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Green hydrogen has been turning red recently. Most of the stocks in this dynamic-but-speculative sector have been drifting lower for several months.
That’s not a great trend in anyone’s book, but the final chapter of this tome has not been written.
The Green Hydrogen Boom Is Coming
Without a doubt, the leading green hydrogen plays are speculative… very speculative. But they continue to possess enormous potential to produce massive revenue and profit gains in the future.
In other words, the story remains the same… but stock prices in the space continue to move lower. Partly, the overall stock market trend is to blame.
Speculative stocks like those in the green hydrogen sector are vulnerable to the whims of the market over the short term. But over the long term, innovative companies can produce amazing results.
Let’s consider a handful of classic examples…
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Even the Greatest Stocks Stumble
Back in 2000, Amazon.com Inc. (AMZN) shares fell 66% between Jan. 3 and Oct. 10. If you purchased the stock that day, your investment would have tumbled another 80% over the next 12 months!
But if you held onto your position, it would have recovered its losses and doubled your investment within three years. After four years, that gain would have increased to 400%, 1,000% after 13 years, and 10,000% after 20 years.
Remember, those are the returns you would have reaped from a stock that fell 80% immediately after your purchase.
Apple Inc. (AAPL) shares underwent a similar metamorphosis – from mega-loser to mega-winner.
During the early months of 2000, they fell 66%. If you purchased the stock at that moment, your investment would have tumbled by an additional 42% during the next three months.
But if you held on, that investment would have recovered its losses to produce gains of 400% in five years, 1,000% in seven years, 2,000% in 10 years, and an astounding 35,000% in 20 years.
These cherry-picked examples may not be typical, but they are more common than you might expect, especially within the universe of speculative, aspirational companies like those that typify the green hydrogen sector.
The Past Doesn’t Determine the Future
In many ways, green hydrogen stocks resemble “junior” mining companies or early-stage biotech companies. They are brimming with potential but lack the kind of success that produces profit growth.
A promising junior mining company, for example, may have a great resource project but not enough capital to advance that project into production. At that stage, the mining stock is a faith-based investment; many pieces have to fall into place to reward that faith with a profitable outcome.
Early-stage biotech companies are identical. They enter the stock market as profitless companies with promising technologies and big dreams, while rarely possessing enough capital to advance those dreams all the way through clinical trials.
Many early-stage biotech companies fail, as do many junior mining companies. Similarly, I expect many green hydrogen companies to fail – or at least fail to deliver on their promise. But early setbacks, and/or wicked stock market selloffs, are not reliable indicators of future success.
During a panel discussion at an investment conference in 2015, the moderator asked those of us on the panel to name our favorite mining stock of the moment.
I named Ivanhoe Mines (IVPAF), a stock that had plummeted 86% during the preceding three years and proceeded to drop another 25% over the next six months.
But Ivanhoe recovered and has soared more than 1,100% since the day I gave it the thumbs-up at that conference.
Ivanhoe would have been an easy stock to leave for dead; it had performed so poorly for so long that many investors probably gave up on it, which is understandable. But even the greatest of speculative stocks can deliver disappointing results for uncomfortably long periods of time.
Stay the Course and Don’t Lose Heart
I remain optimistic about the speculative stocks that populate the green hydrogen industry.
This industry is still in its infancy, and accordingly, many of the stocks I have my eye on are trying to establish a dominant presence in it. They might fail to do so, but it is much too early to know.
These stocks’ eventual success is not certain, but what does seem close to it is the long-term success and growth potential of the entire green hydrogen industry.
The bottom line: The green hydrogen story is one that deserves your attention.
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Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, here.
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