We all want to find the next Tesla (TSLA) . We all want to find companies that run on electricity or green hydrogen, the emerging fuel that has some very big backers.
The problem as I see it? There is no Tesla other than, well Tesla. There is a reason why the market cap of Tesla is worth $547 billion, up 586%, it has the most popular electric car, one that is the rage in the United States and China and soon in Germany, the heart of where the best cars are thought to be engineered.
Elon Musk has earned a place among the richest people on Earth and his company has earned a place in the S&P 500 simply because its size is way too big not to be included. So far many have tried to rival Musk's cars and they have failed. That makes me feel that the company has a bigger moat than we think and the fact that it doesn't need to advertise while every other car company spends tens of millions of dollars telling us why to buy their wares, solidifies the success of Tesla.
Now, I keep waiting for the rivals to surface. So far, while many companies talk of offering winning electric vehicle cars, I am betting on what seems to be a long shot, Ford's (F) electric 150 in 2022 simply because it is the best selling vehicle ever which makes it a solid choice to be the second best selling EV product after, of course, Tesla.
The difficulty in valuing the other Tesla derivatives, mostly Chinese Tesla's, are stocks based on more hype than I care to focus on. Take NIO (NIO) . There is no doubt that there's a market for NIO's vehicles. The last 12 months the company has been able to rack up $12 billion in sales but it is losing a great deal of money. It's a $70 billion company with $6.5 billion in losses that is up more than 1000%.
I am even more skeptical of a company called Kandi Technologies Group (KNDI) . The high quality work of Hindenburg, a short sheller who zeroes in on Nikola (NKLA) , suggest some extremely suboptimal facts involving accounting for this small car company that makes me very wary of the billion stock.
Okay, lets go to the elephant in the room, let's go to Nikola. This morning GM (GM) announced its long awaited deal with Nikola, a hydrogen powered truck company, and it was less than meets the eye and certainly less than what was expected when the deal was announced. We got that unfortunate feeling when we interviewed Mark Russell, the CEO of Nikola, last week. There's a raft of insider selling going out after a big lock-up expiration and I don't want to be involved.
I am also getting nervous of Plug Power (PLUG) after an incredible run for this hydrogen fuel cell company. Too much insider selling and not enough organic orders.
That said, I like and believe in hydrogen as a fuel, I just don't think it is ready. That's why I prefer the derivative plays, Cummins (CMI) , which is developing hydrogen based engines, and Linde (LIN) , one of the world's largest hydrogen developers. I'd feel even more bullish about Cummins if we saw a national rollout of hydrogen fuel cell fueling stations by, say, a BP (BP) or a Royal Dutch (RDS.A) (RDS.B) , but that remains to be seen. Cummins, by the way, has the best explainer on the technology on its website because it is not a feat that's easily understood.
All that said, here's what may be most important. President-elect Biden is more committed to environmental protection than any president I have listened to. I think he would be more likely to support any of these technologies rather than fossil fuels. Does that mean Nikola or Plug Power or any of the other fuel cell companies should be bought? No, it just means that there will be a tailwind that most certainly didn't exist during the tenure of the carbon loving, global warming nonbelieving current president.