Our theme of Hydrogen Economy Stocks, which includes the stocks of U.S. listed companies that sell hydrogen fuel cells, related renewable energy equipment, and supply hydrogen gas, has seen a solid rally in recent months, rising by almost 40% since our last update in late June. The theme also remains up by about 11% year-to-date, outperforming the broader S&P 500 which remains down by roughly 11% over the same period.
There are multiple factors driving the theme’s recent outperformance. Firstly, the Inflation Reduction Act which carries about $370 billion in subsidies and credits for clean energy investment in the United States, was cleared by the House last week and sent to the President for signing. This is the largest-ever investment to fight climate change and this could result in as much as $1.2 trillion in private investments into the renewables space by 2035, according to Wood Mackenzie. Moreover, the Russian invasion of Ukraine and other geopolitical issues have also resulted in a surge in energy prices. The elevated energy prices and uncertainty relating to gas supplies are serving as a wake-up call for energy importing countries, particularly in Europe, potentially hastening the process of shifting to renewable energy and alternative energy sources such as hydrogen. Moreover, there might be macro factors at play, as well. U.S. GDP has contracted over the last two quarters and U.S. inflation has cooled off a bit to about 8.5% for July. This could cause the Federal Reserve to go a bit easier on its rate hikes, potentially helping high-growth futuristic themes such as hydrogen.
However, there are risks as well. Although hydrogen holds long-term potential in decarbonization and reducing the dependence on fossil fuels, particularly for heavier applications such as trucking and manufacturing, it remains a futuristic bet, given the high costs involved presently and lack of scale. Within our theme, Bloom Energy (NYSE: BE), a company that produces solid oxide fuel cells, has been the best performer, with its stock rising by about 37% year-to-date. On the other side, FuelCell Energy (NASDAQ:FCEL), a company that designs, manufactures, and operates fuel cell power plants, has been the worst performer with its stock down by roughly 12% year-to-date.
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|S&P 500 Return||4%||-10%||91%|
|Trefis Multi-Strategy Portfolio||8%||-7%||267%|
 Month-to-date and year-to-date as of 8/14/2022
 Cumulative total returns since the end of 2016