With millions of people and governments pushing for a greener, clean future, we wanted to highlight some of the top ways to trade the story.
In this report, we focus on three key investing ideas:
1. The $12 Trillion Green Hydrogen Opportunity
2. The Top Ways to Trade Lithium with the EV Market Exploding
3. The Top Ways to Trade the Coming Graphite Market Boom
THE $12 TRILLION GREEN HYDROGEN OPPORTUNITY
With millions concerned about climate change, people are looking for green resources to replace current pollution-heavy processes.
One way to do just that is with green hydrogen, “which is formed through electrolysis, which uses electricity from renewable sources such as wind or solar power to split water into hydrogen and oxygen. Since the source is from renewable energy, the fuel is truly emission-free and clean, making it green,” as noted by Engineering.com.
Goldman Sachs is already calling it a “once in a lifetime opportunity,” says Barron’s. The firm also notes the addressable market could be worth up to $11.7 trillion in the next 30 years with the U.S., Asia, and Europe leading the way.
Analysts at Bank of America says green hydrogen could be worth more than $11 trillion by 2050, as well. In fact, the firm compared green hydrogen to smartphones pre-2007 and the Internet prior to the dot-com boom, as also highlighted by Barron’s.
“Hydrogen, the first, lightest, and most abundant element in the universe, could supply our energy needs, fuel our cars, heat our homes and help to fight climate change,” said Haim Israel, the bank’s head of global thematic investing research.
In short, it would be smart for investors to start jumping in now.
In fact, here are three of the top ways to trade the explosive opportunity.
PLUG POWER (PLUG)
Plug Power Inc. provides hydrogen fuel cell turnkey solutions for the electric mobility and stationary power markets in North America and Europe. It focuses on proton exchange membrane (PEM) fuel cell and fuel processing technologies, fuel cell/battery hybrid technologies, and related hydrogen storage and dispensing infrastructure.
According to the company, “Plug Power customer demand for hydrogen has grown 10x in five years – nearly a 200% annual growth rate. From a market perspective, McKinsey expects hydrogen will provide 18% of global energy by 2050. As the world’s largest supplier and user of liquid hydrogen, we’re positioned as the forward-thinking company, leading the expansion of green hydrogen technologies while growing their use into a range of transportation and stationary power applications.”
“We’re projecting using more than 80 tons of hydrogen in 2024, and have made a commitment to achieve 50% green content,” they added.
In addition, analysts at Citi just initiated a buy rating on the stock with a $35 price target.
According to analyst P.J. Juvekar, as quoted by TheFly.com:
“Plug Power is ‘leading the way’ in the nascent hydrogen economy, which is ‘at the cusp of a breakout,’ Juvekar tells investors. Plug has ‘positioned itself at the center of the hydrogen economy’ with its unique vertical integration from making electrolyzers to hydrogen production, delivery and building fuel cell modules.”
BALLARD POWER SYSTEMS (BLDP)
Ballard Power Systems Inc. engages in the design, development, manufacture, sale, and service of proton exchange membrane fuel cell products. The company offers heavy duty modules, fuel cell stacks, backup power systems, and portable power/ unmanned aerial vehicles (UAV), and material handling products.
According to President and CEO, Randy MacEwen, as quoted in a company press release, “Global policy announcements supporting decarbonization continue to move at record pace. The Fit for 55 initiative in Europe, and Hydrogen Earth Shot program in the U.S., both represent clear commitments to accelerate the expansion of a clean hydrogen economy. These policies, and with further clarity regarding the China hydrogen and fuel cell policy still to come, will support future order growth from our customers and scaling of our business.”
BLOOM ENERGY (BE)
Bloom Energy Corporation designs, manufactures, and sells solid-oxide fuel cell systems for on-site power generation. It offers Bloom Energy Server, a stationary power generation platform that converts standard low-pressure natural gas, biogas, or hydrogen into electricity through an electrochemical process without combustion.
Bloom Energy recently announced it entered into the commercial hydrogen market by introducing hydrogen-powered fuel cells and electrolyzers that produce renewable hydrogen.
These products will be first introduced to the South Korean market in 2021 through an expanded partnership with SK Engineering and Construction (SK E&C).
Bloom’s technologies are critical in enabling South Korea to execute on its government-mandated Hydrogen Economy Roadmap. Bloom’s existing partnership with SK E&C has already sold 120 megawatts (MW) of fuel cells in South Korea, generating over $1 billion in equipment and future services revenue for Bloom.
THE TOP WAYS TO TRADE LITHIUM WITH THE EV MARKET EXPLODING
With the electric vehicle boom accelerating, the world must get its hands on lithium supply.
“Money needs to start flowing into the lithium market quickly, or the road to electrification will be stunted by lithium supply, in even the most conservative of forecasts,” says Benchmark Minerals Intelligence, as quoted by Reuters.
In fact, after falling out of favor on oversupply concerns, the world is running into a major issue that could send lithium back to historical highs – and fast.
Electric vehicles for example will drive lithium higher.
All as EV demand grows much faster than anyone expected.
Analysts at Cairn Energy Research Advisors say we’re likely to see a monster surge in electric vehicle sales in 2021 as countries around the world push new programs to encourage consumers to buy battery powered vehicles, reports CNBC.
In addition, by 2025, EV sales could surpass internal combustion engine vehicles with up to a third of EV market share. And, according to the International Energy Agency, the world could see 130 million EVs on the road by 2030, a massive jump from just 5.1 million in 2018.
