Hydrogen in Your Portfolio

Before we put hydrogen in our cars we will need to put hydrogen in our portfolios. If you believe we are headed to a hydrogen-based society, then you must believe we can profit from this decentralizing and de-carbonizing sustainable energy trend.

RE Insider – April 7, 2003 Where does hydrogen fit? Most stock portfolios adhere to the characteristics of a broad market index. In other words, money managers will use an index, like the S&P 500, to guide portfolio construction. Hydrogen-related companies can be found in sectors such as Energy, Industrial Materials and Utilities and also in Business Services, Hardware and even Consumer Goods. If you consider the 12 sector categories of the S&P 500, as defined by Morningstar, we find hydrogen-related stocks in 6 of the 12 or in over 50 percent of the broad index. We have identified 218 companies that fully or partially address these energy trends within their business strategies. For example, within Energy, you can find 70 hydrogen-related stocks. Hydrogen is cracked from hydrocarbons (coal, oil and natural gas) with the carbon dioxide hopefully sequestered from the environment. Of course, some of the large energy companies – BP PLC (BP), ChevronTexaco (CVX) and Amerada Hess (AHC) – are moving faster than others. The next sector, with 49 hydrogen-related stocks, is Industrials. The extraction process for processing hydrogen or the chemical production of electricity from hydrogen requires the manufacturing of various cell stacks and ancillary components. Building fuel cells, storage devices and the reconfiguration and maintenance of appropriate applications can be found in numerous industrial plants around the world. This is the area where new power technology is being developed in companies like Ballard Power (BLDP), Energy Conversion Devices (ENER) and Proton Energy (PRTN). Another sector, Utilities, has 31 potential hydrogen-related stocks. They are beginning to plan for services in the storage and distribution of hydrogen. Some day renewable power, extracting hydrogen from water, to be filtered through a fuel cell for reliable electricity may fulfill a utility shareholders’ dream. Some utilities that might move in this direction are Calpine (CPN), FPL Group (FPL) and Idacorp (IDA). There are 36 other stocks in Business Services, Hardware and Consumer Goods that are either beginning to support the hydrogen business or are looking at products that could use hydrogen as its energy source. For example, Catalytica Energy (CESI) is listed in Business services, Astropower (APWR) in Hardware and Delphi (DPH) in Consumer Goods. Morningstar does not recognize 32 available publicly traded securities on our list as these stocks trade overseas, as ADRs or are just not in their system such as Johnson Matthey (JMPLY). Hydrogen will dominate the energy scene when there is a surplus of Renewable Energy available, but Morningstar does not list companies like NEG Micon (NEGMF) and Vestas (VWSYF). This is what is available today in the publicly traded market place. Those who want to put hydrogen in their portfolio; there is the opportunity to build a diversified approach in the public markets. About the Author Robert S. Preston has 25 years investment experience with senior positions at AXA, Nomura, Rothschild and Paine Webber. He is the founder of Craigmillar LLC, General Partner to Craigmillar Partners LP and Craigmillar Energy LP. In 1979, he founded American Solar Design, Inc., a company that financed, designed, built and managed solar thermal micro-utilities in Northern California. The following stocks mentioned in this article are currently owned by Craigmillar: BP PLC, Ballard, Energy Conversion Devices, Proton Energy, Astropower and NEG Micon. Preston can be reached bob.preston@craigmillar.com
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