Nikola (NKLA), Omeros Corporation (OMER), and ITM Power may each rally in the near future. The former two corporations have shares that are volatile. Volatility is sometimes identified with a metric known as beta, roughly equated to “system risk,” which is attributed to financial research, approximately 50 years ago, that won a Nobel Prize in 1990. In present times, aside from quantitative methods that are not well-known, a security that is highly volatile can be identified as a questionable store of value. There is some color included in commentary on an aspiring drug company below.
The stocks are discussed in order of current preference:
NKLA shares have been in the doldrums for a few months, pursuant to extensive press that has been predominantly negative. However, it is better to invest when a share price is declining, particularly when and if a bottom can be identified. For what it is worth, the founder’s moving on may be for the better, as the sexual assault claims against him admittedly were an unknown.
Also, Nikola’s previous deal with General Motors was not terrifically favorable as GM was not a buyer of the stock but accepting shares given to it, in addition to valuable electric vehicle credits and also an agreement to have a paying client of its hydrogen fuel cell technology. The revised Memorandum of Understanding involves GM’s Hydrotech for heavy trucks, probably as an ancillary or backup system, and there should not be a Nikola Badger pickup truck produced by GM. Hydrotech has evidently been engineered for passenger cars and Nikola’s plan is to produce heavy trucks that are powered by hydrogen.
Fuel cells are known for being extremely complicated. Another issue is the need for improved efficiency as it is lacking in comparison to traditional combustion technology. Nikola’s leadership states that it has a fuel cell created through a partnership with Germany’s Bosch for its rig trucks, the vehicles that may be used for interstate transport and appear to be the most viable use case for hydrogen as a clean fuel.
OMER is among the most volatile stocks that are readily observed (its chart probably illustrates the attribute better than published measures of beta). Over years, the pay off has typicallly been to buy low and then sell high within weeks or months (or sell high and buy back low), not by being a long-term investor. Evidently, at the 2009 Initial Public Offering, shares debuted at $10 and in December 8th of 2020 they are closed at $14.23.
Risk: there is competition working on a similar therapeutic, including Alexion Pharmaceuticals. There is reason to believe that the Omeros product has a better safety profile, and there has been no indication of concerning side effects through extensive research. However, clinical trials are required for reasons, demonstration of safety among them. When the dust settles, and that might be years from now, the monoclonal antibody developed by Omeros probably will have efficacy that is equivalent and lack some of the concerns that are identified with Alexion’s product. There may also be the possibility of a superior product from a different company; however, it would be further off than Alexion’s drug, if it is ever investigated by the firm owning it.
ITM Power plc, based in the United Kingdom, specializes in hydrogen energy and renewable energy.
Not only does the company have a terrific foothold in the UK, notably Scotland, but it should also have prospects in Europe.
The above is similar to Nikola’s near term aspiration of partnering to develop hydrogen fuel stations and infrastructure, only on the other side of the Atlantic Ocean.
Risk: the stock is at its all time high, so typically it is better to look for a slightly lower price, maybe 5 – 10%. Also it is an international company with shares that trade on a foreign exchange. Further, though the firm recently issued shares to shore up its financial position, the same information and resources to evaluate the stock have not been readily available as is customary.
Stocks gain in value most of the time. There are occasions when markets decline or correct. However, pursuant to a correction that has resulted in gains far beyond it during 2020, it could be a while before it happens again. Of course, there is no guarantee.
Still, there are reasons for all three stocks discussed to go up in the near future. They are not without risks. Two of them may involve system risk; if the market were to plummet, they could fall faster.
*** The author owns shares of NKLA, OMER and may invest in ITM in the near future.
12/15/10 according to a piece in Financial Times, NKLA might not have a partnership for fueling stations until next year. Provided there is an agreement reached, it is probably better to hold off until that happens. Additional shares may be sold from my account.