Electric vehicle (EV) stocks are Wall Street darlings of Wall Street. Many of these stocks have notched record highs in recent weeks. Today, we’ll take a look at 7 robust EV stocks that could bring holiday cheer to any long-term portfolio.
The International Energy Agency (IEA) says that, “the Covid-19 pandemic is causing a major shock to the global economy. Electric cars – a key element of transitions to cleaner energy – are being affected in key markets. But despite the crisis, their sales could reach a record share of the overall car market this year.”
According to BloombergNEF, “by 2022 there will be over 500 different EV models available globally. Consumer choice and competitive pricing will be key to attracting new buyers to the market… By 2040, over half of all passenger vehicles sold will be electric. Markets like China and parts of Europe achieve much higher penetrations, but lower adoption in emerging markets reduces the global average.”
Here are 7 electric vehicle stocks with style and substance:
- Global X Lithium & Battery Tech ETF (NYSEARCA:LIT)
- Honda Motor (NYSE:HMC)
- Invesco Dynamic Semiconductors ETF (NYSEARCA:PSI)
- Nio (NYSE:NIO)
- SPDR S&P Kensho Smart Mobility ETF (NYSEARCA:HAIL)
- Tesla (NASDAQ:TSLA)
- Volkswagen (OTCMKTS:VWAGY)
Ebbs and flows in our economy could understandably affect revenues of EV makers as well as companies in related industries. However, the robust companies and leaders in the sector have tailwinds behind them. And secular trends, i.e. growing consumer interest in alternative energy vehicles, will propel these businesses forward.
Electric Vehicle Stocks To Buy: Global X Lithium & Battery Tech ETF (LIT)
52-Week Range: $17.83 – $54.69
Year-to-date (YTD) change: Up 98.45%
Dividend Yield: 0.82%
Expense Ratio: 0.75%
Our first choice today is the Global X Lithium & Battery Tech ETF, which provides access to global businesses that focus on lithium. Their operations range from mining and refining lithium to manufacturing lithium batteries, which have been in high demand due to increased EV sales.
InvestorPlace readers likely know that battery costs affect the final sales price of any electric car. Thus, any discussion on EV stocks would also benefit from paying attention to companies engaged in the manufacturing lithium batteries.
LIT, which has 41 holdings, tracks the Solactive Global Lithium Index. This fund started trading in July 2020 and net assets stand close to $1.4 billion. From a geographic standpoint, China-based companies top the list with 43.3%, followed by the U.S. (22%), South Korea (11.7), and Japan (6.7%), among others.
The top five names, Albemarle (NYSE:ALB), Ganfeng Lithium, LG Chem (OTCMKTS:LGCLF), Samsung and Tesla comprise close to 34% of the fund. So far in 2020, the fund is up over 98% and hit a record high in early December.
Given the recent run-up in the price of the fund, short-term profit-taking could well be around the corner. However, the bull trend in batteries will likely continue into 2021 as well.
Honda Motor (HMC)
52-Week Range: $19.38 – $30.21
YTD change: Up 5.31%
Dividend Yield: 2.66%
Japanese Honda Motor is well known for its motor products, ranging from small general-purpose engines to specialty sports cars. The Accord, Civic, CRV and Acura lines have been on global roads for decades. In September Honda and General Motors (NYSE:GM) agreed to collaborate in North America to build “on successful collaboration in electrified vehicles and technologies,” which they have had in place for several years now.
In early November, the car maker announced announced FY2020 Q2 earnings metrics and the fiscal first half-year results ended September 30. Quarterly sales revenue decreased by 2.1% YoY. But investors were pleased to see that profit before income taxes increased by 19.4% from the same period last year.
Since the start of the year, HMC stock is up more than 5% and hit a 52-week high in early December. Forward P/E and P/S ratios are 9.88 and 0.42, respectively. Long-term investors could consider buying the shares, especially if there is a decline toward $28. Honda Motors is likely to increase its emphasis on EV cars in the quarters ahead.
Invesco Dynamic Semiconductors ETF (PSI)
52-Week Range: $44.68 – $104.78
YTD change: Up 56.09%
Dividend Yield: 0.26%
Expense Ratio: 0.57%
Recent research on trends in automotive semiconductors highlights:
“Semiconductors are crucial components of electronics devices… The electronics control of automobiles, as well as the rising demand for automation in vehicles along with miniaturization of integrated circuit technology, system on chip are the driving attributes which brought the semiconductor market in the sector of automobiles.”
Therefore, investing in robust semiconductor shares is another indirect play on the growth of the EV industry. Our next choice, the Invesco Dynamic Semiconductors ETF gives access to a range of U.S.-based chip business. Fund managers include them in the ETF, based on several investment criteria, such as earnings and price momentum, management, and value.
PSI, which has 30 holdings, tracks the the Dynamic Semiconductor Intellidex Index. The top five names in the fund are Micron (NASDAQ:MU), Lam Research (NASDAQ:LRCX), Advanced Micro Devices (NASDAQ:AMD), Qualcomm (NASDAQ:QCOM) and Applied Materials (NASDAQ:AMAT).
Year to date, the fund is up over 54% and hit an all-time high in early December. Long-term investors should consider buying the dips in the fund.
52-Week Range: $2.11 – $57.20
YTD change: Up 1,029.65%
Dividend Yield: N/A
Shareholders in China-based Nio stock have had a great year. $1,000 invested in the company in January would now be worth over $11,000, and it’s hard to argue with that such a remarkable return.
