We recently compiled the 10 Best Hydrogen and Fuel Cell Stocks to Buy. In this article, we are going to take a look at Air Products and Chemicals, Inc. (NYSE:APD) against the other hydrogen and fuel stocks.
Global Warming Driving the Hydrogen Market
As of 2024, climate change has become an increasingly significant issue globally, as June in 2024 was the warmest month in the 175 year old history of NOAA National Centers for Environmental Information’s data record. Since carbon emissions is one of the driving factors for such a massive global impact, hydrogen, one of the biggest green & clean energy sources, is expected to see an upward trajectory in its market growth in the coming years. As such, its production and consumption are on the rise.
Therefore, the global hydrogen generation market, which stood at the $148 billion mark in 2023, is on its way to hitting $259 billion by 2033, growing at CAGR of 5.75%. Furthermore, BloombergNEF expects the hydrogen supply to grow thirty-fold to 16.4 million metric tons per year by 2030; however, they expect 30% of this planned supply to be achieved by 2030 mainly because of longer project timelines and unstable policy support. This supply is driven by the demand coming from electrolysis, which makes up most of the demand; also, blue hydrogen is pushing up the demand for hydrogen.
In terms of the countries’ share of this global supply, the U.S. is expected to account for 36% of this forecasted supply by 2030, thanks to the fact that most mature projects exist in the country, along with favorable tax policies. Moreover, China, Europe, and the U.S. would all together account for most of this supply by 2030 – 80% of the global supply to be exact. Moreover, the U.S also delivers over half of the world’s fuel cell vehicles, and is responsible for the production of 25,000 fuel cell material handling vehicles, over 8,000 small-scale fuel systems in the country, and over 550 MW of large-scale fuel cell power under planning or already installed, according to The Fuel Cell and Hydrogen Energy Association (FCHEA).
China Leading the Game of Hydrogen
On the other hand, China is leading in the game of electrolysis projects, meant for the production of hydrogen, as it owns 40% of these projects that have reached their Final Investment Decision (FID) globally. Kuqa electrolyzer in Xinjiang, which reached its completion in late June 2024, is the largest electrolysis project in the world, with a capacity to produce 200,000 tons of hydrogen per annum, on the back of the 250-megawatt electrolyzer powered by solar energy.
Germany Coming into the Play
Whereas, on the European front, Germany is leaping forward in the electrolysis market, as its government was seen to be confirming funding of two large hydrogen projects, worth $674 million. Similarly, The U.S. Department of Energy announced in March 2024 its plans to invest $750 million in the hydrogen projects, to bring down costs of clean hydrogen and up the advanced electrolysis technologies.
Therefore, with this analysis of the hydrogen market in the bag, it’s quite necessary to conduct an analysis of the best hydrogen and fuel cell stocks to buy right now, so that we can capitalize on this market growth in the coming time. Thus, let’s jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Methodology
To curate our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy, we gathered a list of all companies with a significant presence in the hydrogen and fuel cell industry. We then further narrowed down on the basis of their upside potential and ranked the finest remaining companies by their number of hedge fund holders as of Q1, 2024, using Insider Monkey’s database that tracks the activity of 920 hedge funds. For stocks with equal number of hedge fund holders, we used their upside as the tiebreaker. With this let’s now jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A line of workers in a refinery wearing protective suits and masks, overseeing the production process of specialty gases.
Air Products and Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 51
Air Products and Chemicals, Inc. (NYSE:APD), headquartered in Pennsylvania, the U.S., produces atmospheric gases, process gases, and specialty gases. Thus, it also produces hydrogen and makes equipment for air separation and purification, and liquid hydrogen storage and transport.
The stock has been experiencing a dip in the last year, falling 15%, amidst the slow recovery of China from the COVID pandemic and the stagnant economy of Europe – the markets the company depends on greatly. The financial performance of the company took a hit from the same factor in Q1 2024 as well, wherein the company lowered its full-year EPS guidance from $12.97 to $12.35. This was followed up by a downtick of 12% in the company’s revenue in Q2 2024. However wary this might make the investors, it’s a matter of time before the company will be back to rolling out revenues, as the company is taking essential steps to restructure its operational plans.
The company has recently sold off its liquefied natural gas process technology and equipment business to Honeywell in July 2024 through a $1.81 billion all-in-cash transaction, in the pursuit of a greater focus on cleaner energy transition through hydrogen business at a larger scale, targeting decarbonization at industrial level and in relation to the heavy-duty transportation industry.
Accordingly, Neom’s green hydrogen project, which is a joint venture of ACWA Power, Air Products, and NEOM, and has a proposed capacity to produce up to 600 tons per day of carbon-free hydrogen, is striding rapidly in 2024, after having received $8.4 billion funding last year. The operations are set to take place in 2026, with substantial progress going to take place in the project’s construction in 2024.
This development showcases the company’s greater focus on the hydrogen market and means exciting times are around the corner for the company. It’s under the radar of the analysts as they see the price of the stock jumping 12% from its current price of $256 to $286.9. As such, the tally of hedge fund holders of the stock has increased from 42 in Q4 2023 to 51 in Q1 2024, taking the aggregate investment to $830.4 million, explaining how the stock makes it to our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Overall APD ranks 4th on our list of the best hydrogen and fuel cell stocks to buy. You can visit 10 Best Hydrogen and Fuel Cell Stocks to Buy to see the other hydrogen and fuel cell stocks that are on hedge funds’ radar. While we acknowledge the potential of APD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than APD that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
