The company Weichai Power, which I’ve so far only mentioned in this column as partnering Ballard, has a revenue around the EUR 20 billion mark and a stock market valuation of the same order. In 2020, a good EUR 1 billion was marked up as profit, with dividends also paid out. Weichai Power has several bus brands to its name and is the nation’s largest diesel engine manufacturer; it has clearly recognized the potential offered by fuel cells in the commercial vehicle sector and, in its own words, is intent on becoming the market leader.
Weichai is the biggest single shareholder in Ballard Power, despite the fact that it now no longer holds a 19.9 percent stake due to the various corporate actions taken by Ballard and the accompanying release of shares. The Chinese company also has a stack factory in China as part of a joint venture with Ballard, with an ownership split of 51/49 percent. The joint venture company could also find its way onto the stock market at some point in the future in the shape of an initial public offering – but that’s pure speculation on my part.
Weichai owns shares in several companies in the industry, Cerus among them. Added to that, the group is planning to single-handedly produce and install the necessary hydrogen infrastructure, i.e., hydrogen refueling stations. This is where Ballard could conceivably get a look in again, since it wants to bring its electrolyzer technology into the market.
One exciting prospect is China’s plan to have a total of 100,000 fuel cell-powered commercial vehicles on the road by 2024. By 2030, 1 million vehicles of all types should be running on hydrogen. As it stands, there are at least 6,700 fuel cell commercial vehicles driving around China, and many of those are kitted out with a Ballard stack.
Weichai owns a 45 percent stake in forklift manufacturer Kion, number two in the world with brands such as Still and Linde. So in a sense Kion is indirectly Ballard’s “sister” and perhaps this will translate into a collaboration on fuel cell forklifts. That would keep everything nicely in the family.
All in all, formidable growth is in the offing. Weichai as well as Ballard will be there out in front even if the competition increases massively, which is to be expected if you’ve been keeping an eye what Toyota, Hyundai and also Hyzon have been doing.
The value of the BZVision Wikifolio has naturally been at the mercy of the general, recently weak trend in hydrogen and fuel cell stocks. So while there was a price explosion from early December 2020 through to the end of January 2021 and the portfolio value shot up by over 600 percent within two years, it’s now gone downhill. So even here, things remain bumpy.
Parallel to this, the investment in put options in Tesla – to shore up the portfolio as well as speculation on declining Tesla prices – turned out to be a good bet as the stock fell from over USD 800 to USD 540. Of course, there is quite a lot of price leveraging at play here, but liquidating and reinvesting in existing fuel cell positions is out of the question for me, even if the stocks for Bloom, Ballard and Nikola are once again listing at an enticing buying price. I’ve sold 55,000 put options and reinvested in the three fuel cell stocks.
In any case, if Tesla drops below USD 500 – and some chartists are predicting exactly that – then the put options will list 100 to 300 percent higher. This is certainly highly speculative, yet not unrealistic if you take into account the 400 percent rise in just 12 months to a current adjusted pre-split level of USD 3,500 per share, or USD 700 following the 5:1 stock split. The extraordinary profit made through the trading of bitcoins is no use to Tesla here if the company cannot realize any long-term profit through the sale of its vehicles and software in order to justify its stock market valuation of over USD 800 billion.
Given that the stock market valuation can fluctuate daily by up to USD 100 billion, I interpret this as a highly risky development that can suggest great uncertainty on the part of investors. Should Tesla options become highly profitable one day, I’ll use the proceeds to buy more of the shares already in the portfolio as well as make new investments, such as in Weichai Power and Burckhardt Compression, the former Sulzer subsidiary from Switzerland specializing in compressors – but that day is yet to come.
Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small- and mid-cap businesses, which means their stocks may experience high volatility. The information in this article is based on publicly available sources, and the views and opinions expressed herein are those of the author only. They are not to be taken as a suggestion of what stocks to buy or sell and come without any explicit or implicit guarantee or warranty. The author focuses on mid-term and long-term prospects, not short-term gains, and may own shares in the company or the companies being analyzed.
Author: Sven Jösting, written March 20th, 2021