Hedge Fund Lakewood Is Shorting One of Canada’s Top Stocks

(Bloomberg) -- Ballard Power Systems Inc., the second-best performing stock in Canada this year, is a new short at Lakewood Capital, the firm said in its quarterly letter, calling it a “consistently loss-making and cash-burning Canadian company.”

Shares of the Vancouver-based hydrogen fuel cell maker have risen 139% this year amid burgeoning speculation that wide-scale adoption of hydrogen fuel cells may at long last be around the corner.

New York-based Lakewood is skeptical on the fuel cell industry and views fuel cell stacks as a “low value-add product that is relatively commoditized.” The firm added that Ballard generates just over $100 million in annual revenue and “has never earned more than $40 million in annual gross profit,” according to the second-quarter letter seen by Bloomberg News. The shares were down 9.1% just after 1 p.m. on Thursday.

“We believe an equipment manufacturer could insource the technology relatively easily or simply switch to one of Ballard Power’s numerous competitors,” the hedge fund said. Ballard did not immediately return a request for comment.

Ballard’s shares have slumped for four straight days in Toronto trading, sliding 17% so far this week, its longest losing streak since April. It’s still the No. 2 stock on the S&P/TSX Composite Index this year.

Earlier this month, the stock rallied to a 17-year high after it received a $7.7 million order from China. The company’s technology currently powers over 650 electric buses and more than 2,200 electric trucks in China, Alfred Wong, managing director at Ballard, said in a statement then.

“We have tracked Ballard Power (and several other fuel cell stocks) for the past decade, and on five separate occasions, investors bid up the shares in a frenzy only to be left holding the bag months later when they came crashing down to earth,” Lakewood said.

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