Hydrogen exchange-traded funds (ETFs) enable investors to play the potential boom in this low-emissions fuel. Several forecasters see hydrogen growing into a more than $1 trillion market. That could fuel lots of growth for companies focused on the sector.
Picking the right hydrogen stock to play this growth opportunity might not be easy. Potential mismanagement or financial issues could cause a leading hydrogen company to underperform its promise and rivals.
That's why investors might want to consider investing in an exchange-traded fund (ETF) focused on the hydrogen stock market sector to gain broader exposure to the entire trend. Here's a look at the best hydrogen ETFs to consider buying.
Exchange-Traded Fund (ETF)
Best Hydrogen ETFs
3 Best Hydrogen ETFs for 2024
According to ETF.com, there are three pure-play sector ETFs focused on hydrogen. Here's a closer look at the top ETFs to buy for investors seeking focused exposure to the hydrogen sector.
Global X Hydrogen ETF
1. Global X Hydrogen ETF
The Global X Hydrogen ETF (HYDR 3.84%) was formed in 2021 and had $35.3 million in assets under management (AUM) as of late 2023. The passively managed ETF aims to track the performance of the Solactive Global Hydrogen Index.
The ETF invests in companies that will benefit from the growth of the hydrogen industry, including those involved in its production, the integration of the fuel into energy systems, and the development and manufacturing of hydrogen fuel cells, electrolyzers, and other technologies related to using hydrogen. The ETF held 25 hydrogen stocks in late 2023, led by:
- Plug Power (PLUG 1.26%): 12.9% of the fund's holdings
- Bloom Energy (BE 10.99%): 12.4%
- Ballard Power Systems (BLDP 5.26%): 9.0%
- Nel ASA (OTC:NLLSF): 8.5%
- ITM Power (ITMPF 2.46%): 6.3%
It provides investors with broad exposure to hydrogen stocks for a reasonable ETF expense ratio of 0.5%.
Defiance Next Gen H2 ETF
2. Defiance Next Gen H2 ETF
The Defiance Next Gen H2 ETF (HDRO 2.13%) was also formed in 2021 and had $24.7 million in AUM as of late 2023. It tracks the BlueStar Global Hydrogen and Next Gen Fuel Cell Index. It holds companies that generate at least half their revenue from developing hydrogen-based energy sources, fuel-cell technologies, and industrial gases. The ETF held 27 stocks as of late 2023, led by:
- Plug Power: 9.0% of the fund’s holdings
- Ballard Power Systems: 8.8%
- Bloom Energy: 7.8%
- Doosan Fuel Cell: 7.4%
- Nel ASA: 7.0%
This hydrogen ETF provides similarly broad exposure to the top hydrogen stocks as the Global X Hydrogen ETF but for a lower expense ratio of 0.3%.
Direxion Hydrogen ETF
3. Direxion Hydrogen ETF
The Direxion Hydrogen ETF (HJEN 2.88%) also launched in 2021. The ETF tracks the Indxx Hydrogen Economy Index's performance. It offers exposure to 30 hydrogen stocks across five hydrogen-related sub-themes: hydrogen production and generation, hydrogen production and storage, fuel cell and battery, hydrogen systems and solutions, and membrane and catalyst. The ETF's largest holdings in late 2023 were:
- Plug Power: 9.7% of the fund's holdings
- Air Liquide (AIQUY 0.74%): 8.3%
- Nel ASA: 7.7%
- Bloom Energy: 7.4%
- Shell (SHEL 0.0%): 7.0%
This hydrogen ETF offers broad exposure to hydrogen stocks for a reasonable expense ratio of 0.45%.
Related investing topics
Should I buy?
Should I buy hydrogen ETFs?
Investing in a hydrogen ETF can be a great way to gain broad exposure to the top stocks in this potentially massive industry. Buying an ETF can help investors prevent the potential pitfalls of being right on their investment thesis (hydrogen demand will grow exponentially) but select the wrong investment vehicle to express that view (e.g., a stock underperforming due to mismanagement or financial issues).
Investors who want to go the ETF route have three solid options in the hydrogen space.
FAQs
Hydrogen ETF FAQs
Which is the best hydrogen ETF?
There are three pure-play hydrogen ETFs: Global X Hydrogen ETF, the Defiance Next Gen H2 ETF, and the Direxion Hydrogen ETF. They share similar focuses and top holdings.
The biggest difference is their ETF expense ratios. The Defiance Next Gen H2 ETF has the lowest ETF expense ratio among this trio at 0.3%. That makes it stand out as the best option because it provides similar upside exposure to the hydrogen megatrend at a slightly lower cost than other hydrogen ETFs.
What ETF is focused on hydrogen?
Three ETFs focus solely on hydrogen: Global X Hydrogen ETF, the Defiance Next Gen H2 ETF, and the Direxion Hydrogen ETF.
What are the best hydrogen stocks to buy?
Some of the best hydrogen stocks to buy are Air Products (NYSE: APD), BP (NYSE: BP), Plug Power, Bloom Energy, and Linde (NYSE: LIN). All five companies have meaningful and growing hydrogen businesses, putting them in strong positions to capitalize on the potential $1 trillion hydrogen megatrend.
Is there a hydrogen investment fund?
Investors interested in a hydrogen investment fund could consider an exchange-traded fund (ETF) focused on the space. There are currently three hydrogen-focused ETFs: Global X Hydrogen ETF, the Defiance Next Gen H2 ETF, and the Direxion Hydrogen ETF.
