Why the renewable power investment opportunity could rival the smartphone boom. Plus, three REITs for riding out the second wave

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BofA Securities analyst Haim Israel is making some tall claims about the future for hydrogen fuel, comparing the scale of the investment opportunity to smartphones before 2007 and the internet during the early 1990s.

A lot has to go right, but Mr. Israel believes hydrogen will account for 24 per cent of the world’s power usage by 2050 and the industry will generate US$2.5-trillion annually.

In a research note last week, the analyst said he sees three primary drivers behind the growth of hydrogen power: the falling costs of generating green hydrogen fuel, new technologies, and ex-U.S. government incentives promoting de-carbonization.

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The current problem with hydrogen fuel is the power needed to produce it. Currently, 99 per cent of hydrogen is made using electricity generated from fossil fuels. (Interestingly, Mr. Israel notes that French industrial gas provider Air Liquide S.A. uses fossil fuels to make hydrogen, but its Cryocap technology recaptures the carbon byproduct of the process to sell as carbon dioxide to industries like beverages that need a steady supply of it).

Hydrogen power will only be fully green if renewable power is used to make it. At this stage, using renewable energy sources to produce hydrogen fuel makes it extremely expensive. Mr. Israel, however, believes a combination of technological advancement and government incentives will soon close the gap.

Hydrogen fuel also fits neatly into renewable power grids as a type of battery. For instance, excess solar power generated during the daytime hours can be used to make hydrogen for night usage.

The conversion of almost a quarter of the world’s power supply to hydrogen, however, will certainly not happen overnight.

Chemical companies like Air Liquide, Linde PLC and Air Products and Chemicals Inc. will benefit through rising hydrogen sales if and when the trend takes hold. Equipment makers like ITM Power PLC and Thyssenkrupp AG, who manufacture the machinery necessary to produce hydrogen fuel, would also see profits, and their stock prices, climb.

— Scott Barlow, Globe and Mail market strategist

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Stocks to ponder

Cascades Inc. (CAS-T) On Friday, the stock price rallied 8 per cent on extremely high volume with over 1.4-million shares traded, well above its three-month historical daily average trading volume of approximately 390,000 shares. The price strength was fueled by reports that North America’s largest containerboard producer International Paper Co. will be raising containerboard prices by U.S. $50 per ton effective Nov. 1. Should other producers follow suit, current earnings expectations may be too low. Jennifer Dowty has a profile of the stock. (for subscribers)

The Rundown

Green power: Four reasons to bet on renewable energy

As the corporate world starts to embrace solutions to climate change, investments tied to renewable energy are producing the sort of growth that is hard to ignore, and supporting hefty dividends. The S&P Global Clean Energy Index of 30 stocks – which includes Canadian Solar Inc. and Toronto Stock Exchange-listed Boralex Inc. and Innergex Renewable Energy Inc. – has surged 46 per cent over the past 12 months. For investors, green means opportunity – not only in the case of traditional utilities that are boosting their exposure to renewables, but also for companies that are defined by their focus on solar, wind and hydro. David Berman provides four reasons why investors should take a closer look at stocks in this promising sector. (for subscribers)

Three REITs that are built to ride out a second wave

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Based on what happened during the first wave of the coronavirus, John Heinzl believes some REITs are better positioned than others to ride out another spike in infections. When evaluating REITs, tenant stability is critical. If tenants can’t pay their bills, the REIT’s cash flow will suffer, potentially putting its distribution at risk. John details three REITs that have a highly stable major tenant that accounts for a large percentage of their cash flows. (for subscribers)

Japan’s little-known Nikkei 500 hits record high, outperforms U.S. S&P 500

The Nikkei 225 share average, Japan’s best-known stock benchmark, on Monday still stood 40% below its historic peak hit three decades ago, while its lesser-known sibling, the Nikkei 500, surged past its previous peak to a record high. Japanese equities in general lag behind their Wall Street peers, with many foreign investors staying away from the market because of a perception of lackluster performance. But the Nikkei 500 looks much different, and trails only the likes of tech indexes, such as the Nasdaq. Tomo Uetake of Reuters tells us more about this little-known index that’s providing superior returns. (for subscribers)

China is on a building binge, and metal prices are surging

The coronavirus pandemic forced China to bring industrial activity to a halt earlier this year, but the country is revving its engines again – and global prices of metals are reflecting that renewed appetite for growth. Matt Phillips of The New York Times tells us more about the latest China-driven surge in metals prices. (for subscribers)

Why RBC’s Chris Beer is betting on gold

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Over his career, Chris Beer has watched the price of gold soar—albeit in fits and starts. In 2003, he became portfolio manager of the RBC Global Precious Metals Fund, which he now co-runs with Brahm Spilfogel and Jeffrey Schok, and has $1.16 billion in assets. Gold took off and peaked near US$1,920 an ounce in 2011, but then plunged and only surpassed that record this past August. The equity fund has outpaced the S&P 500 Total Return Index in Canadian dollars over the past 15 years. Shirley Won has this Q&A with the fund manager, and asks if investors should consider gold stocks for dividend income and why he likes Barrick Gold Corp. (for subscribers)

Others (for subscribers)

Monday’s analyst upgrades and downgrades

Monday’s Insider Report: Director buys this stock yielding 8.7% that’s nearing oversold territory

The highest yielding stocks on the TSX, plus risk data

Gordon Pape: My High-Yield Portfolio has posted strong gains since the spring’s market turmoil

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Chart watch: Bullish on Empire Co.

Sell the day and go away? U.S. stock returns come overnight

Others (for everyone)

Investors swamp IPO for K-Pop band BTS management label, prices at top of range

Globe Advisor

Professional investors should not ignore the retail wave

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What’s up in the days ahead

The COVID-19 crisis has dealt a serious blow to the faithful of low-volatility investing. Tim Shufelt will take a look at what went wrong with this investing strategy, and whether it will soon return to its glory days.

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Compiled by Globe Investor Staff

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