HTHIF - Hitachi A Quiet Achiever In Grid Transformation

2024-01-31 17:29:17 ET

Summary

• Big industrial companies Hitachi and GE were major outperformers in 2023, while most stocks other than the “Magnificent 7” went nowhere.
• Hitachi has a long history in electronics and heavy industry that has relevance to grid management and power distribution; these are key issues in the renewable energy transition.
• Whereas the old view of power systems revolves around “base load”, Hitachi is interested in flexible supply/demand balance, especially in light of renewables beginning to dominate power supply.
• Hitachi and GE have a JV in SMR (Small Modular Reactor) nuclear power developments. This must be a significant financial drain on both companies.
• Hitachi’s overall business has performed well in the past 5 years and there are reasons to think that this will continue. It is well-placed to be a big player in grid restructuring.

Hitachi, Ltd ( OTCPK:HTHIY ) is a big Japanese company (not on the S&P 500) that has managed to achieve a (relatively) consistent share price increase of 46.5% over the past year. Hence it has substantially outperformed the S&P 500’s 23% rise over the same period. This is even more remarkable when one considers that the “Magnificent 7” (Apple ( AAPL ), Microsoft ( MSFT ), Amazon ( AMZN ), Alphabet ( GOOG ), Nvidia ( NVDA ), Meta Platforms ( META ) and Tesla ( TSLA )) are responsible for most of the S&P 500 outperformance in 2023. In fact, 72% of S&P 500 stocks underperformed the index in 2023. There is another S&P 500 company, General Electric ( GE ), with a Hitachi-like performance over the past year. In fact GE was up 66% over the past year, its best performance since 1963.

12 month performance of Hitachi, GE and S&P 500. Source Seeking Alpha

If one takes a 5-year view, the picture for Hitachi is even better as it outperforms GE and the GE share price has been more volatile. Over five years Hitachi is up 140%, GE up 119%, while the S&P 500 is up 82% over the same 5-year time period....

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