Yowza! Like a rocket. Some readers may recall a piece I wrote here at Real Money and Real Money Pro almost a month ago. I wrote on the name Plug Power (PLUG) that at that time had been getting quite hot, along with the rest of the "Renewable Energy Equipment" industry ever since Democrat Joe Biden had won the general election in early November. Renewable Energy Equipment currently falls within the Information Technology sector, not the Energy sector, and has been regularly outperforming the more well known and well understood industries that reside in that sector such as the semis, hardware and cloud-based software ever since.
(For more on PLUG, see Trade Carefully as Plug Power Is Still Extended)
Now back to that piece I wrote. I offered up two trade ideas. The stock was trading at $27.50 at the time. If you chose door number one (the path I took), you turned a quick profit of roughly 6%. If you chose door number two (the other path), and still have not sold, then you are now up about 70% with the shares trading above $46.
There is no quit in this name. By the way, FuelCell Energy (FCEL) is a cheaper, and perhaps less volatile (for now) way to play this game. PLUG ran 7.5% on Wednesday, to close at $35, which was right in the middle of the day's range. You have already seen the titanic overnight moves in the name based on what is significant news.
That said, first, if the name is new to you, Plug Power is a leader in building out the "hydrogen" economy. Hydrogen for the new kids is a product of natural gas, and is generated through hydro-electrolysis. The process is powered obviously by a renewable source. Oh, and best of all, no greenhouse gases are produced. Plug Power is not new.
The firm produces fuel cell batteries that power data centers, and certain types of small to mid-sized vehicles such as delivery vans and forklifts. Key clients include both Walmart (WMT) and Amazon (AMZN) . What is new is the global paradigm shift toward new and cleaner ways to produce energy and to power transportation. What's even newer than that are the results of the recent national election that have put the Democratic party in a position of power across both the executive and legislative branches of government. What's even newer than new, would be the embarrassing (and tragic) events that took place in DC on Wednesday that will likely result in greater cooperation at least for now, from the Republican party on a number of issues where there has been a recent but sharp divide.
Now, The News
Let's start at the beginning. About a year ago, the South Korean government announced the "Hydrogen Economy Roadmap" that lays out an ambitious green agenda to run through the year 2040. Fast forward all the way to Wednesday night. Plug Power and SK Group (of South Korea) announced that the two companies intend to form a strategic partnership to accelerate hydrogen as an alternative energy source throughout Asian markets.
Plug Power and SK Group plan to grow hydrogen fuel cell systems, and hydrogen fueling systems to Korean markets specifically, and then to Asian markets more broadly. As part of this partnership, SK Group has entered into a definitive agreement to make a $1.5 billion strategic investment in Plug Power while also announcing that the two will form a joint venture company in South Korea.
Plug Power CEO Andy Marsh commented, "SK Group has an established strategy for building out the hydrogen economy in South Korea and beyond. The current relationship with SK Group offers immediate strategic benefits to Plug Power to accelerate its expansion into Asian markets... and is intended to result in a formal joint venture by 2022."
The Pitchfork model that I showed you three weeks ago is still very much intact. However, the last sale has moved from the lower chamber into the upper chamber. This is where it gets tough. Thursday's action has produced a gap. We know that gaps usually do fill. The stock's placement in the Pitchfork also suggests potential for short-term resistance.
That said, do any of you see the political will to get behind green energy withering or growing over the next two to four years? Yeah, me neither. PLUG does not report for a while. No announcement has yet been made, but we are probably looking at the first week in March. Revenues have grown by 80% plus in two of the past three quarters. I see no reason now that anything less will become the norm moving forward.
I want to buy some PLUG. I also want to buy some FCEL. I can not do so at the top of the chart on top of a gap. My code of discipline does not allow for such activity. Perhaps by day's end, certainly after the close of business tomorrow (Friday) night, I expect to take the first baby steps toward building these positions. No more trading for a quick 6%, these are going to be investments that will be built over time. Speaking of time. the time has come. For me. To evolve.