Helium and hydrogen stock ideas for investment exposure to two gases with growing commercial markets

Our recent article Helium vs Hydrogen: investing in the gases of the future (link to article), explored the factors behind current commercial shortages of both gases and why demand for them is expected to rise significantly over coming years.

Hydrogen cars look like they have lost the technology battle with electric but hydrogen powered planes, trains, buses and trucks look like they have a bright future. Green hydrogen, produced with renewably generated electricity is also seen as a vital part of the future energy mix at the grid level as an alternative to natural gas. It results in almost no emissions and would offer better energy security if produced domestically, decreasing reliance on fossil fuel imports from places like Russia.

Meanwhile, there is also increasing demand for helium, which is used in a growing number of technologies from computer hard disks and smartphones to MRI scanners.

The gases exist in abundance naturally but there’s a deficit of both when it comes to their commercial availability. That’s led to shortages and the predicted future need for more of both has attracted investment over the past few years. From start-ups to multinational conglomerates, companies are investing in developing new technologies such as hydrogen-powered jet engines and more efficient techniques to produce the gases.

Both are young markets and many of the companies seeking investment exposure to hydrogen and helium will struggle or fail. But those that are successful should grow quickly with the market.

Here we’ll take a look at some of the more interesting listed companies with direct or indirect exposure to the hydrogen and helium markets as a starting point for investors researching opportunities in both markets.

Hydrogen stocks

There are two main routes to investing in hydrogen and hydrogen-based technology. The first approach is diversified exposure though a company or fund that has interests in hydrogen but as part of a broader business or portfolio.

Rolls-Royce

An example would be a company like Rolls-Royce, which is investing heavily in developing hydrogen technologies like combustion engines and hydrogen fuel cell batteries. The British engineering company is also moving into hydrogen production and recently acquired a 54% majority stake in the electrolysis stack specialist Hoeller Electrolyzer.

Rolls-Royce is making significant investments in hydrogen technology and clearly sees a lot of potential in the market for it as part of the future low carbon energy mix. However, the investment in hydrogen production and technology is just one part of a much larger engineering group.

If it goes well and the investment in hydrogen technology pays off, it could become a major new business unit for the company and contribute to its future growth.  But if it doesn’t, it would be a blow but not one that should seriously compromise the wider group’s long term prospects. A company like Rolls-Royce is always investing in new technologies and markets with a mid-to-long term view and not all of those investments will ultimately provide a return.

For investors looking for exposure to the hydrogen market, that’s a double-edged sword. If the company’s investment in hydrogen R&D and assets works out well, it will make a positive difference to the company’s future share price. However, returns from an investment in Rolls-Royce stock will be influenced by many other things, diluting the impact of its exposure to hydrogen.

It’s possible the company’s hydrogen investment works out well but poor performance in other parts of the engineering group drag the share price down. But on the flip side, an investment in Rolls-Royce shares could do well despite the company’s investments in hydrogen technology performing poorly, if other parts of the business do well.

Linde

Another group with significant interests in hydrogen as part of a much broader businesses is Linde, the world’s largest industrial gases company. The Germany-founded and UK-headquartered company is a member of the Hydrogen Council and has dual listings on the NYSE and Germany’s Frankfurt Stock Exchange. Linde is also one of the world’s biggest suppliers of helium.

Linde’s hydrogen capabilities have so far primarily focused on grey and blue hydrogen but it is investing heavily in green hydrogen and plans to triple the amount of clean hydrogen it produces by 2028.

Defiance ETFs reports Linde is in the process of building a 24MW electrolyzer at its hydrogen plant at Leuna, Germany, in collaboration with ITM Power and building a 24MW green hydrogen plant in Norway, for the chemicals company Yara to use in the production of green ammonia for fertilizer and emission-free fuel for ships^.

A 200MW plant in Lingen, Germany, is also under development with German energy company RWE AG, with the goal of scaling to 2GW green hydrogen production by 2030, and Linde has partnered with Infineon Technologies to build, own and operate a 2MW electrolyzer plant in Villach, Austria, to power Infineon’s semiconductor production.

