Editor’s Note: Today’s piece is from Capitalist Exploits, an investment research company that’s run by my friend Chris Macintosh. Chris specialises in finding extreme deep value situations that offer big potential payoffs, often in markets and sectors that are way off the radar. He’s recently found ridiculously cheap shipping companies, oil drillers that are priced for armaggedon and natural resource companies that are seemingly worthless. Today’s investment idea is targeting 20x returns in a technology that’s rapidly gaining market share… but no one’s talking about it. If you want to find out more about the opportunity Chris talks about below, you can also go here.
– Kim Iskyan, Publisher, Stansberry Pacific Research
Thirty-six people died when the Hindenburg – a massive luxury hydrogen-powered air ship – burst into flames during what was to be its maiden trans-Atlantic flight in May 1937 (see photo below). It was one of humankind’s first forays into using hydrogen as a fuel source… and the last attempt, for a very long time.
Until recently, that is. But no one is talking much about recent technological advances made in hydrogen fuel cell technology. And that’s created an enormous opportunity.
Before I tell you about that, though… I want to explain the difference between speculators and commercial users – because it shows why there’s any opportunity at all here.
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Are you a speculator… or a commercial user?
In the investment world, one of the most reliable indicators used by professional investors is the positioning in an asset – like, say, copper or currencies – of “commercials” (that is, people or companies who use an input to create something) vs. “speculators” (who take a position in an asset just because they think they can make money from it). Information about these two groups is published by exchanges, and provides insight into who is positioned in a given market.
One way to think about it is like this… “Commercials” are the guys involved in the particular sector earning their daily bread. For example: if we’re talking about the copper market, then these are the mine operators and the contractors. Typically these guys know the industry like the back of their hand.
The “specs”, on the other hand, are non-commercial. They’re retail investors through to mutual funds and hedge funds and everything in between. It’s common knowledge in the world of finance that whenever there’s a large divergence between the commercials and the specs, the commercials – who have an eye on what’s really happeneing – are almost always correct.
The reason I mention this is because of what’s happening with electric vehicles (EVs). The big news, at least in the U.S., when discussing electric vehicles, has been Tesla – which produces lithium-ion battery powered vehicles.
Who’s talking about hydrogen?
But nobody is talking about hydrogen powered fuel cell vehicles. Search the media for coverage on lithium-ion battery EVs – which are used in Teslas – and there’s no shortage of articles and opinions, much of it from traditional media outlets, funds, analysts and blogs abound. We could call these guys the “specs”. They’re definitely not industry.
Now, go search for hydrogen fuel cell powered EVs and you’ll struggle to find commentary by the amateurs. No… the vast majority of commentary and coverage to be found on hydrogen is from the industry. In a word… the commercials.
Interesting, isn’t it? What that means is that although the folks who are actually building and selling hydrogen-powered fuel cell vehicles are making it very clear what is already taking place, the speculators have yet to pay any attention to this. This is a significant divergence and is exactly where profits all too often are to be found.
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Why industry is increasingly betting on hydrogen
EVs can be run by either lithium-ion batteries, or by hydrogen powered fuel cells. And while the lithium-ion battery powered vehicles have been first movers in this space, they have some significant disadvantages compared to hydrogen fuel cell powered vehicles, which are rapidly catching up. Part of this is due to the inherent problems encountered with lithium-ion powered vehicles. Namely…
Scalability of lithium-ion batteries is a major issue… there just aren’t enough of them. Worse… they’re dirty. Lithium-ion battery powered vehicles still have to get their power from the grid – which in many countries is still powered by fossil fuels. And then there is the problem that the lithium batteries contain many heavy metals that are extremely difficult to recycle – and mining them is highly polluting.
And in terms of usage… Lithium-ion batteries run out rapidly, lose charge rapidly in the cold, are heavy, take a long time to charge and their restricted range is a big problem.
A solution? Hydrogen fuel cells.
Hydrogen is cheaper, faster to refuel, and lighter than lithium. Most importantly, when you burn hydrogen, all that comes out the exhaust pipe is water. Charge times are almost identical to gasoline-powered vehicles (just a few minutes). Unlike lithium-ion battery powered vehicles, hydrogen powered vehicles are massively scalable. And they don’t rely on the grid.
What’s been holding hydrogen back has been that science hadn’t yet figured out how to economically create and store hydrogen. But now thanks to the excess (off-peak) electricity produced by wind and solar power – and the inability of these plants to capture this excess electricity – hydrogen has a chance. I wont go into the technical aspects of this here (it’s all in this report) but suffice to say, this is a game changer for the industry.
Why now? What happened on March 26
But there is something just as big that just took place very recently which promises to ignite a fire under this sector.
When it comes to electric vehicles, China is THE heavyweight in the room. Nobody comes even close. China is the global leader in both production and sales, and by the end of this year is set to account for 59% of global sales of EVs.
So China matters a lot in the EV market.
Which brings me to a decision made on March 26. That’s when the Chinese government cut subsidies for lithium battery-powered electric cars by a huge 67 percent. That’s a big problem for everyone – EV car makers, lithium battery makers, and the entire supply chain – who relies on these subsidies.
The reduction in the subsidies was implemented shortly after Chinese Premier Li Keqiang visited Japan. You see, Japan is betting everything on hydrogen, which is saying something – given that Toyota was the first company to produce a lithium-ion powered electric vehicle. And the indications are that China is changing directions completely – in favour of hydrogen fuel cells.
If we look at the big gains that investors have enjoyed in the lithium-ion led vehicle space already, we have some indication as to what may be possible in the hydrogen arena. A space which nobody is talking about… yet.
Right now there is a window of opportunity. I don’t know how long it remains open. What I do know is that things are moving fast and when the mainsteam media (that is, the specs) begin to catch on it won’t be long before the herd begins to move.
We cover much more about this exciting sector, including some carefully selected stocks. If you’re an intrepid investor who is courageous enough to buy when nobody else will, getting in at the grass roots level, then I have a feeling you’ll enjoy this report. You can get the report here.