Hydrogen Stocks Have Corrected, Should You Buy?

FCEL: FuelCell Energy logo
FuelCell Energy

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 declined by almost 21% year-to-date, marginally underperforming the S&P 500 which remains down by about 20% over the same period.

The theme performed quite well earlier in the year following Russia’s invasion of Ukraine, which caused oil and gas prices to rally. For perspective, Brent crude remains up by almost 40% year-to-date. The elevated energy prices and uncertainty relating to gas supplies were seen as a wake-up call of sorts for energy importing countries particularly in Europe, potentially hastening the process of shifting to renewable energy and alternative energy sources such as hydrogen. However, the narrative appears to have changed a bit in recent months. 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. With inflation surging, the Federal Reserve is getting more aggressive with its interest rate hikes, carrying out a 0.75 percentage point hike earlier this month, with more similar hikes are likely on the horizon. This is causing investors to reduce their allocation to themes with a long-term horizon while focusing on lower multiple, cash flow generating assets.

Within our theme,  FuelCell Energy (NASDAQ:FCEL),  a company that designs, manufactures, and operates fuel cell power plants, has been the worst performer, with its stock declining by about 35% year-to-date.  On the other side, Cummins (NYSE:CMI), an industrial company best known for its engines and power generation products, has fared a bit better than the rest, with its stock declining by about 10% year-to-date.

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With inflation rising and the Fed raising interest rates, Fuelcell has fallen 35% this year. Can it drop more? See how low can FuelCell stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jun 2022
MTD [1]
YTD [1]
Total [2]
 FCEL Return -10% -29% -82%
 S&P 500 Return -8% -20% 71%
 Trefis Multi-Strategy Portfolio -6% -24% 198%

[1] Month-to-date and year-to-date as of 6/29/2022
[2] Cumulative total returns since the end of 2016

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