Three Fuel Cell ETFs for the Hydrogen Economy

The efficient market hypothesis states that all available information is priced into the market. If new information becomes available, stock prices will react accordingly, sometimes in a dramatic fashion. This often happens when companies meet or fail to meet guidance. Trading on information before it becomes available – insider trading – is illegal. Therefore, stocks that rise meteorically should be viewed with a great deal of suspicion, especially when a loosely related group of tech stocks does so in unison.

Check out these charts.

The chart in the lower righthand corner reflects the performance of a U.K. fuel cell stock, while the other three charts reflect the biggest fuel cell stocks trading in the United States.
Credit: Yahoo Finance

The chart in the lower right hand corner reflects the performance of a U.K. fuel cell stock, while the other three charts reflect the biggest fuel cell stocks trading in the United States. The red “X” you see on each of the four charts denotes early January 2021, a time when all these stocks peaked simultaneously. A cursory look at the news around that time shows a $1.6 billion investment in Plug Power by SK Group, a rising tide that lifted all ships. Clearly, hydrogen investors are agreeing upon which stocks belong to the hydrogen thesis.

Three Hydrogen Fuel Cell ETFs

Now that the dust is settling, numerous subscribers have asked for an update on the hydrogen economy thesis. It’s about due considering our last update was back in May 2020 when we published A Guide to Investing in Fuel Cell Stocks. At the time, we couldn’t find a single fuel cell ETF, but that’s no longer the case. Weren’t we surprised to see three thematic ETFs launched in 2021 for the hydrogen theme. The names of these fuel cell ETFs, the indices they track, and the assets under management (AUM) they’ve managed to accumulate can be seen below.

  • Name: Global X Hydrogen ETF (HYDR)
    Index: Solactive Global Hydrogen Index
    AUM: $25 million
    Expense Ratio: 0.50%
  • Name: Defiance Next Gen H2 ETF (HDRO)
    Index: BlueStar Hydrogen & NextGen Fuel Cell Index
    AUM: $53 million
    Expense Ratio: 0.30%
  • Name: Direxion Hydrogen ETF (HJEN)
    Index: Indxx Hydrogen Economy Index
    AUM: $31 million
    Expense Ratio: 0.50%

A successful ETF measures AUM in billions, while an ETF that stays below $100 million AUM for too long just isn’t attracting assets quick enough, which implies that institutional investors don’t consider the theme viable. All three hydrogen ETFs combined have drawn $109 million in investor interest so far. The Defiance ETF seems to be coming out ahead, perhaps because of the remarkably low expense ratio – 0.30% – that’s uncharacteristic of thematic funds. But when it comes to ETFs, the most important thing to consider is the sort of exposure you’re getting. Did all three index providers manage to agree on which companies ought to be considered pure-plays on the hydrogen fuel cell economy?

Pure-Play Fuel Cell Stocks

In looking at the top-ten stocks for all three ETFs by weighting, there were three stocks that all providers agreed upon (in green shading) and seven stocks that two providers agreed upon (in yellow shading):

Credit: Nanalyze
  • Included in all ETFs: Ballard Power Systems (BLDP), Plug Power (PLUG), and Doosan Fuel Cell (336260.KS)
  • Included in two ETFs: Air Liquide (AI.PA), Bloom Energy (BE), Linde Plc (LIN), McPhy Energy (MCPHY.PA), Nel ASA (NEL.OL), AFC Energy (AFC.L), and ITM Power (ITM.L).

As for weighting, here’s how much exposure you’re getting from each group of stocks in the three ETFs.

DirexionGlobal XDefiance

The Global X ETF has the most exposure to the most commonly accepted fuel cell stocks. As for the Direxion and Defiance ETFs, they’re telegraphing what many index creators do when trying to reduce risk and make a basket look more appealing to institutional investors – they’re adding some big names. Nobody ever got fired for investing in Linde Plc, a $158 billion U.K. company that’s the world’s largest industrial gas company by market share and revenue. In second place by revenue is Air Liquide, another company that’s being peddled off as a “hydrogen stock.” Then there’s Air Products & Chemicals, a $61 billion gases and chemicals company we’ve been invested in for over a decade as part of our dividend growth investing strategy. These three companies make up nearly 22% of the Direxion ETF and 10.6% of the Defiance ETF.

