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A blend of hope and fear has given hydrogen stocks a boost over the last few days. The UN just released the first of a six-part series on climate change, which has been described as sounding a "code red for humanity." But at almost the same time, the US Senate passed President Biden's $1 trillion Infrastructure Bill, including significant investment in decarbonization and green hydrogen, offering hope that leaders will hear the wake-up call[1].

The UN report states that within 20 years, the world will exceed the Paris climate accords' target of limiting global warming to 1.5℃ above previous levels, and without harsh, swift action, temperatures could rise by 2.7℃ by 2100.[2] The report's timing, while wildfires are destroying thousands of acres and millions of homes in the US, Greece, Turkey, and Italy, and floods have hit Turkey, India, and parts of the US, makes it impossible to ignore.

Green hydrogen offers hope for the future

There's no single solution to the climate crisis. Planting trees and cutting energy usage are important, but we also need to replace carbon-heavy fuels with alternatives like green hydrogen.

Hydrogen fuel is produced using electrolyzers to harvest hydrogen molecules for conversion into fuel. Until recently, most hydrogen was "gray hydrogen," made using fossil fuels, but today's "green hydrogen" uses renewable energy sources, resulting in energy that's pollution and emissions-free.

Hydrogen is ideally suited as a replacement fuel source. It's abundantly available across the planet in the form of water; it's energy-dense, giving it a long-duration discharge cycle that can store energy and release it later at times of peak demand; it's more stable than solar or wind power, and as a molecule-based fuel, it can be used by high-polluting industries that can't switch to electrification.

All eyes are turning to green hydrogen

Private investors and national leaders alike recognize the importance of investing in hydrogen stocks to support the development of green hydrogen production. The US government’s Infrastructure Plan includes[3]:

  • Building 15 decarbonized hydrogen demonstration projects
  • Funding R&D in advanced hydrogen electrolyzers
  • Redirecting tax credits from fossil fuel producers to industrial decarbonization
  • Incentivizing adoption of hydrogen-powered fuel cell (FCEV) and electric vehicles (EV)

That's not the only legislation pushing green hydrogen ahead. In June, the US Energy Secretary

Jennifer Granholm announced a "Hydrogen Shot" program to lower the costs of clean hydrogen by approximately 80% to $1/kg by 2030.[4] In Granholm's words, “Clean hydrogen is a game changer.”[5]

Last week, a bipartisan Clean Hydrogen Energy Act was presented to the House of Representatives, proposing a hydrogen R&D program that would focus on driving down the costs of hydrogen production, transportation, and storage.

“In the fight against climate change, hydrogen has the potential to be the best tool we have,” said Mike Doyle (D-PA), one of the 3 co-sponsors of the bill. “Hydrogen can decarbonize transportation, power generation, and the industrial sector all while utilizing existing infrastructure and fuel supplies.”[6]

Green hydrogen projects have mushroomed over the past few months. Leading hydrogen cell producers Plug Power broke ground on a $84 million hydrogen refinery in Georgia, USA[7], and hydrogen company FuelCell Energy secured $15 million to build a 7.4 megawatt fuel cell project in Connecticut[8]. Cities are adopting hydrogen FCEV buses and trains; the Port of Los Angeles rolled out five hydrogen-powered FCEVs and opened two hydrogen fueling stations[9]; and even big oil and gas companies are ramping up investment in green hydrogen production[10].

Green hydrogen stocks are benefiting from the mood of the moment

All of this makes investors sit up and take notice of  hydrogen companies stock. For example, hydro stocks like Plug Power, Ballard Systems, Bloom Energy, and FuelCell Energy all rallied over the past week[11].

Investors looking to spread their exposure to hydrogen across as many of the potentially best hydrogen stocks as possible could consider a hydrogen ETF like Defiance's HDRO ETF. HDRO is a relatively low cost, accessible way to gain exposure to a number of leading hydrogen companies' stocks. It is just one of Defiance’s suite of disruptive ETFs.

 


 

N.b. This is sponsored content and not FINSUM editorial

 

Important Disclosures:

Read more about HDRO here, including current holdings and performance:  https://www.defianceetfs.com/hdro/. Fund holdings are subject to change and should not be considered recommendations to buy or sell any security.

 

The Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383.

 

Investing involves risk. Principal loss is possible. As an ETF, HDRO (the “Fund”) may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. It is not possible to invest directly in an index.

 

A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in hydrogen and fuel cell companies. Such companies may depend largely on the availability of hydrogen gas, certain third-party key suppliers for components in their products, and a small number of customers for a significant portion of their business.

 

The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.

 

HDRO is new with a limited operating history.

Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.

HDRO’s gross expense ratio is [0.3%] Commissions may be charged on trades.

 

The Defiance ETFs are distributed by Foreside Fund Services, LLC.

