Tesla’s (TSLA) Fuel Cell Threat

By Stephen Petranek Dec 31, 2014, 2:23 PM 

Thirty years ago, I was introduced to a wonderful financial guru. He seemed like an ordinary enough stockbroker at the time, but I came to discover that he had been a star at a major brokerage house in New York, and more importantly, he had been trained by a genius investor. At the time, I was just looking for a relatively inexpensive middleman who would offer me a single yearly fee for unlimited trades and, frankly, a voice who might keep me from doing something stupid. I got far more than I ever expected. My broker became my friend, and he passed on what had been passed on to him.

He wanted me to see a bigger picture than the stocks we were investing in. He wanted me to understand the real power of buying low, the power of trends, how the market often fails to let go of a rally when it should, that the markets aren’t really rational in the short run, how to use options for almost guaranteed income and other wisdom of evaluating a company that only time and experience provides.

He wanted me to understand risk/reward ratios and how seven out of 10 stocks could be bad investments, but if the other three were spectacular, you could come out a winner. He also taught me to recognize when something was too good to be true. When WorldCom started paying 10% dividends, he wouldn’t let me buy it: “Too good to be true,” he said. Eight months later, WorldCom stock was worthless.

The disruptive technology you think you see…is not the big picture.

Two concepts my guru taught me are underlying themes of how I pick investment ideas — and I recommend you adopt them as well. First, it’s important to see the big picture. I want you to get good enough at recognizing big changes in the world of science and technology to identify innovation worth investing in — with or without a newsletter editor, financial advisor or anyone else. Second, I want you to get a feel for appropriate risk/reward.

To learn about investing in tech stocks, you must open your mind to the big ideas in science today. If a company is developing a new cancer drug, you must understand the cancer before you even think about investing in the company. Therefore, it’s important to choose investments the way Magellan Fund guru Peter Lynch did it: He wandered into a mall and watched consumers. Then he bought Gap Inc. (GPS) We will wander into the world of science and technology and observe.

Storytelling among humans is at least 40,000 years old, and it remains the most developed interface for transferring information. Storytelling makes investing compelling, understandable and fascinating. Last month, you may have read my story about a breakthrough idea about how two different fuel cells could complement each other.

It had nothing to do with any specific stock, and I mentioned none at the end of the article, but I am confident fuel cells are going to be very big in your life as we move away from petroleum-based energy. I want you to know about the trend toward fuel cells. It will make you a better investor.

As it turned out, my timing was fortunate. Honda Motor Co. (HMC) recently showed off a sexy new prototype automobile that runs on the most plentiful element in the universe — hydrogen. But it doesn’t burn hydrogen in an internal-combustion engine the way a prototype Mazda did 15 years ago. That technology is old.

The Honda FCEV (Fuel Cell Electric Vehicle) Concept, first shown in December 2013 at the Los Angeles Auto Show.

This Honda makes electricity by passing hydrogen through a fuel cell. Honda’s surprise wasn’t the technology itself — auto companies like Mercedes and independent firms such as Ballard Power Systems (BLDP) have been experimenting with fuel cells for decades — it was the announcement that Honda will introduce a fuel cell auto you can buy in two years.

Tetsuo Iwamura, CEO of American Honda, said his concept car “hints at” a new direction for the company. Just when you thought the Nissan Leaf and the Chevy Volt and Tesla (TSLA) cars were the future, a Honda with a small tank of hydrogen shows up that can go 300 miles before it needs refueling, which takes three minutes.

I’m not recommending Honda stock, or even Ballard Power Systems, though you could do worse. I just wanted you to see a big picture that’s forming and embrace a revolutionary idea that will show up as investment opportunities.

The disruptive technology you think you see — the conversion of automobiles from internal-combustion engines to electrics — is not the big picture. That is yesterday’s big picture. Technology has already moved past the electric vehicle.

The truly disruptive trend is where the electricity to power these vehicles will come from. Who wants to rely on batteries? Who wants to wait for a charge cycle? Who wants to worry about building enough new power plants or installing 50-amp, 220-volt circuits in our garages? Wouldn’t you rather make your own electricity on the fly? You can with fuel cells.

And while we’re at it, just how far-fetched is the final scene in the movie Back to the Future Part II, in which Doc Brown picks up an aluminum soda can from the garbage and pops it into his car’s fusion reactor?

I can’t gaurentee that our additional science and technology features will offer immediate relevance and connectivity to daily life the way our usual stock coverage does.

But if you keep reading, one day soon your own brain will get it — the perfect investment opportunity based on a better general knowledge of science and technology. You’ll connect the dots and nobody will be able to take that away from you.

1 Comment on Tesla’s (TSLA) Fuel Cell Threat

  1. This is a horrible article, you need to Lear more about fuel cells and hydrogen production. There are two ways to produce hyrdogen, the first being electrolysis. Electrolysis would require a $200k setup to generate and compress enough hydrogen to fill two cars a day. It uses a high voltage and current to split water into hydrogen and oxygen. This is not something you are doing at home because everyone would need a $200k machine and 480v 3-phase electric service upgrades. This means we need more gas stations equipped with electrolysis setups at a tremendous cost to the gas stations. This will not be cheap or easy to create the infrastructure. Additionally, electrolysis wastes 50% of the energy as heat, then the fuel cells themselves are only 50% efficient. So your car only gets a total of 25% of the energy used to create the hydrogen.

    The other process to create hydrogen is high temperature steam reformation using fossil fuels. This process is even more expensive, creates a lot of pollution, and is not very pure. There will be carbon monoxide mixed in with the hydrogen. Carbon monoxide poisons the platinum catalysts used in fuel cells and quickly and irreversibly damages the $10k fuel cell in a car.

    On the other hand you can charge a battery with 95% efficiency from a $500 or less outlet installed in any home (mine cost $30 because my electric panel is already in the garage). No more stopping at gas stations, no more worrying about gas price fluctuations, and your car only uses $.02 of electricity per mile versus the roughly $.08 that gasoline costs.

    Until we come up with new ways of producing hydrogen, fuell cells will always be 10 years away like we were told back in the 70’s.

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