Weichai Power – intriguing prospects

Like all hydrogen and fuel cell stocks, Weichai Power’s has come under pressure since February. That doesn’t change the business’s bright prospects. Weichai [2338:HK] is turning a profit and is expanding its operations through joint ventures and strategic acquisitions. One example of this is Weichai’s recent purchase of a 45-percent ownership stake in Kion, the world’s second-largest forklift truck manufacturer. The deal, valued at EUR 3.5 billion, might even lead to the deployment of hydrogen and fuel cell systems in Kion’s next-generation forklift trucks. Like Bosch, Weichai owns part of CERUS. It also has an around 15-percent stake in Ballard Power, with which it runs a stack factory in China (a 51/49 partnership).

The factory may become the center of attention once the Chinese government puts numbers to its hydrogen and fuel cell plans, which could benefit the entire sector. Chinese fuel cell stack producer Refire will then be used as the basis for assessing the performance of the joint venture, as an IPO seems likely. Analysts expect Weichai’s stock to end up between EUR 2.7 and EUR 3.5 – which works out to, on average, 50-percent growth.

HyVolution

Wikifolio

Like the company stocks discussed in this issue, my Wiki portfolio, BZVision, has lost some ground. And yet, it’s still up by over 60 percent year over year. My Tesla puts with a USD 600 strike price are seeing a great deal of movement, fluctuating between EUR 0.7 and EUR 1.3. This is because the stock is now trading at the set limit, so there’s a constant back and forth between intrinsic value, i.e., a price under USD 600, and time value. But their December 2021 expiry isn’t that far into the future. Should Tesla’s second-quarter results be as disappointing as I think they will be, its stock could drop, possibly to as low as USD 400. That’s a bet I’m willing to make, as the puts comprise only around 13 percent of my portfolio. I will need to wait, though, until the puts are sold before I increase my investment in the three hydrogen and fuel cell stocks previously discussed in this section. In the meantime, the price of those three should gradually be rising again, so we’ll have new targets soon.

Risk warning

HOC

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 June 1st, 2021

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