Green is and will be good

When diesel engine maker Cummins unveiled its quarterly results, which exceeded market expectations by nearly 20 percent, and confirmed a solid outlook for 2021 last week, many shareholders of the company certainly expected a positive market reaction and planned profit-taking. But the company’s shares closed that day with a decline of 1.5 percent, thus only confirming the direction in which investors’ attention has been focused in recent months.

At present, the market is not interested in trucks powered by a diesel engine, these days and weeks we are riding the green wave. Everything that runs on electricity, hydrogen, or gas is “in” and brings shareholders unprecedented profits. And let’s not deal with valuations, after all, at the time of the GameStop case, many investors are not so interested. The story is important and in many cases it is very strong.

One of the conglomerates that has given the necessary impetus to small companies in the “green” sector is Amazon. By 2030, the company wants to deliver half of its orders to customers without emissions and is investing heavily on several fronts to meet this goal. Rivian Automotive, which plans to go public in September this year with an estimated valuation of $ 50 billion (interestingly similar to the market capitalization of Ford, which invested in the company together with the aforementioned Amazon, BlackRock and a total of $ 8 billion), won the contract for 100,000 light commercial vehicles from Amazon.

Shares of Westport Fuel Systems jumped more than 40 percent this week after winning a contract again from Amazon to supply more than a thousand natural gas engines for its truck fleet. Thousands of plug-powered forklifts powered by Plug Power’s hydrogen fuel cells are being driven into Amazon’s warehouses, which can undoubtedly be considered the most comprehensive supplier of hydrogen technology. And other big companies like Walmart or Home Depot are being added to help give these stories a real foundation and justify dizzying valuations.

We can discuss whether or not the electrification of passenger transport is a dead end, I personally believe more in hydrogen, which some analysts estimate will attract $ 2.5 trillion in investment by 2050, compared to just 1 billion in 2018-2020. , 8 billion a year. Long-term investors should not be discouraged by the appreciation of companies such as the aforementioned Plug Power by almost a thousand percent in 2020. We are just at the beginning of the story.

The author is an analyst at J&T Bank.

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