 

[1] https://www.cnbc.com/2021/08/10/senate-to-pass-bipartisan-infrastructure-bill.html

[2] "AR6 Climate Change 2021: The Physical Science Basis", released August 9, 2021 https://www.ipcc.ch/report/ar6/wg1/

[3] "Biden Details $2 Trillion Plan to Rebuild Infrastructure and Reshape the Economy" March 31, 2021 https://www.nytimes.com/2021/03/31/business/economy/biden-infrastructure-plan.html

[4] "Biden administration launches program to cut cost of climate-friendly hydrogen production" June 7, 2021 https://news.yahoo.com/biden-administration-launches-program-cut-121558346.html

[5] "Plug Power Is Still Undervalued as the Good News Keeps Coming" June 10, 2021 https://www.nasdaq.com/articles/plug-power-is-still-undervalued-as-the-good-news-keeps-coming-2021-06-10

[6] "Reps. Doyle, Fitzpatrick and Lamb introduce clean hydrogen energy act" August 6, 2021 https://dailyenergyinsider.com/policy/31424-reps-doyle-fitzpatrick-and-lamb-introduce-clean-hydrogen-energy-act/

[7] "Plug Power breaks ground on $84m liquid green hydrogen plant in Georgia, US" August 10, 2021 https://www.h2-view.com/story/plug-power-breaks-ground-on-84m-liquid-green-hydrogen-plant-in-georgia-us/

[8] "Why Ballard Power, Plug Power, Bloom Energy, and Especially FuelCell Energy Stocks Popped Today" August 9, 2021  https://www.fool.com/investing/2021/08/09/why-ballard-plug-bloom-fuelcell-stocks-popped/

[9] "Port Of Los Angeles Demonstrates Hydrogen Fuel Cell Electric Trucks" June 10, 2021 https://www.fleetequipmentmag.com/port-los-angeles-hydrogen-fuel-cell-electric-trucks/

[10] "Big Oil Companies Push Hydrogen as Green Alternative, but Obstacles Remain" July 26, 2021 https://www.wsj.com/articles/big-oil-companies-push-hydrogen-as-green-alternative-but-obstacles-remain-11627297201

[11] "Why Plug Power, Bloom Energy, and FuelCell Energy Stocks Rallied Today" August 10, 2021 https://www.fool.com/investing/2021/08/10/why-plug-power-bloom-energy-and-fuelcell-energy-st/ "Why Ballard Power, Plug Power, Bloom Energy, and Especially FuelCell Energy Stocks Popped Today" August 9, 2021 https://www.fool.com/investing/2021/08/09/why-ballard-plug-bloom-fuelcell-stocks-popped/

Tuesday, 19 October 2021 19:44

Goldman’s Big Call on Real Estate

The housing market has outpaced nearly all expectations as prices are up a staggering 17.7% over the last 12 months. Some bears said this pace has to slow and that simply put there aren’t enough buyers to keep demand boosted this high, but Goldman Sachs sees it differently. They are projecting home prices to grow at 16% over the next year. They believe millennials are just hitting their stride in the buyers market and that a woefully short supply will keep prices elevated. New home construction has been far too sluggish in the post-2008 environment as investors are skittish, but low-interest rates give many the opportunity to buy. All of this puts the U.S. at an estimated 4-million home shortage, which has Goldman extending the horizon for house price growth through 2023, projecting another 6% increase. Others aren’t as bullish; CoreLogic and Freddie Mac are projecting 2.2% and 5.3% respectively.


FINSUM: Extremely low interest rates and glimpses of inflation could prop up home prices for the time being, as excess money has tended to flow disproportionally into assets like real estate.

Tuesday, 19 October 2021 19:40

The Next Big Sector?

Privatized space launches were a hot topic in news cycles this year, with success from SpaceX and private launches of billionaires Bezos and Branson. However, space didn’t just move headlines this year, it moved bottom lines as well. Privatized space infrastructure investment drew $3.9 billion in 2021Q3, setting an annual record of $10.3 billion. Space investments are broadly divided up into infrastructure (which posted the record year), distribution, and application. Special Purpose Acquisition Companies (SPAC) were the predominant factor in space investments. The capital was raised in private markets and mergers to go public happened frequently this quarter by Rocket Lab, Spire Global, BlackSky, Momentous, and Redwire. The trend won’t stop this quarter as more deals SPAC deals are expected to place and set more records in Q4. Space investment has raised nearly $231.2 billion in private equity since 2012.


FINSUM: While a lot of major deals are done in private equity, retail investors can look to ETFs like ARKX to invest in this growing market segment.

Tuesday, 19 October 2021 19:38

Value’s Rally is Still Alive

Value stocks are usually sought after for their relatively cheap prices trading at low P/E ratios or below book values. They had been on a near decade-long losing streak that culminated in the Pandemic crisis, which drove investors to the lofty tech-based growth stocks, but things turned around for value in September 2020 but were once again stalled out by the delta variant. However, as the economy begins to once again stabilize value is coming back with a vengeance. Bankruptcy concerns and thin profit margins are no longer fears, and value is at the ultimate discount. Research Affiliates, and investment strategy firm, value is poised to return between 5-10% in the coming decade. Global vaccine rates are making progress and cyclical sectors and hence then value sectors are going to turn around the way they started to in September 2020.


FINSUM: Value’s comeback seems inevitable, the ultra-low prices are out of wack stability will see value outperforming other factors in the upcoming year.

(Washington)

Financial advisors have been highly focused on the prospect of the Biden Administration imposing a new capital gains tax rate. In particular, the abolition of the “step-up in basis” at death that inheritors currently benefit from. The popular parlance that has emerged in the industry is “death tax”. Clients generally hate this new proposal, but one of the underappreciated risks is the major liquidity risk that the rule presents. On many assets, capital gains taxes could be large—and take a large amount of cash to pay, cash that many inheritors may not have.


FINSUM: One typical example is on US farms, where land has become hugely valuable over time, but where the actual farming business runs on slim margins. This means inheritors may have high wealth in terms of assets, but little liquidity, creating a significant tax debt under Biden’s proposals.

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