the opportunities for investing in and trading hydrogen stocks?
A Short History of Hydrogen
The British scientist Henry Cavendish discovered that hydrogen is a unique substance in 1766. He named it “water-former” in Greek which is hydrogen in English. He knew that when combined with oxygen it burned and produced water as a byproduct. It is the simplest element with a molecular weight of 1 and exists as a gas all the way down to minus 423 degrees Fahrenheit or minus 253 Celsius. It was used in German dirigibles including in the Hindenburg rigid airship which carried passengers across the Atlantic. The Hindenburg caught fire at Naval Air Station Lakehurst in New Jersey on May 4, 1937. This disaster served to discourage the viability of hydrogen for commercial use for decades. Every time someone mentions using hydrogen the immediate response is “Hindenburg.”
Commercial Extraction and Use of Hydrogen
Hydrogen is making a comeback. Because it is abundant and because it does not produce greenhouse gas it is back on the list of viable fuels. One of the keys to making hydrogen a viable addition to world energy sources is not producing more greenhouse gas when extracting it from natural gas, oil, or coal. This method produces what is called blue hydrogen as opposed to green hydrogen which comes from electrolysis of water. Some advocate using hydrogen instead of natural gas to run power plants and say this would be a $10 trillion industry.
Potential Hydrogen Stocks
Companies of interest include Air Products, BP, Plug Power, Bloom Energy, and Linde. Companies that create energy or make products that use energy and those that control sources of hydrogen are all potential investment or trading opportunities. The thing is that one has to find efficient and cost effective ways to produce clean hydrogen. Then one needs to find absolutely safe ways to use it everyday as a fuel source. It currently costs about $5 per kilogram to get clean hydrogen. The US Department of Energy has a goal of getting that price down to $10 for a kilogram over the next decade.
Bloom Energy makes solid oxide fuel cells that use hydrogen. Plug Power is the largest buyer of liquid hydrogen in North America. They make batteries but also create end to end hydrogen fuel solutions for both stationary hydrogen fuel uses and for mobile use (vehicles). BP is a big oil company with lots of natural gas and oil that it can turn into hydrogen if the price is right. Air Products sells chemicals and gases to commercial users and is 85% owned by institutional investors.
Investing in or Trading Hydrogen Stocks
If you had bought Air Products stock as a $5.16 stock in 1983 you would have a $270 stock today. If you had bought the stock last December for $314 you would not be happy today. It currently has a 2.58% dividend yield and a PE ratio of 26.31. The stock has long term potential but is also sufficiently volatile to provide trading opportunities.
Plug Power was first listed on Nasdaq in 1999 at $160 and rose briefly to $1,495.50. It took three years to settle into the $50 range and another seven to get to the $4 range. It started 2020 as a $4 stock which is what it is at the end of 2023. However, over the last years it has traded as high as $66.87. Thus, Plug Power does not appear to be a great long term investment but could provide significant trading opportunities.
Because the media is so focused on climate issues and how to deal with greenhouse gas there is a tendency for related stocks to rise and fall based on the news more so than their long term potential. Here is where the value of hydrogen stocks as trading opportunities may be found.