Independent Financial Advisor and Co-Founder of Affari Miei
February 15, 2024
You are looking for information about hydrogen why would you like to opt for an investment in energy clean?
The transition towards energy green to try to support planet Earth is increasingly predominant, and it is estimated that demand will continue to increase in the coming years.
To stay updated on the new trend of investing in hydrogen, all you have to do is continue reading this article, where we will see how you can invest in hydrogen and above all whether it is worth it.
Enjoy the reading!
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A few words about hydrogen
L’hydrogen it is a chemical element present in nature: it is found in the form of diatomic gas (H2) and is flammable.
It is the first element that appears in the periodic table of the elements, with atomic number 1, and is also the lightest.
It is an odorless, colorless and tasteless gas.
How is it used?
Hydrogen is used in the chemical industry to synthesize ammonia, methanol and also in the production of hydrocarbons.
In the context of ecological transition it is certainly an element to take into consideration, given that if we continue at this rate hydrogen will most likely transform into a megatrendespecially in the future.
Europe is investing in it, since it is thinking about how to replace Russian oil and gas by making thegreener economy.
One of the most suitable elements for doing this is hydrogen: it is suitable for powering engines and replacing the gas used for heating in production.
The element can also be transported through pipelines and under the oceans: in this regard, the first international shipment of liquefied hydrogen traveled from Australia to Japan in February.
What are the leading countries in hydrogen production? We have Australia, Chile, China and Saudi Arabia. The Netherlands and Germany are also planning hydrogen projects.
It’s an interesting investment, but what are the problems?
As always when we talk about investments we must also analyze the risks and the part of various problems that could arise.
Isolating hydrogen and then getting it where it needs to go is complicated and also requires gods huge costs.
We must in fact interface with practical problems: to produce hydrogen we can currently think of extracting it from water or solar energy, but the preferred method still remains that of the use of fossil fuels which, inevitably, causes a net loss of power.
If current hydrogen production methods are used they are not environmentally friendly, and really require a lot of energy, while using greener methods high costs must be considered.
Overall, therefore, there are challenges to overcome, which perhaps will be overcome in the future, however, at the moment, it is mandatory to consider all facets of the investment.
Hydrogen actions
Per investing in hydrogen you might think about betting on individual companies who are investing in this market, who are expanding and who therefore represent the new frontier of sustainable energy.
Let’s see now three companies who invest in hydrogen and who you could consider for a possible investment.
Plug Power
It is an American company that deals with the development of computer systems hydrogen fuel cellswhich replace conventional batteries in equipment and vehicles powered by electricity.
Its headquarters are in Latham, New York.
It is one of the leading companies operating in the hydrogen energy sector.
His market capitalization is equal to 2.41 billion dollars and in the last two years its turnover has recorded important numbers.
2021 was a big year, as it saw a 950% increase after the difficult months of 2020.
Its main products include a hydrogen-powered proton exchange membrane fuel cell system GenFuela hydrogen fuel system designed to allow customers to refuel the units GenDrive for productivity.
Its major competitors are Nel ASA and FuelCell Energy.
The company seems to be promising and solidand investing in the stock does not appear to involve particular risks.
A share costs 3.82 euros and in the last year its performance stood at 16.67%.
Bloom Energy
Bloom Energy is based in San Jose, California and is mainly involved in producing solid oxide fuel cells for backup power applications.
The company was founded in 2011, and raised over $1 billion in venture capital funding before going public in 2018.
In recent years the company has established itself as a leader in the alternative energy sector.
One of the reasons that leads investors to keep an eye on the performance of these stocks is also that of megawatt supply project of hydrogen fuel cells al Korean group SKwhich plans to deploy fuel cells by the end of 2022.
Precisely for this reason it seems that the growth forecasts for the stock are good for the years to come.
One of the best moments for stocks was from December 2020 to February 2021, in which stocks experienced a really interesting rise.
His market capitalization is equal to 2.64 billion dollars, and a share costs 11.85 dollars.
As for the future, the company’s ambitious projects invite us to monitor it, especially from a long-term investment perspective.
