The daily price fluctuations of the shares in the hydrogen and fuel cell sector discussed here – primarily those from the USA and Canada – give an indication that very different interests determine events here: Thus, on many days in July 2021, there was a concurrence of price declines with almost identical percentage losses in the prices of all these shares with manageable trading volumes at the same time. In other words: The buy side held back and the forces betting on falling prices had the upper hand. However, no selling pressure could be detected, which is reflected in the amount of shares traded.
At the same time, the number of short sold shares increased significantly for some of these stocks, because short sellers were so visibly betting on falling prices and caused the shares to fall even more. This development also shows how differently the potential of hydrogen in its various colours – depending on the production method and energy for conversion – and the fuel cell are seen. This can best be seen in the discussion concerning electro-mobility: There seems to be a camp thinking there, in the sense that some clearly see the battery and others the fuel cell with the conversion of hydrogen into electricity as having the benefit.
I, on the other hand, see the two variants as complementing each other. On the stock exchange, however, there can be very different moods and assessments, which are then naturally reflected in the prices of the shares concerned.
Consolidation – but no crash
Seen in this light, the sharp price decline in the shares mentioned here, as well as in almost all other H2 and FC shares since February 2021, was not a crash. The panic selling that always accompanies a crash was missing. Rather, the decline in prices was accompanied by only moderate turnover and thus represented a compensation for a price exaggeration that had previously taken place in the short term. This consolidation is now coming to an end, leading to a long-term upward trend and successive price increases. Because in view of the excellent prospects for hydrogen and the various fuel cells (PEM, SOFC, etc.), the companies or their shares discussed here will follow a positive path.
This can be deduced from the fact that there are already projects worth more than US$ 500 billion worldwide (projects worth US$ 1 billion are added every week – source: Hydrogen Council), which are based on hydrogen, its production, transport and fields of application. In addition, many countries (Japan, South Korea and China) are massively relying on hydrogen in many markets and applications. For all the companies discussed here, it is true that they have specialised in certain markets and products, that they have abundant know-how or intellectual property, and that the technologies developed are available and about to be used on a large scale (ramp-up of production). Moreover, these companies have extremely healthy balance sheets.
Strategic alliances are being worked on in parallel. So my clear conclusion is that it makes sense not to be worn down by temporary declines in prices and instead to bet on the big long-term trend. This can also mean using currently still low prices as a basis for additional purchases, possibly reductions in the price of existing positions, rather than selling, as short sellers do.
As an investor in this profession, you should bring something very important with you: Time and understanding for a new mega-trend that is slowly developing and then gaining momentum. One year is nothing. But: The trend is your friend. The industry’s prospects could not be better, which of course also applies to the shares of the companies presented here.
Every investor must always be aware of his own risk assessment when investing in shares and also consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid caps, i.e. they are not standard stocks and their volatility is also much higher. This report is not a buy recommendation – without commitment. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on a medium- and long-term valuation and not on a short-term profit. The author may be in possession of the shares presented here.
Author: Sven Jösting, written August 12th, 2021