Will Hydrogen Stocks Benefit As The E.U. Looks To De-Risk Gas Supplies?

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FSLR: First Solar logo
FSLR
First Solar

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 about 3% year-to-date, faring slightly better compared to the S&P 500 which remains down by about 6% over the same period. While the broader markets and growth stocks, in particular, have been hurt by the rising interest rate environment and the war between Russia and Ukraine, hydrogen stocks appear to be holding up a little better for a couple of reasons.

The primary narrative around hydrogen stocks so far has been fighting climate change, specifically decarbonizing highly polluting heavy industries where electricity is a less viable option. However,  the ongoing war between Russia and Ukraine is also making countries more serious about energy independence. Oil and gas prices have soared in recent weeks and there are increasing uncertainties about gas supplies, particularly in the E.U, which imports about 40% of its natural gas from Russia. Although Western sanctions haven’t directly targeted Russia’s energy exports yet, this remains a possibility. For instance, Germany has canceled the Nord Stream 2 pipeline project, which was to supply Russian natural gas directly to the country. This could make counties in the E.U look to reduce their dependence on Russian oil and gas, hastening the transition to renewable energy sources. Now, hydrogen will likely be a component of the long-term renewable transition, as it finds applications in multiple areas including transportation, electricity generation, heating, and also for industrial purposes such as cement and steel manufacturing. Hydrogen can also be used as a means of storing excess renewable energy generated from sources such as solar and wind.

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Within our theme, FuelCell Energy (FCEL), a company that designs and manufactures carbonate and solid oxide fuel cells, has performed a bit better than peers, declining by under 2% year-to-date. On the other side, First Solar (FSLR), a company that produces solar panels used in large-scale solar deployments – has been the weakest performer, with its stock down by 24% year-to-date.

Here you’ll find our previous coverage of the Hydrogen Economy theme, where you can track our view over time.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 FSLR Return -10% -24% 107%
 S&P 500 Return 0% -8% 95%
 Trefis MS Portfolio Return -1% -11% 244%

[1] Month-to-date and year-to-date as of 3/4/2022
[2] Cumulative total returns since the end of 2016

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