Air Products & Chemicals
It is an American company whose main activity concerns gas sales e di chemical products for industrial uses.
The company is headquartered in Allentown, Pennsylvania.
And the largest supplier of hydrogen and helium in the worldand its customers are both chemical companies and companies active in the metals and electronics industries.
His capitalization is 50.37 billion dollars.
In addition to being there larger company among those presented, it can also count on the multi-billion blue and green hydrogen projects that it is expected to finalize in the next five years, and is also looking for new opportunities in emerging markets.
The investments in research and innovationand the development of new products will likely allow the company to double profits over the next five years.
It is therefore a stock to be monitored carefully.
A share costs around 210 euros.
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Hydrogen ETF
If instead of individual securities you prefer to expose yourself to the market in another way, and you want to focus on passively managed investment funds which have low management costs and are very liquid, then you can choose this other path.
They are Italian stock exchange there isn’t a lot of alternatives, but there are some interesting ETFs that I will now present to you.
VanEck Vectors Hydrogen Economy UCITS ETF
This is a fund that offers broad exposure to companies operating in various sectors related to hydrogen, such as the production and storage and distribution of the element itself. The ETF is interesting because it manages to cover theentire hydrogen horizon.
Here you will find the in-depth review of the tool.
L&G Hydrogen Economy UCITS ETF
L’indice Solactive Hydrogen Economy replicates the performance of international companies operating in the hydrogen industry.
The fund has a large size of 400 million euros and was listed at February 2021so we are faced with a truly recent fund, for which we cannot have many comparisons with past data.
The replication method is physical and has no currency hedging.
The fund is domiciled in Ireland, and the politics as regards dividends it is ad accumulation.
I management costs amount to 0.49% per year.
Il risk profile for this fund it is equal to 6on a scale ranging from 1 to 7, so we are talking about a high risk.
L’sector allocation sees companies operating in the industrial sector in first place, equal to 50.5%, followed by the basic materials sector with 24.6% and public utility services with 10.8%.
Global X Hydrogen UCITS ETF
Also for this fund the benchmark is the Solactive Global Hydrogen index that replicates the performance of international companies operating in the hydrogen industry.
This ETF has a small size of 2 million euros and was listed at January 2022so it’s really very recent.
The replication method is physical and has no currency hedging.
The fund is domiciled in Ireland, and the distribution policy is ad accumulationi.e. with coupons that are not distributed to investors but are reinvested in the fund.
I management costs are equal to 0.50% per year.
Is it worth investing in hydrogen?
We tried to analyze the sector in detail, and we understood that it is a sector with many possibilities future growthbut which at the same time also hides some problems and challenges to overcome.
Hydrogen is one of the best and most viable solutions to reduce CO2 emissions in the future: many world economies have also given themselves a deadline to reach the goal of being at zero impact regarding CO2 emissions, and this is 2050.
So is it worth investing in this sector?
You might first of all ask yourself if this is a sector you believe in, that is, if you believe that hydrogen can become a megatrend of the futureand if you think that green trends will be the ones that will increasingly assert themselves, then you could think along these lines.
Il hydrogen sector it is undoubtedly a young sector, which can lead to great satisfaction but which also deserves some additional precautions, given that it could still hide some pitfalls within it.
As you can see, the ETFs are quite recent, so you do not have data to which you can refer for a possible performance indication, while the shares of individual companies They are from safe companies but still require precautions. In this case it would be great for you to analyze the securities in detail.
Basically I can’t give you a clear answer because I don’t know your financial and personal situation.
If you think it could be an interesting sector with good growth prospectsthen consider an investment in this sense.
It’s up to you to choose whether to focus on individual shares or an ETF.
With an ETF you would have greater diversification and you could benefit from low management costs, while with individual shares perhaps you simply need more familiarity to be able to efficiently diversify your portfolio.
Before choosing the tool you may need a little training: you may want to better define your investment strategy, focus on your objectives and your profile as an investor.
For this reason I want to leave you alcune guide which could be useful for you to start taking your first steps in the world of investments:
Happy continuation!
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