Investment megatrends emerge in two waves.
The first wave is what I like to call the “rising tide.”
Wall Street gets all excited about an upcoming megatrend. Hyped-up investors high on growth adrenaline rush into the space, buying up anything and everything even tangentially related to the megatrend. Every stock in the space gets priced as if its going to take over the world.
This creates a rising tide that lifts all boats. During this rising tide, everyone has a lot of fun and makes a lot of money.
Then comes the second wave. I call it the “curation” wave.
In this second wave, early enthusiasm from the first wave moderates. Investors start to get picky. They start to realize that not every company in the space will be a runaway success. They realize that not every stock deserves to be priced for world-domination.
Investors start to curate their investments, separating the wheat from the chaff. They cut the weaklings loose and pile more heavily into the stronger investments.
If the first wave was the fun part, the second wave is the hard part.
You must find the real winners to continue making money. If you don’t, you could lose your gains as the rising tide fades.
The electric vehicle megatrend has already gone through the first wave.
Wall Street decided in the first three weeks of November 2020 that electric vehicles are, indeed, the future of transportation. Every EV stock in the market soared, from the EV mothership Tesla (NASDAQ:TSLA), all the way down to obscure small caps like Ideanomics (NASDAQ:IDEX).
That was the fun part. Everyone in the EV space made money.
Now comes the hard part.
The rising tide in the EV space is fading and the curation wave is emerging. You are starting to see weak EV stocks fail to hold onto their gains, while strong EV stocks are charging ever higher.
So, no, now is not the time for you throw in the towel on the EV megatrend. Electric vehicles are still taking over the world. By 2040, every car, truck, van, and bus on the road will be electric.
Rather, now is the time for you to be selective about which EV stocks you buy. Forget the weak ones. Double down on the strong ones.
But how can you tell the difference?
Strong EV companies usually have great underlying technology and a strong IP to protect that technology. They usually have proven management teams, with an impressive roster of engineers to further enhance the underling technology. They have the capability and resources to mass produce cars (or other EV related equipment), and also tend to have either big pre-orders or big sales.
If an EV company isn’t checking those boxes, then it’s probably not a strong EV company.
So… with that in mind… here are five of my favorite high-quality EV stocks to buy amid this second wave of the EV megatrend:
- NIO (NYSE:NIO). This company is essentially China’s Tesla. It has industry-leading battery technology, industry-leading premium car designs, industry-leading branding, industry-leading production capability, so on and so forth. China is the world’s largest auto market, with a government that’s exceptionally supportive of EV adoption. Add it all up, and you have a big-time winner in NIO stock.
- ChargePoint (NYSE:CHPT). There are a lot of EV charging companies out there. In the charging game, since size enables network effects with both consumers and commercial clients, size is everything. ChargePoint is the largest EV charging station operator in North America, and it’s not even close. The company should be able to leverage this notable early size advantage to dominate the EV charging landscape at scale.
- Fisker (NYSE:FSR). Two things stand out about Fisker. One, the management team: The company’s CEO, Henrik Fisker, is a design legend of unparalleled reputation in the luxury automotive world, and he has attracted a top-tier management team to run this business. Two, the business model: Fisker’s platform-sharing business model essentially allows Fisker to focus on what it’s best at – designing awesome luxury cars – and outsource everything else. Through outsourcing, Fisker reduces its cost basis and can sell very high-quality cars at very reasonable prices. To that end, we see Fisker thriving in the overlap of luxury and affordability.
- Arrival (NASDAQ:CIIC). Like the EV charging space, the commercial EV industry is crowded with competition. But Arrival stands out from the pack for its technology, business model, order backlog, and strategic partners. The underlying commercial EV skateboard technology is best-in-class. Its innovative microfactory business model allows the company to manufacture that best-in-class tech at industry-low costs. The order backlog sits at $1.2 billion. And strategic partners/investors include Hyundai, Kia Motors, and UPS. This is the top dog when it comes to pure-play commercial EV stocks.
- Lucid Motors (NYSE:CCIV). If there’s one company that can challenge Tesla for EV market supremacy, it’s Lucid Motors. The company has the technology (its state-of-the-art electric drivetrain platform called the Lucid Electric Advanced Platform features market-leading driving range, recharge time, and horsepower), the talent (its CEO is the former Chief Engineer for the Tesla Model S), and the resources (post-SPAC merger, the company will have $4.5 billion in cash on the balance sheet) to become a very formidable player in the EV space. Long-term, there are few investments in the EV space with as much potential as Lucid Motors.
That’s a strong list.
But it also leaves off my 3 favorite EV stocks to buy for the long haul. These three stocks represent the cream-of-the-crop when it comes to disruptive technological innovation in the EV market, with second-to-none management teams, and huge long-term potential.
They are stocks which could post Tesla-like returns over the next decade.
To see which stocks I’m talking about, click here.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.