Future Man. I have given myself this moniker, not after the character played by the lesser-known third Wilson brother (Andrew) in Wes Anderson's "Bottle Rocket," but as I attempt to find undervalued stocks in a sea of bubblicious big tech names.
The only way to beat this wall of central bank-fueled valuation-ignorance is to, I think, find companies that are going to exploit future opportunities that are not comprehended in the current stock price.
This goes the other way, of course. Search online for "Tesla (TSLA) one million units 2021" and see how many results pop up. Tesla will report first-quarter deliveries data this week, and the company will not be on pace to hit 800,000 units this year, let alone a million. Also, semiconductors for automotive applications are in very short supply these days, and Teslas have more chips than most cars do.
But, on the long side, where are the companies that can actually deliver innovation and generate cash flows and accounting profits not comprehended in a discounting back of some hazy future outlook? I think the opportunities are in the small and microcap sector. As I always write, smaller companies require bigger due diligence, but it is in this segment of the market where the real home runs can be found.
Also, these companies are subject to some wild stock price swings, as they don't have the natural dollar amount of daily trade flow of a Tesla or an Apple (AAPL) . So, that's where I look to pounce.
In my column last week, I mentioned three emerging growth companies that were worth further due diligence: Exro Technologies (EXROF) , Nano One Materials (NNOMF) and Westwater Resources (WWR) . They are all plays on the decebonization of the transportation sector. So, that's how one has to play this game. Tesla may be ridiculously overvalued, but that doesn't mean that the world is not moving to electrified powertrains. Our staircase-challenged president in the U.S. seems to want to throw fuel on those flames, so let's try and play it in a rational manner.
VW's Power Day, I believe, was the most revolutionary corporate event since Steve Jobs introduced the iPhone at Macworld on Jan. 9, 2007. The amazing thing about VW (VLKAF) CEO Herbert Diess' presentation, though, was it did not contain a single picture of a completed vehicle. No car porn. No, Power Day was all about the guts of electric vehicles, and how VW's innovations will produce batteries for lower cost on a greater scale (with in-house battery plants and also working with Northvolt) and drive the transformation of the mobility sector.
So, this move toward decarbonization is real, and I am looking for ways to play it. Exro announced yesterday its plans to construct a 37,000 square foot facility near its headquarters in Calgary. This facility, set to open by year-end with volume production slated for 2022, will allow Exro to produce its coil drivers in medium-volume (Exro's press release noted 100,000 units as an annual capacity) while still seeking partnerships for higher-volume production. Exro's release specifically highlighted the potential for automotive applications for its coil drivers.
So, Exro shares are jumping Thursday, and I feel good about highlighting them in my Real Money column last week. I started to buy Exro shares last month, when I was in Brazil, working on my project there, and the shares cratered based on a report from a short seller.
As someone who has dedicated his entire adult life to researching stocks, I was pained by the existence of such a report. I was able to speak with Exro senior management soon after and believed that this report -- published about on Seeking Alpha and highlighted on Twitter -- was just absolute nonsense.
So, that's when Future Man can make a few dollars. When platforms like Twitter -- often notoriously filled with misinformation -- highlight an idea, it is in your best interest to take the other side of the trade. I did with Exro, and I am happy with the results so far.
Keep looking to the future when investing, and make sure you have some extra cash in your portfolio to jump on opportunities when misguided "research" presents attractive entry points for specific stocks.
