How to Invest in Fuel-Cell Stocks

Fuel cells could make gasoline obsolete.
i Medioimages/Photodisc/Photodisc/Getty Images

Fuel cells are devices that convert a fuel into electrical energy, almost like a miniature power plant. Instead of using turbines and generators, though, they use a chemical reaction to turn the fuel into power with little or no emissions. Fuel cells have been used in the space program and are the primary power source for hydrogen cars. They are also being used as small, reliable generators. There are a few ways you can invest in the technology and in its potential future growth.

Pure Plays

The most direct way to invest in fuel-cell stocks is to buy shares in a company that makes them. Not only can you invest in a fuel-cell company, but you can even chose which fuel-cell technology you want to support by buying a specialized organization. For example, Ballard Power and Plug Power both make membrane-based low-temperature fuel cells. Ceres Power and Ceramic Fuel Cells make cells using solid ceramics, and Fuel Cell Energy makes units with molten-salt technology.

Broader Plays

Instead of buying stock in a fuel-cell producer, you can also invest in fuel-cell users. For instance, car companies are developing a new generation of vehicles that use them for power. As of February 2014, Hyundai, Toyota and Honda are all planning on launching fuel-cell vehicles in 2014 or 2015. Fuel-cell-powered forklifts are popular among businesses. Another way to invest more broadly in fuel cells is to invest in the materials they use, such as the platinum and palladium that go into the catalysts on many membrane cells.

Alternative-Energy ETFs

Another way to invest in fuel cells and broaden your exposure is to look into funds that are involved in alternative- and clean-energy investing. These funds cover a broad portfolio of technologies. In addition to owning fuel-cell makers, they also invest in companies that leverage wind, solar or other alternative forms of power. These ETFs may also include companies that make green products using these technologies.

Risks of Fuel Cell Investments

Although fuel cells have been around for a while, they are still largely cutting edge. Most companies that are directly involved in making them as a primary business are not profitable as of the date of publication, which suggests the risk that they might never become viable. The fuel-cell industry has also had a spike and subsequent drop in interest before. Given this risk, you may want to diversify your investments by purchasing multiple companies or by purchasing a diversified fund.

the nest