We recently compiled the 10 Best Hydrogen and Fuel Cell Stocks to Buy. In this article, we are going to take a look at Linde plc (NASDAQ:LIN) 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 scientist in a lab coat inspecting a cylinder filled with industrial gas.
Linde plc (NASDAQ:LIN)
Number of Hedge Fund Holders: 65
Linde plc (NASDAQ:LIN), a global industrial gas company, specializes in hydrogen solutions. With its operations spanning across the world, Linde offers gases including hydrogen, oxygen, nitrogen, and argon, and also offers hydrogen and other process plants, targeting industrial sectors like healthcare, energy, manufacturing, and electronics.
The company recorded a revenue of $8.1 billion, which is a decrease of 1% from last year’s same period, amidst lower sales volumes recorded because of below-par production in the quarter. Despite this, the operating profit shot up 6% in the quarter to $2.3 billion, resulting in an operating profit margin of 28.9, up by 200 basis points – which was a result of efficient price and cost management. EPS on the other hand jumped 10% to $3.75 per share on the back of a reduced share count which occurred due to $1 billion worth of share repurchases in the quarter, showcasing the company’s healthy free cash flow position.
For the year 2024, the company has given an EPS guidance expecting EPS to lie somewhere between $15.3 to $15.6 per share, which would translate to 8% to 10% growth from the previous year. This company expects on the back of a healthy backlog worth $5 billion and continued developments taking place.
In April 2024, the company announced the initiation of a second electrolyzer in Brazil next to the company’s air separation facility in São Paulo. The plant would become operational in 2025 and would be responsible for the supply of green hydrogen to glass-making company, Cebrace. Furthermore, the company is putting in money worth $150 million to build, own, and operate an air separation facility in northern Sweden, through which it would help H2 Green Steel’s integrated plant reduce its carbon emissions by 95% through the supply of oxygen, nitrogen and argon. The plant is expected to be off and running in 2026.
As a result of its promising earnings growth trajectory, effective pricing, and robust productivity, the stock has grown 15% in the past year, and 8.3% from the year’s start. Looking forward, the analysts believe in the company’s continued growth and developments in the decarbonization initiatives, and are eyeing a target price of $470, which would translate to an upside potential of 6%. As such, hedge fund holders have invested their money worth $3.8 billion, with Scopus Asset Management investing the biggest chunk, worth $29 million. Thus, the stock bags a place in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Overall LIN ranks 2nd 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 LIN 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 LIN 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.
