Although the exact date is yet to be determined, driverless cars are coming. This will be an extraordinarily hot trend when it happens, but there are already established mega-cap companies in the lead of the pack. And those are the driverless car stocks to buy now.
Unlike 2018, this year, the equity markets are soaring and the S&P 500 is once again near all-time highs. As a result, investors are nervously awaiting the next shoe to drop. So even though stock prices are rising, Wall Street is expecting last October’s scenario replaying itself so caution is warranted in a form of fearing fear itself.
This means that owning stocks here is a risky proposition while this malaise persists. So my approach to investing in self-driving car stocks is to divest the risk and bet on hybrid companies: Ventures that are pure plays on these cars is an all-in bet on a market that is yet to establish itself. Same as in poker, all-in is too much speculation, especially when there are viable alternatives that have a plan-B if necessary. There are hundreds of regulatory adjustments that need to happen for driverless cars to become mainstream and legislation is a slug.
Here are three driverless car stocks to consider owning today.
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been investing in self-driving technology for years. Last year, Waymo, which is a subsidiary of Alphabet, launched a self-driving robo-taxi. This is a real taxi service that will serve as a real-life test for a few hundred clients. Waymo has been testing this concept for two years so this time they put it in play inside a sandbox to temporarily limit the liability.
Eventually, as the laws change to accommodate this new concept, the uses of driverless vehicles will expand coverage nationwide. I doubt that this expansion will be explosive, so investors need to be patient. GOOGL offers a great stock to park money in while it unfolds and still be part of the driverless investors. Alphabet stock alone is a great long-term investment and it offers a leading way into the future of this transportation concept.
Technically, the GOOGL stock chart suggests that the stock could fall 5% in the next few weeks, especially going into the uncertainties of an earnings report. But this is a long-term bet and a few bucks up or down now are not going to make a big difference.
Vehicles driving themselves is a controversial topic and so is Tesla (NASDAQ:TSLA) stock. That makes the two perfect for each other.
Yes, Tesla, under the leadership of its eccentric CEO Elon Musk, jumped head first into the autonomous driving pool. But it has had accidents in the news where its cars were driving on their own while the drivers may not have been in control.
Since then, TSLA learned to temper its claims of who is doing what inside the vehicle while it’s moving, but they have been collecting valuable, real driver-less miles. So when the environment adjusts for driverless vehicles, TSLA will have a strong position going into it.
This is a riskier bet than say GOOGL because the company has operational restrictions and is not financially independent yet. Furthermore there is the threat of leadership as Musk navigates through his legal troubles with the Securities and Exchange Commission. But eccentricities aside, Tesla is a disruptor that stands to greatly benefit from driverless tech.
Technically, TSLA stock is testing a support zone above $260 per share and so far it is holding. But if the levy breaks, the sellers could push it toward $220 per share. While this is not a forecast, it is a scenario that buyers of TSLA stock need to consider.
General Motors (GM)
From one extreme to another, General Motors (NYSE:GM) is the vanilla car manufacturer substitute to the rocky road flavor that TSLA offers.
GM has been making cars for over a hundred years, so it has gone through several waves of technological shifts. And its foray into the self-driving arena is well on its way. Last year, GM CEO Mary Barra announced that GM is in a tight race against GOOGL’s Waymo. GM’s entry into the race is the Cruise AV, which will be on public roads this year. The tests to make this a reality are ongoing in San Francisco.
Fundamentally, GM stock is the cheapest driverless car stock. It sells at a price-to-earnings ratio of 8. This is four-times cheaper than GOOGL, so owning GM stock here is not going to be a financial disaster. This makes it a safer bet on a concept that is not yet mainstream. To make it even more attractive, GM also a dividend that currently yields 4%.
For once, owning a piece of an exciting new industry does not have to be risky. All three companies noted today offer a reasonably safe entry into self-driving cars without the risks that usually come with owning a complete start-up company.
Investing in stocks near all-time highs is risky enough on its own, so there is no need to add to it by betting on unproven concepts. Google, GM and, yes, even TSLA have a great chance at hitting the street first with their driverless cars.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits.