I have been writing about tech stocks that grew in a short time. But there is growth in other sectors as well. The energy transition is the next big opportunity. Rising temperatures have increased the urgency of reducing CO2 emissions, and the Russia-Ukraine war has reinforced the need for energy security. Green energy is the long-term sustainable solution to the energy, environmental, and economic problems of today.
How to grow your money 10-fold in 10 years
Energy has various forms. It’s the electricity that powers industries and homes, and it’s fuel and gas that powers transportation. The electric vehicle (EV) growth cycle has already attracted investors’ attention and pushed up the valuation of EV-related stocks. EVs will help countries reduce CO2 emissions, fuel consumption, and dependence on a few oil-rich countries. Investing in EV trends can give you a 15-20% compounded annual growth rate (CAGR), but it can’t grow your money 10-fold.
To get a 10-fold growth, you need a small-cap value stock with the potential to become a large-cap stock in the next market cycle. If you think long term, EVs are not a foolproof solution to reducing CO2 emissions. Many critics have pointed to the emission from lithium mining and highlighted the issue of addressing the rising electricity demand to charge EVs. As problems with EVs increase, a greener alternative will be needed.
Hydrogen cars are the next trend. Green hydrogen is generated by separating hydrogen from water using electrolysis. However, this technology is at a nascent stage. Like all new technologies, it faces the problem of high cost and lack of infrastructure. Even Tesla faced problems with the manufacturing cost of EVs 10 years back. Today, it has overcome critical technological hurdles, and EVs have secured government support on the investment and policy front. This 10-year period made Tesla investors rich and its owner Elon Musk the richest. A $10,000 investment in Tesla in June 2012 is now over $1 million — 100-fold growth.
Hydrogen fuel cell opportunity in the next 10 years
Hydrogen fuel may or may not be a 100-fold growth opportunity, but it can be a 10-fold growth opportunity that could convert $10,000 into $100,000 when adoption increases. With nascent technology, the growth will take seven to eight years to pick up. But when it does, the wait would be worth it. PWC analysts believe that the hydrogen fuel technology might grow at a moderate pace till 2030 and then scale with rapid adoption.
One small-cap stock with 10 times growth potential
One company that could be at the forefront of tapping this 10-fold market cycle is Ballard Power Systems (TSX: BLDP)(NASDAQ: BLDP). Ballard leverages its core fuel cell technology to develop hydrogen fuel cells for bus, truck, rail, marine, off-road vehicles and stationary power market. This diversification could be a growth catalyst for Ballard and generate several revenue streams once its technology achieves scale.
Ballard is testing fuel cell platforms in the trucks and trains. It is also developing a method for fast refueling of hydrogen trains. Ballard has also become the first company to get DNV-type approval for its FCwave module. This approval instills confidence in product safety, performance and durability for marine applications. It is working with Anglo American on the world’s first hydrogen-powered mining truck.
The testing phase is putting downward pressure on Ballard’s margins. The company is investing in advanced manufacturing but producing low quantities. There are also short-term headwinds, like rising labour and freight expenses and lockdowns in China (Ballard’s third-largest market). Ballard’s latest quarter’s adjusted EBITDA loss widened to US$27.5 million from US$14 million a year ago. These losses have kept investors disinterested.
But as Warren Buffett says, “The time to get interested is when no one else is. You can’t buy what is popular and do well.”
Ballard’s catalyst is its biggest market in Europe’s growing investment in hydrogen. The European Commission plans to increase annual electrolyzer manufacturing capabilities by 2025 to boost annual green hydrogen production 10-fold. Ballard Power is a small-cap stock to buy through a Tax-Free Savings Account and forget for 10 years.
