The old BASF (BFFAF) tagline is applicable to many interesting companies these days: "We don't make the products you buy, we make the products you buy better." In today's markets, that really is not the focus of analysis... simply because there is no analysis. Basically this market just wants to hear reassuring words from Yellen and Powell, read the incredibly misleading official government statistics on inflation (try living your life without food or energy for even one day and see how that goes), and pay ridiculous multiples for companies that are only occasionally innovative.
In the real world, however, there are smaller, innovative companies working to make the world better. I have the ability to meet and get to know these management teams. This is the thin end of the wedge of capitalism and these companies must be funded if we are to have a better world.
The world is moving to decarbonize transportation, and the levers may just be pulled in unfamiliar places. Volkswagen (VLKAF) CEO Herbert Diess helmed that company's Power Day presentation on March 15th and it received very little coverage in the "non-geek'' sector of the U.S. financial media. A typical mistake from them. They only missed the second coming of Steve Jobs' MacWorld speech on January 9, 2007 when he introduced Apple's (AAPL) iPhone. The world is changing and VW's stock price finally reflects that. Tesla's (TSLA) has for the past nine months. The way to generate sustainable profits through investing is always to find the NEXT BIG THING.
I have had the chance to talk with senior management from three truly innovative companies in the past couple weeks. All three are pre-revenue, so remember always that smaller companies require bigger due diligence, and that risk is magnified as the ratio of market cap/revenue (price/sales) increases.
Nano One Materials (NNOMF) . I first mentioned Nano in my RM column on December 11, 2020, and since then the stock has risen 45%. Since the date of that first column, Nano announced it had entered a cathode evaluation agreement with an unnamed U.S.-based auto manufacturer (of course, there was speculation that this was with Tesla, and I can neither confirm nor deny this) and, more importantly, has laid out its plan to implement its M2CAM - metal to cathode active material - process. I don't have a lot of space here, but, suffice it to say, the process of making current-gen BEV batteries is REALLY "un-green." It is incredibly metals-intensive, requires the use of sulfuric acid and other dangerous chemicals, and requires shipping of materials around the world (in ships powered by hydrocarbons) as the key battery raw materials are, almost without exception, not mined where electric cars are produced. It is a barrel full of yuck, and this little company out of British Columbia has a technical solution for producing battery cathode materials that reduces the need for a lot of the yuck.
Exro Technology (EXROF) . Exro shares have had a wild ride lately thanks to a negative report that was circulated by a short-seller on, where else, Twitter (TWTR) . Like Nano, Exro is in pre-revenue mode, and one should realize that many start-ups have a customer base that is full of non-household names, i.e., other start-ups. Exro's coil driver technology allows for different torque profiles from the same eclectic motor, a technology that is most useful for e-bikes, scooters, etc. (Exro yesterday announced that it had reached an agreement to commercialize its 100-volt coil driver with German small-motor company Heinzmann), and then in the heaviest of electric engines, those that will power Class 8 trucks and boats. This will be a very valuable technology as the world decarbonizes transportation segments other than the entry-luxury passenger car market.
Yesterday, I had the opportunity to speak with Chris Jones, the CEO of Westwater Resources (WWR) . Any conversation about BEV batteries will inevitably involve China, as that country absolutely dominates the supply of raw materials, both for the cathode and the anode. Current-gen anodes are made primarily of graphite, and we do have abundant sources of that here in North America. Westwater is currently performing a definitive feasibility study at its graphite mine, Coosa, in the heart of the formerly-productive Alabama Graphite Belt. The Southeastern U.S. has become "BEV Central," with VW beginning production of the ID.4 in Chattanooga next year and Daimler (DDAIF) set to produce the upcoming Mercedes EQE and EQS BEV models in Vance, Alabama - and building a battery plant in nearby Bibb County - with production also slated to begin in 2022. Alabama is well-positioned to become a key final-production location for graphite, which needs to be heavily purified before it is battery-grade. That's what Westwater is doing, with full production from Coosa set for 2028 and production of refined graphite, from a third-party supplier, set for 2022.
So, watch out for these three small companies. They might just change the world.
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