For that to happen, we need more lithium – which is falling into short supply.
According to CleanTechnica:
“Miners have barely scratched the surface of the global lithium potential. The challenge is to match the mining timeline with the electric vehicle manufacturing timeline. It can take years to start up a new mining operation, and meantime automakers are already gearing up for an electric vehicle recovery after the COVID-19 downturn.”
That will only lead to a monster supply crunch – and interest in beaten down lithium stocks.
THE GLOBAL X LITHIUM ETF (LIT)
The Global X Lithium ETF (LIT) invests in the full lithium cycle, from mining and refining the metal, through battery production. The ETF gives investors exposure to Albemarle Corp., LG Chem Ltd., Tesla Inc., Panasonic, and BYD Company Ltd.
In the last lithium boom, the LIT ETF rocketed from a low of $16 to nearly $40. We believe it could be setting up for another sizable run, as demand picks up steam with supply issues. While the ETF has exploded from a March 2020 low of $17.83 to $85, LIT could see higher highs.
ALBEMARLE CORP. (ALB)
Albemarle Corporation develops, manufactures, and markets engineered specialty chemicals worldwide. One of the segments it operates in is lithium.
The Lithium segment offers lithium compounds, including lithium carbonate, lithium hydroxide, lithium chloride, and value-added lithium specialties, as well as reagents, such as butyllithium and lithium aluminum hydride for applications in lithium batteries for consumer electronics and electric vehicles, high performance greases, thermoplastic elastomers for car tires, rubber soles, plastic bottles, catalysts for chemical reactions, organic synthesis processes, life science, pharmaceutical, and other markets.
With big exposure to lithium, ALB should easily see higher highs moving forward. Better, the company expects to see very strong demand for lithium thanks to consumer electronics and the electric vehicle boom. In fact, the company expects for the EV market could see a nearly 600% increase in lithium demand through 2025.
LITHIUM AMERICAS (LAC)
Lithium Americas Corp. operates as a resource company in the United States. The company explores for lithium deposits. It primarily holds interests in the Cauchari-Olaroz Project located in Jujuy province of Argentina; and owns a 100% interest in the Thacker Pass lithium project located in Humboldt County in northern Nevada.
At the moment, it’s developing the 40,000 tpa (tonnes per annum) Caucharí-Olaroz lithium project in Argentina with Ganfeng Lithium.
In addition, “The Thacker Pass Project is being engineered to produce low-cost, battery-quality lithium products reliably and at scale, however, the environmental design is a point of pride for the project team. Our goal is to produce the first carbon neutral lithium products, representing an innovative benchmark in the industry,” commented Alexi Zawadzki, CEO of Lithium Nevada. “Our vision is for a more sustainable battery supply chain in the US, with cathode and cell manufacturing located in close proximity to the proposed Thacker Pass mine site.”
THE TOP WAY TO TRADE THE COMING GRAPHITE MARKET BOOM
With the electric vehicle boom well under way, there’s big demand for lithium.
That we already know.
At the same time, there’s also big demand for graphite, which is essential for producing anode of lithium-ion batteries found in EVs.
Considering the world could see 125 million EVs on the road over the next 10 years, the industry will also need plenty of graphite.
Heavy dependence on graphite is also why the USGS lists graphite on its list of 35 minerals and metals considered critical to the United States. “USGS also sees a major spike in U.S. demand for graphite when Tesla Motor’s Gigafactory, an enormous lithium-ion battery facility being constructed in Nevada, is fully operational.”
We’ll see even more demand because of governments all over the world, which want millions of electric vehicles on the roads.
President Biden, for example, is pushing for EVs to make up 40% to 50% of all new vehicle sales by 2030. In fact, “The president is set to sign an executive order calling for half of new car sales to be of electric vehicles powered by batteries and fuel cells or plug-in electric hybrids by the end of the decade.”
Plus, “In the near term, the Environmental Protection Agency and the Transportation Department were also set Thursday to propose new requirements on greenhouse gas emissions and fuel efficiency for cars, SUVs and pickup trucks through model year 2026,” they added.
It’s why General Motors and Ford are investing billions in EVs.
General Motors just said it’ll boost spending on electric vehicles by $35 billion through 2025. Plus, according to a new study by Ernst & Young, electric vehicles could outpace combustion engines in the next 12 years in the U.S., Europe, and China, according to The Street. “By 2045, non-EV sales were seen plummeting to less than 1% of the global car market.”
While there aren’t a ton of graphite stocks to buy and hold, one of the top ways to trade graphite demand is with an ETF.
AMPLIFY LITHIUM & BATTERY TECHNOLOGY ETF (BATT)
This ETF has been in a solid uptrend since bottoming out in March 2020. From here, the ETF could run even higher with the EV boom accelerating.
According to Amplify ETFs:
“BATT is a portfolio of companies generating significant revenue from the development, production and use of lithium battery technology, including: 1) battery storage solutions, 2) battery metals & materials, and 3) electric vehicles. BATT seeks investment results that correspond generally to the EQM Lithium & Battery Technology Index. (BATTIDX)”
The BATTIDX has exposure to global companies associated the development and production of lithium battery technology and/or battery storage solutions; the exploration, production, development, processing, and/or recycling of the materials and metals used in lithium battery chemistries such as Lithium, Cobalt, Nickel, Manganese, Vanadium and/or Graphite; and/or the development and production of electric vehicles.
