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Be a Smart Horse, Not a Workhorse

Every now and then, I like to throw some crazy analogies far out of left field to help people understand why a publicly traded company is reacting a certain way. Regarding electric vehicle firm Workhorse (NASDAQ:WKHS), you can tune into the popular reality comedy series Impractical Jokers to help strip away the confusion in WKHS stock.

Image of a Workhorse (WKHS) logo and drone on the side of a truck.

Source: Photo from WorkHorse.com

If you don’t know, the premise of Impractical Jokers is that four lifelong adult friends challenge each other to engage in socially awkward interactions with unsuspecting people. Whoever loses the series of challenges ends up having to perform a humiliating scene, again to an unsuspecting public audience.

One of the funniest of these so-called punishments was unlucky soul Q. He, while being introduced as a pro-female advocate, had to say ridiculous things that contradicted his stance. The most outrageous line he delivered was that while he supported the idea of gender-neutral mechanics, he also wanted his car to run well.

What made the joke stick is that Q didn’t believe in any of the nonsense he had to say. But it does bring up a lighthearted but relevant point about WKHS stock: do you want an electric fleet or do you want your mail?

You see, unlike the equal rights and dignity between women and men that all societies should strive for, clear differences exist between electric transportation, based on the internal combustion engine. Historically, both go back centuries – Ferdinand Porsche in 1898 started his vehicular journey with an electric motor. But combustion power has a much more robust and proven track record.

And that’s the deal with WKHS stock and folks hoping that Workhorse will grab a piece of the U.S. Postal Service contract pie. It probably won’t.

WKHS Stock Doesn’t Have the Best Argument

I’m not sure if exhortations about not shooting the messenger will be helpful in this day and age but hopefully you won’t shoot me for bringing this up. Right before the USPS made its announcement that Oshkosh (NYSE:OSK) – which for full disclosure partnered with Ford (NYSE:F), a stock that I own – will replace the postal service’s aging mail-carrier fleet, I warned that Workhorse wasn’t a shoo-in.

To be fair to myself, I also said the exact same thing in January of this year. To summarize my reservations regarding buying WKHS stock for the USPS deal, I noted the following:

  • EV performance may degrade under certain weather conditions
  • EVs are essentially grid-dependent
  • EV batteries are constantly declining in price, presenting opportunity cost problems

Of course, it wasn’t the popular idea at the time and guess what? It’s still not popular! House Democrats are up in arms about how a combustion-engine platform aligns with the Biden administration’s push to electrify the fleet. Further, some have pointed out unusual stock trades before the USPS announcement.

Here’s the deal. Even if there’s a lot of BS going on with the contract – we’re talking about the government, right? – the fundamental question isn’t about emissions so much as it is about functions.

Do you want an electric fleet or do you want your mail?

I’ll tell you another reason why Oshkosh won the USPS contract and why WKHS stock is a risky bet at this juncture – just look at Oshkosh’s website. It’s the easiest marketing pitch in the world. Soldiers trust our transport carriers. You can too.

Think of all the places where Oskhosh vehicles have gone through, where manufacturing failure means lost lives and national disgrace. There’s a reason why it won the USPS contract – it’s a proven builder even if it’s a little bit dirtier.

Be Smart with Workhorse

As my InvestorPlace colleague Faisal Humayun pointed out, the attempted engendering of short squeezes on stocks with significant bearish interest has become a popular contact sport. Indeed, the drama has had real-life consequences for short-trading hedge funds.

Sure enough, the bears are hungry for WKHS stock, which could just as easily turn into a meal for the bulls through coordinated buying activity. Still, Humayun acknowledges that this is a risky argument because of rising competition in the commercial electric fleet industry.

Also, you can’t really assume what social media traders will do. Attempting to corral the troops is often met with derision.

In my opinion, our own Chris Lau has the most balanced take. If you want to trade WKHS stock, do so on technical sentiment, not on the chances that Workhorse will win some portion of the USPS contract. You’ll be better informed, and ultimately, much happier.

On the date of publication, Josh Enomoto held a long position in F stock.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2021/04/wkhs-stock-be-a-smart-horse-not-a-workhorse/.

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