Air Products and Chemicals

The smaller American company Air Products and Chemicals also sells industrial gases and chemicals and is the world’s largest supplier of merchant hydrogen. Like Linde, it covers the full hydrogen cycle from production to transportation and end point distribution, through a network of hydrogen plants, transfill facilities, and pipelines. It is also ramping up its green hydrogen capacity and is building Saudi Arabia’s flagship 2GW green hydrogen plant at Noem, which should produce 650 ton of green hydrogen per day from 2026. The company has also announced plans to build a green liquid hydrogen production facility in southwestern USA, which will produce zero-carbon for California and other areas.

Like Linde, Air Products is also a major helium supplier. Air Liquide of France is another major industrial gases group with significant exposure to both hydrogen and helium.

Plug Power

Nasdaq-listed Plug Power, which is developing hydrogen fuel-cell systems, represents a pure play on the hydrogen technology market. That makes it a much riskier investment but one with potentially the biggest upside. Investors should expect volatility and have significant tolerance to risk but as a long-term play on the hydrogen market, it is an interesting option with an integrated business model from generation to distribution to end-market applications, with broad business opportunities from transportation, industry and power generation.

Diversified direct exposure – Defiance Next Gen H2 ETF

A nascent market like hydrogen where the technology and its applications are still developing can make picking individual stocks a very risky approach. There will likely be some major success stories in coming years but also many failures.

With this in mind, investors interested in hydrogen exposure might consider the Defiance Next Gen hydrogen ETF. The ETF tracks the BlueStar Hydrogen & NextGen Fuel Cell Index, which includes companies engaged in hydrogen-based energy development and fuel cell technologies around the world. Top holdings, the ETF holds stakes in 26 companies, including California-based Bloom Energy, Oslo-based Nel and Plug Power.

However, investors should keep in mind that the ETF is still relatively small with net assets of just over $43 million and low average daily trading volumes of around 58,000 shares. This means that while it does reduce risk by providing diversified exposure to the sector, it’s not a particularly liquid ETF which can make selling at short notice problematic. As such, any investors considering it should look at it as a buy-and-hold investment.

Helium stocks

Helium is an even smaller and newer market than hydrogen, despite its rapid growth due to the use of the gas in especially the high-tech and aerospace industries and in medical equipment such as MRI scanners. That means there are limited investment options that offer direct exposure to helium and there is not currently an ETF option that offers diversification across multiple companies in the space.

As mentioned, two of the biggest producers and sellers of helium are Linde and Air Products, covered above. Other options include:

Total Helium

A particularly young company, Total Helium was formed in late 2021 through a merger between Wintertide Ventures and Brooks Energy Company. Despite its freshness, Total Helium holds a significant asset in North America’s largest conventional onshore natural gas and helium field, the Hugoton Gas Field in Western Kansas.

The company is already drilling in its Boltz 35B field and has secured purchasing agreements, and payments, from what is described as a leading global industrial gases company. Like any small commodities exploration company, Total Helium would represent a risky investment that will either deliver significant returns if drilling activity is successful or significant losses if progress and extraction stalls.

However, hopes are high and a joint venture with the same company purchasing agreements have been struck with will see Total Helium develop a major salt cavern helium storage facility in the vicinity of its existing Western Kansas operations. Currently, the world’s only existing viable long-term storage facility for helium is the Federal Helium Reserve in Amarillo, Texas managed by the US government. However, there is uncertainty over its future operation, which makes the new facility a potentially more valuable asset.

Desert Mountain Energy

Desert Mountain Energy is another pure play helium stock and is listed on the Canadian Venture Exchange, which is roughly comparable to London’s AIM. The company owns mineral leases to 85,000 acres of land in Northeastern Arizona known to be rich in helium. Wells have already been drilled and the McCauley Helium Field is now operational with the process entirely funded by equity capital and no debt.

Another 60-70 wells are planned to be drilled on the land over the next 5 years. As with Total Helium, the success of any investment in the stock will rely on the output of these and the existing wells but currently looks promising, driving the share price up 47% so far this year.

Both hydrogen and helium are exciting markets that will almost certainly grow significantly over the next several years. There are likely to be major opportunities for investors but the nascent nature of both markets and many of the small companies that offer direct exposure also come with high-risk levels.

The post Helium and hydrogen stock ideas for investment exposure to two gases with growing commercial markets first appeared on Trading and Investment News.
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