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August 03, 2001
Fuel Cell Stocks Lose A Little Spark
by Doug Wheat and Mark Thomsen
But for the social investor who does not get jolted by volatility, the sector may generate
long-term gains.
SocialFunds.com --
Alternative energy stocks treated green investors well in 2000. Some of best performing stocks in
this arena were fuel cell company stocks. This year, however, has been a different story as fuel
cell stocks are 50 to 65 percent below their 52-week highs.
 "During the 'California energy crisis,'
the stocks rallied to their year highs, based on investor interest in the sector," said Eric
Packer, a Principal and Branch Manager of Progressive Asset Management. "As oil and
natural gas prices have dropped, these companies have lost a substantial amount of their value."
Investors like fuel cells because they promise to save energy in everything from cars to
commercial businesses. Fuel cells create electricity by combining oxygen and hydrogen, an
electrochemical process that produces electricity and water. Hydrogen for fuel cells is generally
drawn from natural gas, although other hydrocarbon fuels are used as well. Hydrogen can also be
separated from water using solar power.
Ballard Power Systems, Inc. (BLDP),
the largest fuel cell company, is developing products for the automotive, power generation, and
small engine markets. Its recent share price of $41 represents a loss of a third of its value this
year, and it has lost two-thirds of its value from its 52-week high of $121 per share. Ballard is
planning to introduce a portable power product at the end of this year; the outcome of that
introduction could have a major impact on the stock price.
FuelCell Energy, Inc. (FCEL), another
"pure play" fuel cell company, manufactures products that produce power on-site for commercial
businesses. FuelCell Energy is currently trading at about $19 per share, which is half of what it
was six months ago. The share price dropped rapidly in June as FuelCell Energy issued additional
shares to a market that was turning unfriendly towards energy stocks.
Plug Power, Inc. (PLUG), the third
major fuel cell company, is concentrating on power generation products for individual homeowners.
Plug Power has a distribution agreement with General Electric and is currently trading at about $13
per share. This highly volatile stock started the year at about $17 per share, but over the last
year it reached $60 per share once and $30 per share twice.
Social investors might
consider looking at other companies looking to profit from the fuel cell market. Impco Technologies, Inc. (IMCO)
provides the 'plumbing' around a fuel cell. General Motors (GM) recently took a 20 percent in
Impco's fuel cell subsidiary, Quantum, which may provide validation to its technology.
Other companies in the sector include UQM Technologies (UQM), which provides power electronics
to fuel cells, and Woodward Governor (WGOV), which manufactures metering technology for fuel cells.
Given the volatility of fuel cell stocks, Packer recommends that individual investors view
them as long-term investments. Nam Kapur, an analyst at Adams, Harkness & Hill, Inc., a Boston-based investment
bank, says the sector could be an attractive investment opportunity if the investor has confidence
in the market demand. But she warned of three pitfalls that investors should keep in mind.
"One, watch out for 'deep pocket' competitors that have the expertise and resources to quickly
scale manufacturing and access to well-developed distribution channels. Two, do not discount the
incumbent technology - its proven, cheap, and familiar - all difficult hurdles to overcome for a
new product. And three, commercialization never occurs as quickly as projected," said Kapur.
Sounds like advice that could help a social investor stay grounded in reality.
©
SRI World Group, Inc. All Rights Reserved.
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