Workhorse Remains An Excellent Speculative Buy

The frustrating part about investing in growth startups such as Workhorse Group (NASDAQ:WKHS) is that so little information is released regarding its progress that you’d swear you were investing in a Trump organization. 

Image of a Workhorse (WKHS) logo and drone on the side of a truck.
Source: Photo from WorkHorse.com

I mean, come on. 

Since I last wrote about Workhorse on Sept. 2, there’s been one press release from the company and three Securities and Exchange Commission filings. That’s hardly enough to hang your hat on. 

WKHS Stock Is for Aggressive Investors Only

This lack of information is part of why I recommended only aggressive investors think about investing in its stock. But don’t misinterpret what I’m saying. If you have the stomach for risk, I absolutely believe Workhorse is one of the better money losers to speculate on.

Why do I feel this way?

Because electric is gaining ground and there’s nothing internal combustion engine supporters can do about it. I get excited just looking at photos of the latest electric vehicle to hit the market, whether it be of the commercial or passenger variety. 

Just looking at the Xpeng (NYSE:XPEV) G3 electric SUV has me ready to trade in my Jeep Cherokee the minute it is available in North America. 

But I digress.

The Commercial Race Is Intense

The point is, like the race to develop Covid-19 vaccines, the competition amongst companies looking to capture a piece of the commercial electric vehicle market is intense. One minute, Workhorse is the horse to bet on. The next minute it’s Nikola Motors (NASDAQ:NKLA), Rivian, or BYD (OTCMKTS:BYDDF). 

Handicapping the race is anything but easy. 

For this reason, some investors have opted to play the field, betting on an exchange-traded fund such as the SPDR S&P Kensho Smart Mobility ETF (NYSEARCA:HAIL). It tracks the performance of the S&P Kensho Smart Transportation Index, a collection of 57 companies dedicated to the idea of smart transportation. 

Of the 57 stocks in the ETF, Workhorse is the second-largest holding with a 5.33% weighting behind only Nio (NYSE:NIO), another Chinese electric vehicle manufacturer. In the top 10 holdings is Tesla (NASDAQ:TSLA), a favorite of mine at a weighting of 3.95%.

If you’re interested in Workhorse but don’t have the risk tolerance, HAIL would be a much more appropriate bet. 

If you can handle the risk, Workhorse stands out because its focus on last-mile delivery is eventually going to deliver rewards for patient shareholders. The pandemic has demonstrated just how important e-commerce is to our daily lives. 

In the second quarter, Workhorse delivered three C-series electric step vans to Ryder (NYSE:R) and Electric Vehicle Fleet Solutions. In July, Workhorse got a purchase order for 20 C-1000 electric step vans from eTrucks, an Ohio-based trucking company. 

Lastly, as my InvestorPlace colleague Ian Bezek recently mentioned, the company is working hard on obtaining a piece of the massive contract to electrify the U.S. Postal Service’s fleet of mail delivery trucks–a contract that could be worth as much as $6 billion to Workhorse. 

If you already own Workhorse stock, by no means should you be counting your chickens at this point, but it does highlight the opportunity that exists.

The Bottom Line on Workhorse

If you consider what some of my InvestorPlace colleagues believe about Workhorse, I don’t think you would be doing yourself any favors. The opinions are all over the map. 

Chris Markoch likes its potential but thinks its stock is overvalued. Luke Lango believes the long-term demand for electric vehicles serving last-mile delivery makes it a winner over the long haul (I agree). Dana Blankenhorn sees Workhorse as a case of wishful thinking on the part of investors. 

I can see the sanity in each person’s argument. 

Yes, a stock worth $2.6 billion with little sales and losing money is overvalued by traditional metrics. Sure, the market for battery-electric commercial delivery vehicles is tremendous, and getting bigger by the week. Lastly, I would be disappointed if any sane investor considered a bet on Workhorse at this point to be anything but speculation. 

As I said initially, I find the speed at which new information pours out of Workhorse to be painfully slow. That said, a watched pot never boils. 

If you can afford to lose your entire investment, Workhorse remains an excellent speculative bet on commercial electric vehicles.  

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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