2 ‘must watch’ FTSE 350 renewable stocks

James Reynolds is passionate about the green transition, but knows the sector poses some great risks. In this article he looks closely at two stocks with great potential.

| More on:

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.

Windmills for electric power production.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The renewable industry is going to take over the world in the coming decades. It has to if we are going to slow down or reverse catastrophic climate change. However, the sector is still in its infancy. There are so many companies and so much new technology. It can be hard to know which ones will pay off in the long run. I’ve looked into two companies that I am considering for my portfolio. I think they have potential but they come with a lot of risk.

1. Accsys PLC

Accsys (LSE: AXS) is a building supplies manufacturer that produces and sells sustainable wood for construction. With its headquarters in London, Accsys sources wood from several locations across northern Europe, then exports it to countries around the world. The benefits of using wood as a building materiel are twofold. One is that wood is a renewable resource that can be carefully managed. The second is that wood acts as a carbon sink, a way to collect CO2 from the atmosphere and store it indefinitely. Storing carbon will become an important part of the green transition and could be a great source of revenue for the company in the future.

Accsys also treats its wood with unique chemicals to make it more durable and extend its effective lifespan.

Accsys does have some challenges to overcome. It has weathered the pandemic but took on debt to do so. However, revenues are up, and if Accsys is able to reduce its debt to pre-pandemic levels then I think it has a chance to become a great, renewable, growth stock.

2. AFC Energy

AFC Energy (LSE: AFC) is a Surry-based designer and manufacturer of hydrogen fuel cells and other hydrogen products. It currently has a patent on several modular fuel cell designs that are transportable and able to run on lower quality hydrogen (meaning with more impurities).

Hydrogen fuel cells work by mixing hydrogen with oxygen, releasing electricity and heat. Producing hydrogen is currently difficult and expensive, but it is possible to do so in a renewable fashion. This is called green hydrogen. If fuel cells are able to use lower quality hydrogen, then producing it will become cheaper, encouraging adoption by everyone else.

AFC has a great market capitalization of £342m and is currently trading at a very cheap 50.82p. It also doesn’t pay a dividend, which is something I like in new companies.

AFC has struggled through the pandemic and only has enough cash to sustain business for another year. It is expected to increase revenue by 100% each year, but is not projected to become profitable for another three years.

I strongly believe that hydrogen power has massive growth potential and will really help our economies to become more renewable. But for now, I will just be watching how AFC manages over the next few years.

Conclusion

The green transition is happening right now, and presents a very exciting opportunity. Both of the companies I’ve looked into today are relatively small, and have clear issues which need to be resolved. But I think they both have big potential upsides. I will not be adding either to my portfolio just yet, but will continue to keep a close eye on them both.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Reynolds does not have a 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.

More on Investing Articles

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Looking for value stocks? Here’s 1 I’d buy and 1 I’d avoid!

This Fool delves deeper into two value stocks she’s had her eye on and explains why she’s bullish on one,…

Read more »

Young black woman using a mobile phone in a transport facility
Investing Articles

With the Airtel Africa share price in pennies, is it a bargain?

With the Airtel Africa share price having slumped by a quarter in just one month, this shareholder considers some of…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Are these 2 defensive FTSE 100 stocks shrewd buys after recent updates?

This Fool takes a closer look at these FTSE 100 stocks. She admires their defensive traits -- but does that…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The FTSE 100 closes up after full-year results from leading UK firms – are they buys?

Earnings season brings about a lot of ups and downs for the FTSE 100. Yesterday had some particularly good releases,…

Read more »

artificial intelligence investing algorithms
Investing Articles

Should I buy NVIDIA stock as a British investor?

NVIDIA stock is up two-thirds this year alone. Our writer considers some pros and cons, specifically given that he is…

Read more »

Investing Articles

With £2,000 in excess savings, I’d buy 41 shares in this Warren Buffett dividend stock

Stephen Wright thinks one of the best dividend shares to buy right now might be a Warren Buffett stock that’s…

Read more »

Investing Articles

How many Aviva shares do I need to collect a £100 monthly income?

Aviva shares are well suited for passive income purposes. Our writer works out how many would be needed for a…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

£2k to invest? I’d buy 883 shares of this overlooked dividend giant for a second income

This FTSE 100 dividend stock has had a mixed time since floating in 2019 but it looks like a brilliant…

Read more »