The Motley Fool

2 UK hydrogen and lithium stocks I’m watching

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Tesla

The rise of electric vehicles continues to shape predictions for future energy demand. There has been a big shift in recent years to planning for future battery use. That has helped many hydrogen and lithium stocks as investors hope to benefit from the role of those materials in generating and storing power for electric vehicles.

Here I’ll discuss two UK hydrogen and lithium stocks I’m watching. I’ll also explain my investment approach towards them.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

UK hydrogen stock

One of the hydrogen and lithium stocks I’m keeping an eye on is AFC Energy (LSE: AFC).

The name AFC references the company’s focus on alkaline fuel cells. Its specialism is hydrogen fuel stacks. Usage cases for this technology include charging stations for electric vehicles.

With demand for charging stations expected to boom, the company is in a strong position to benefit. It has already developed a prototype of such a charging station that uses its technology.

AFC Energy share price and risks

With a market cap of half a billion pounds, some investors clearly see potential in AFC’s future. Over the past year though, the shares have drifted down 10%. Could that make this a good time for me to buy AFC Energy shares?

My answer is no –  the shares currently feel too speculative for my own portfolio.

While I think the company’s technological competence is strong, I see risks. The pathway to full commercialisation still seems slow, which could elongate cash burn. The hydrogen cell development space is very crowded right now, and deep-pocketed competitors could damage the overall profitability of the market as it grows.

Lithium stocks watchlist

While it’s listed in the UK, Bacanora Lithium (LSE: BCN) offers global exposure. It has a number of international assets but the jewel in its crown is an interest in a lithium mining development in Sonora, Mexico.

The development is still at an early stage. The company and its partners have done test work on samples from the site to assess the likely quality of the area’s lithium. They’ve also done extensive analytical work to assess how large the deposits are, as well as how easily workable they may be.

Now they’re laying the groundwork, literally. Work is going on to clean up the site and build an access road. That underlines that the project has a long way to go yet. The company expects the  mine to be commissioned in 2023, although there’s no guarantee that lithium will start being pulled from the ground in commercial quantities by then.

Bacanora Lithium share price risks

The Sonora development looks promising to me and I’ve looked at the technical report on the Sonora project available on the firm’s website.

But there are always risks with any early-stage mining shares and that includes lithium stocks. The mine may be less productive than hoped. Extraction costs could be higher than planned. Both could damage profits. Additionally, doing business in Mexico can be complicated from a regulatory perspective.

If the Sonora project works out and the lithium price is high, I think today’s Bacanora Lithium share price could end up looking like a bargain. But there are substantial risks here for a fairly conservative investor like me. So for now, I’m watching the company, but I’m not yet ready to buy.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

christopherruane has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.