The Direxion ETF really doubles down on chemicals company, also choosing to include a Thai chemicals company (PTT Global Chemical) and Japan’s largest (ENEOS) and second-largest (Idemitsu Kosan) petroleum refiners. Consequently, nearly 40% of the Direxion ETF is exposed to chemical and petroleum companies (seen in dark shading below).

Credit: Nanalyze

As usual, we find ourselves leaning towards the Global X offering. Most ETFs we’ve ever invested in were Global X because they seem to understand the importance of selecting the right index. If we’re looking for exposure to a particular theme, we don’t want it padded with “safer” stocks in order to provide index stability. Without sufficient exposure, we’re not placing our bets where we want them, and receiving unintended exposure. The Global X top-ten list contains the usual suspects at the top and doesn’t include a single large chemicals company.

Credit: Nanalyze

Of these stocks, around half are new to us (highlighted in yellow). That may be because they’re all foreign stocks and our domestic bias got the best of us. Let’s take a quick look at what each company does.

5 New Fuel Cell Stocks

TickerMarket Cap (USD billions)CountryDescription
McPhy EnergyMCPHY.PA0.543FranceDevelops and supplies hydrogen production, storage, and distribution equipment
Nel ASANEL.OL1.96NorwayOperates in two segments, Nel Hydrogen Fueling and Nel Hydrogen Electrolyser. 
PowerCell SwedenPCELL.ST 0.793  SwedenDevelops and produces fuel cell systems for automotive, marine, and stationary applications
Doosan Fuel Cell336260.KS 2.17 KoreaDevelops and distributes power generation fuel cells in South Korea
AFC EnergyAFC.L  0.326 United KingdomEngages in the development of alkaline fuel cell systems

Aside from AFC Energy, all these companies have meaningful revenues. They’re also quite small, and only two – Nel ASA and Doosan Fuel Cell – exceed our $1 billion market cap threshold. We’re trying to avoid investing in small stocks, and we’re not even sure we want exposure to the hydrogen thesis to be honest.

Investing in a Hydrogen ETF

We’ll start by saying we don’t find this thesis overly compelling because it’s been pumped and dumped for as long as we can remember. Even if the hydrogen economy is right around the corner, we wouldn’t be trying to play the thesis with an ETF. In fact, we’re selling off the last two ETFs we’re holding and moving towards a stock-only portfolio. That means we’d have eyes for only the leader of the pack. Right now, that appears to be Plug Power for a number of reasons that are best articulated in a follow-up piece. Our researchers are presently working on describing how the company managed to achieve negative revenues so it should be a real exciting read.


When interest in hydrogen stocks peaked – again – in early 2021, three index providers thought investors would be keen on getting some exposure to the hydrogen economy. The increasingly green rhetoric coming out of the current administration should be giving a green light to hydrogen fuel cell investors, but interest in the available investment products tells us otherwise. Maybe we need to take a step back and decide if hydrogen is a thesis we really want exposure to.

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2 thoughts on “Three Fuel Cell ETFs for the Hydrogen Economy
  1. you should step back and take a close look. converting renewables to energy, using that energy to convert a feedstock to hydrogen, generating some not so nice waste, carrying green hydrogen to the locus of reconversion to electricity to convert that electricity to work, are an awful lot of conversion steps, implying many unhealthy and costly side-effects. as a feedstock substituting petrochemicals that may work. what could improve the picture is carbontax fueling rising incumbent energy cost, and significant gains in conversion technology. but you would still need to do away the negative effects of the many conversion steps. nothing that would rebute a standard oil&gas though, but also extremely capital intensive, no infrastructure, only for the happy-few (could be seen as an advantage 😉 ), and an “explosive” product, many buts and ifs for a clean tailpipe.

    1. Thank you for that comment Christoph. We’re picking up what you’re putting down. Our understanding is that hydrogen fuel cells only throw off water, so maybe you’re referring to the “not so nice waste” that the entire operation produces. This brings up the point many raise that perhaps electric vehicles aren’t as environmentally friendly as the marketing folks are leading us to believe.

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