When looking for the best stocks to invest in, battery stocks generally receive little attention. This likely stems from the fact that few companies market themselves as such. For example, Duracell Inc. functions as a subsidiary of Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B). As such, the public tends to focus on Warren Buffett instead of his battery business. Others such as Interstate Batteries or retailer Batteries Plus Bulbs remain in private hands.
Still, as the march toward improved technology progresses, the need for the energy batteries provide continues to grow. Batteries can now power cars and homes. Additionally, advances in solar and the launch of 5G wireless networks mean that the latest tech advances will derive their power from batteries. Given the world’s future energy needs, these battery stocks look especially well positioned to power both the tech industry and investor stock gains:
For all of the publicity surrounding its cars, investors should classify Tesla (NASDAQ:TSLA) as one of the more essential battery stocks. Consumers often forget that Tesla also has its Solar City subsidiary, which manufactures solar panels and solar roof tiles. Like the car, all of these products depend on a battery to store the energy. Hence, in truth, the battery serves as the company’s core product.
Admittedly, I have long seen TSLA stock as one of the only overinflated battery stocks. I respect the accomplishments of Elon Musk. However, I fear that he’s a creative genius with little business sense, much like the company’s namesake, Nikola Tesla. Still, with TSLA stock now earning a profit, I see a buy case for more risk-tolerant investors.
I do not often recommend stocks with a forward P/E ratio of around 64. Still, the P/E means the company now earns a profit. Additionally, analysts predict profit growth in the triple digits through at least 2021. Such income increases make it difficult to count out TSLA.
Moreover, its product lines have tremendous implications for both life and business as we know it today. The car battery could greatly reduce the need for fossil fuels. Furthermore, the company’s Solar Roof could mean consumer independence from electric utilities.
Despite the promise, one cannot overstress Tesla’s risks. For one, Mr. Musk’s behavior does not inspire confidence. In fact, a layoff announcement to control costs recently led to a one-day stock selloff of about 13%. Also, products such as Solar Roof have not yet become cost effective. Moreover, from a financial perspective, if profit forecasts turn negative, the case for TSLA stock could fall apart. Still, if Tesla lives up to its potential to change the world, Tesla stock will appear cheap at these levels.
Admittedly, most Americans think of Panasonic (OTCMKTS:PCRFY) as a consumer electronics company. However, PCRFY has moved into battery production in recent years. It has claimed its place among battery stocks by becoming the only approved supplier of lithium-ion batteries for Tesla’s cars.
It produces these batteries in both Japan and at Tesla’s Gigafactory 1 in Nevada. Now, with a new factory in China, Panasonic plans to almost double its production capacity. To say the least, batteries are positioned to serve as one of the PCRFY’s bright spots in future years.
Also, in an ironic twist, PCRFY stock may allow for an indirect way to profit from Tesla. As one of Tesla’s most important partners, it will benefit from Tesla’s success. However, if Tesla falls short, Panasonic’s eco solutions, appliance and connected solutions divisions will soften the blow.
PCRFY stock also carries fewer risks than Tesla financially. PCRFY trades at 9.5 times forward earnings, less than one-sixth Tesla’s forward multiple. Also, it expects profit growth of 15.7% next year. It also pays a substantial dividend. Even with currency risk, analysts estimate an annual dividend for 2019 of about 26 cents. This places the dividend yield at around 2.7%.
Despite optimism on this front, PCRFY stock fell for most of 2018. And Panasonic currently trades at about 40% below its 52-week high. However, we could be in the midst of a rebound. The stock has risen by almost 15% since December 24. The realization of double-digit profit increases could also inspire more buyers. No matter what happens in the near term, the unusually low P/E and the growth prospects coming from Tesla could make PCRFY one of the more attractive battery stocks.
Along with Duracell, Energizer (NYSE:ENR) is one of the names that comes to mind when discussing batteries. Energizer has long served as a common choice when needing a battery for one’s flashlight, toy, or portable electronic device. Since 1988, the Energizer bunny has reminded consumers of the power of Energizer batteries and inspired consumer purchases for more than three decades.
The company can trace its origins back as far as the 1890s. However, ENR stock came about when the company split from Edgewell Personal Care (NYSE:EPC) in July of 2015. As such, it trades much like the stock of an older company despite its relatively recent IPO.
I would recommend ENR stock for investors seeking both income and growth. It has raised its dividend every year in its existence. For 2019, it will pay an annual dividend of $1.20 per share. This brings the yield to just over 2.5%.
ENR has also shown steady but significant appreciation. It has risen just under 35% in its 3.5 years of existence. Also, ENR has achieved this despite falling almost 29% from its 52-week high over the last six months.
The market hammered ENR stock following its third-quarter revenue miss. Still, I see this as an overreaction. Analysts forecast 25.1% profit growth in 2019. Even if that slows in future years, the low PE, a growing dividend, and the ever-increasing importance of batteries should keep ENR stock in good ste/ad for years to come.
As of this writing, Will Healy held no positions in the aforementioned securities. You can follow Will on Twitter at @HealyWriting.