Fuel Cells Are the Biggest Loser as the Market Falls

The Dow Jones Industrial Average is down slightly today while fuel cell companies are taking it on the chin.

Mar 26, 2014 at 3:30PM

It was a quiet day on Wall Street until President Barack Obama pledged in a speech in Brussels that the United States would not stand idly by in the face of Russian aggression against U.S. allies. Just when we thought things were cooling down in Crimea, the market sold off heavily because conflict with Russia would have a terrible economic impact on both Europe and the U.S.

The Dow Jones Industrial Average (DJINDICES:^DJI) went from nearly a 100-point gain in early trading to falling 54 points, or 0.33%, at 3:30 p.m. EDT. The sell-off was fast and furious at midday. But that volatility is part and parcel of the market; investors with a long-term time horizon, like we recommend at The Motley Fool, can look at the drop as noise to their investments.

Screen Shot

Plug Power fuel cell on a Raymond forklift. Source: Plug Power website.

Fuel cells are falling flat
The big move in energy today comes from fuel cell companies, which were some of the hottest on the market in early 2014. Plug Power (NASDAQ:PLUG) was down 24%, FuelCell Energy (NASDAQ:FCEL) fell 17%, and Ballard Power Systems (NASDAQ:BLDP) dropped 22%.

What's interesting is that this comes after a pop in shares yesterday after Plug Power's CEO hinted at a deal with an automaker that would be announced in the next few weeks. But Andy Marsh wouldn't give any information about the deal and today said the order was disclosed during earnings on March 13. That's when management said orders had already reached $60 million of an expected $150 million for 2014. Basically, shares today are just retracing yesterday's gains.  

Ballard is along for the ride because it actually makes the fuel cell stacks that Plug Power uses in its systems, so it's understandable why the two companies would rise and fall together as traders speculate on the potential growth in fuel cells.

But FuelCell Energy has almost nothing in common with these two, instead making fuel cells that are primarily used as backup generators. It's not as easy to make the leap from backup generators to the auto market as forklifts to the auto market, but the market has been carrying FuelCell Energy along anyway.

Can fuel cells live up to the hype?
Let's keep in mind that the auto industry has been researching fuel cells for years, and it's a big leap to think that any of these three companies could offer a huge jump in technology. There's also the fact that they're primarily selling fuel cells to power forklifts and backup generators, not building millions of cells to go into cars. That's not even mentioning the massive infrastructure needed to adopt fuel cells outside of a contained environment.

Fuel cell stocks will jump around, but at the end of the day these stocks are more hype than fundamental value. In fact, none of them are even close to profitable, despite valuations between $500 million and $700 million. Until I see more concrete evidence that the market is as big as traders think, fuel cells are a risk I'm not willing to take.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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