We recently compiled the 10 Best Hydrogen and Fuel Cell Stocks to Buy. In this article, we are going to take a look at Exxon Mobil Corporation (NYSE:XOM) 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).

Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 81

Along with its traditional energy operations of crude oil and natural gas, Exxon Mobil Corporation (NYSE:XOM) is also striding towards the hydrogen segment by engaging itself in hydrogen production, carbon capture, and lower-emission solutions.

Reported in July 2024, Jim Cramer included Exxon in the top companies expected to make it to the $1 trillion mark, on the back of its impressive consistent operational performance; Jim expects that to happen in the next two years, given that the oil prices jump at the same time, which the analysts are finding hard to predict.

The company has continued to perform well in Q1 2024 as it was seen recording an increase of $10 billion in free cash flow that exceeded analysts’ expectations by 21%, taking the total balance to $33 billion! Whereas the operating cash flow equaled $14.7 billion in the quarter. This was a result of $94 billion worth of capital expenditure in the past five years giving out returns to shareholders in the form of increased free cash flows in the quarter. The company continues to allocate capital towards exploration expenditures as it set aside an amount of $5.8 billion in the quarter for the said purpose.

The stock acts as a haven for investors as it not only paid back $6.8 billion worth of returns through dividends and share repurchase, but it also keeps its debt level at $40 billion which is quite healthy with respect to its free cash flow balance of $33 billion. Given the robust cash position and strong operational performances in the past some time now, the stock is an attractive one given its priced quite attractively as well at $12.52. More so, the company has been paying dividends for the past 142 years, with the quarterly dividend being $0.95 per share, yielding 3.3%.

In addition to this, the company finalized a project framework agreement with JERA, a Japanese power generation company, to explore ventures of low-carbon hydrogen and ammonia production in the U.S. Moreover, the two would now work together over the low-carbon hydrogen production plant in Baytown Complex, which Exxon is currently developing; this plant is expected to give out an annual production of 900,000 tons of low-carbon hydrogen and one million tons of low-carbon ammonia.

As such, the stock is expected to keep going on its upward trajectory (rose 14% on a YTD basis) as the analysts expect it to grow 17% in the next twelve months. Moreover, 81 hedge fund investors have held on to the stock, with the total investment being $5.5 billion. This comes on the back of the company’s earning guidance till 2027 according to which the company’s earnings potential is expected to increase by $10 billion till 2027, which is an annual growth rate of 10%. The company aims to do this through its projected cost savings, worth $15 billion, and its constant pricing and margins. Thus, the stock is well placed in our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy.

Overall XOM ranks 1st 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 XOM 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 XOM that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.

Disclosure: None. This article is originally published at Insider Monkey.