China is the largest EV market in the world. In 2019, about 2.3 million electric cars were sold globally and more than half of those were in the Asian nation. Nio currently sells cars only in China. Its top model is the ES8 (a seven-seat SUV). The group has two other vehicles, the ES6 (a five-seat SUV) and the EC6 (a 5-seat premium electric coupe SUV).
In mid-November, Nio announced Q3 metrics. EV sales hit $628.4 million, representing an increase of 146.1% YoY and an increase of 22.4% from the second quarter of 2020. Net loss was $154.2 million, a decline of 58.5% YoY and a decrease of 11.0% from the second quarter of 2020. As of September 30, cash and equivalents stood at $3.3 billion.
CEO William Bin Li commented, “We achieved a new record-high quarterly deliveries of 12,206 ES8s, ES6s and EC6s in total in the third quarter of 2020, followed by the best-ever monthly deliveries of 5,055 vehicles in October.”
Nio is still a young company. Despite potential short-term volatility, long-term investors can expect years of growth. Any decline toward $45 or below would improve the margin of safety.
SPDR S&P Kensho Smart Mobility ETF (HAIL)
52-Week Range: $15.70 – $53.19
YTD change: Up 71.45%
Dividend Yield: 0.24%
Expense Ratio: 0.45%
Next in line is another fund, i.e., the SPDR S&P Kensho Smart Mobility, that provides access to innovative companies behind the evolution in transportation. In addition to EV manufacturers, other companies involved in hydrogen cell, batteries, as well as drones are part of the ETF. Put another way, this is not a dedicated EV fund, which means increased diversification that could appeal to some investors.
HAIL, which started trading in 2017, currently has 56 holdings. Assets under management are close to $73 million. The top ten firms comprise over 40% of the fund. Nio, hydrogen fuel cell technology group Plug Power (NASDAQ:PLUG), Tesla, Workhorse (NASDAQ:WKHS) and components supplier BorgWarner (NYSE:BWA) head the names in the list.
In terms of sector allocation, over fifteen industry groups are represented. Automobile Manufacturers lead with 24.70%. Next in line are Auto Parts & Equipment (21.08%), and Semiconductors (11.70%). Year-to-date, the fund is up over 70% and hit an all-time high in late November.
52-Week Range: $65.5-$648.8
YTD change: Up 667.08%
Dividend Yield: N/A
Few stocks evoke as much debate as Tesla among market participants. A recent article suggested:
“Some of the most shorted stocks by hedge funds have been the biggest winners this year. Hedge funds’ biggest short position right now is Tesla, which has a negative 1.7% overall weight among the funds.”
The debate translates into short-term volatility in TSLA stock price. However, 2020 has been a great year both for earnings and the share price, which is up over 660%. Investors have been celebrating the upcoming move into the S&P 500 index on December 21 by loading up on Tesla stock, which recently hit a record high.
In late October, the electric car maker released robust FY2020 Q3 earnings results. Revenue was $8.8 billion, a 39% YoY increase compared to $6.3 billion in Q3 2019. GAAP operating income was $809 million, translating into an operating margin of 9.2%. Non-GAAP net income was $874 million. Adjusted earnings per share came in at 76 cents, compared to 37 cents a year ago.
Management further noted:
“The third quarter of 2020 was a record quarter on many levels. Over the past four quarters, we generated over $1.9B of free cash flow while spending $2.4B on new production capacity, service centers, Supercharging locations and other capital investments.”
Shareholders are pleased that this company is profitable and cash flow positive. However, on the other side of the equation, many realize that shares are richly valued. Forward P/E and P/S ratios are 158.73 and 23.18, respectively. Short-term traders need to exercise caution as Tesla is volatile.
Prospective long-term investors may consider buying the dips, especially if the shares decline toward $575.
52-Week Range: $10.60-20.25
YTD change: Down 10.84%
Dividend Yield: 3.3%
Germany-headquartered Volkswagen is our final stock for today. In addition to its passenger cars, InvestorPlace readers are likely to be familiar with many of its brands, including Audi, Seat, Skoda, Bentley, Bugatti, Lamborghini, Porsche, Ducati and Scania.
CEO Herbert Diess recently recently commented how President-elect Biden’s policies would help Volkswagen’s efforts to grow EV sales worldwide. The group has been working on participating in the growth of electric vehicles. For instance it has recently increased its equity stake in Quantumscape (NYSE:QS), solid-state battery specialist that has recently gone public in a reverse merger with Kensington Capital Acquisition, a special purpose acquisition company (SPAC).
In a recent press release, the company said, “The Volkswagen Group is pressing ahead with its transformation into a digital mobility company,” and it would raise “investments in future technologies to EUR 73 billion.”
In late October, Volkswagen released Q3 results that showed the group returned to profitability despite the challenges posed by the pandemic. September saw the first increase in vehicle deliveries for the year.
Management noted, “The countermeasures initiated worldwide to cut costs, secure liquidity and decrease the funds tied up in working capital had as much of an impact as the continuing improvements in the situation in key sales markets.”
The stock’s forward P/E and P/S ratios stand at 8.16 and 0.44 respectively and offers value at these levels. Long-term investors with a two to three year time horizon could consider buying the shares.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil Ph.D. has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination.