Investments in hydrogen are a big hype today. This is looking like a very intriguing play for the long term. Other trends include sustainability (ESG), renewable energies, cybersecurity, robotics, and blockchain. Here are a few tips when investing in next-gen technology. Until 2021, investors could only buy individual stocks. You no longer drill down into single stocks. You can also consider in ETFs as a so-called peripheral investment.
| | | | | | Another Way to Make Money on The Energy of the Future |
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| Dear Reader,
Investments in hydrogen are a big hype today.
This is looking like a very intriguing play for the long term.
Other trends include sustainability (ESG), renewable energies, cybersecurity, robotics, and blockchain.
Here are a few tips when investing in next-gen technology.
Until 2021, investors could only buy individual stocks. You no longer drill down into single stocks. You can also consider in ETFs as a so-called peripheral investment.
Remember niche ETFs offer higher return potential. But they come with more risk and the likelihood of volatility.
A few hydrogen ETFs exists. Companies in each index make 90% to 100% of revenues from hydrogen-related solutions. I want to highlight two that have garnered my attention.
First is the L&G Hydrogen Economy ETF (HTWO) launched in February 2021. Its fund volume is significant. Its holds about 200 million euros in investments. And it has a a total expense ratio of 0.49%. It tracks the Solactive Hydrogen Economy Index.
The ETF is currently 28 companies worldwide that are active in the hydrogen industry. Companies engage in the full supply chain of hydrogen.
This includes electrolyzer manufacturers, hydrogen producers, fuel cell manufacturers, specialized mobility providers, fuel cell component suppliers to major industrial and utility companies.
Its largest holdings are Kolon Industries, The Chemours, Linde, Daimler and Air Products & Chemicals.
According to the fund company L&G, all positions shall be equally weighted. Rebalancing will occur semi-annually. This is also important. Because in the meantime, the distribution weights had shifted quite a bit.
FuelCell Energy was represented in the ETF with a weighting of almost 18% due to its strong rise at the beginning of the year. Plug Power followed right behind with a 6% weighting - so two companies made up a quarter of the ETF.
As long as it's up, it's wonderful. But in the meantime, FuelCell Energy's share price has dropped from about $30 to $10.
The price of Plug Power experienced a similar fate: Here, the price of a good $75 has now leveled off at $30.
You see, there's quite a bit of volatility in there.
The second hydrogen ETF is the VanEck Vectors Hydrogen Economy ETF (HDRO). The fund value sits around 20 million euros. That's about one tenth as large as the first-mentioned ETF.
With a total expense ratio of 0.55%, it is also more expensive.
The ETF launched at the end of March 2021 - so there is one month of price history here. So you have to give the ETF a lot of advance praise and trust if you buy this.
The fund tracks the MVIS Global Hydrogen Economy Index.
According to the fund company VanEck, companies in the fund generate at least 50% of their revenues in the global hydrogen segment. It also has companies engaged in fuel cell development or industrial gases.
It goes on to say, "This fund may not be suitable for investors who wish to withdraw their investment within 5 years."
Now that's what I call honest!
Also, in the risk profile of 1 to 7, this ETF lists at the highest level 7.
Companies represented include:
- Fuel manufacturer Ballard Power Systems (10%);
- Linde and Air Products & Chemicals (just under 9%);
- Mitsubishi Chemical Holdings Air Liquide, and Plug Power (around 8% each),
- Nel Asa and FuelCell (just under 8%)
As you can see, the companies don't differ too much from the first ETF mentioned. VanEck focuses more on the so called "pure play stocks." They generate income in the hydrogen sector.
While the much larger and somewhat cheaper ETF from L&G mainly contains stocks that are only "incidentally" active in the hydrogen sector and play the main role.
On the one hand you can invest easily in this mega future trend with these two ETFs. But you should be aware that the prices can fluctuate very strongly.
In the case of the VanEck ETF even more so, since many small pure play stocks are included than in the case of the L&G ETF, which mainly contains stocks of large corporations that also operate H2 technology on the side.
In any case, I wish you a happy hand with your investments.
I'll be back with more commentary on Sunday.
Enjoy your weekend, |
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