5 Global Stock Plays on Electric and Self-Driving Vehicles

Despite uncertainty over global trade, Brexit worries and potential tariffs, four leading investment advisors -- and contributors to MoneyShow.com -- have issued buy recommendations for global automakers; a common catalyst in each bullish review is progress in technology such as electric and autonomous vehicles. Mark Skousen, High-Income Alert Bayerische Motoren Werke Aktiengesellschaft is better known to Americans as Bavarian Motor Works -- or simply BMW. Founded over a century ago and based in Munich, the company manufactures and sells cars, trucks, SUVs and motorcycles under the BMW, MINI and Rolls-Royce brand names. It also operates a financial services division that finances, leases and insures vehicles. BMW, of course, is one of the world's most prestigious brand names. The company's products have a well-deserved reputation for quality and reliability. Annual revenue tops $113 billion. Sales are growing. And management is earning a healthy 15% return on equity. Yet the stock sits on the bargain basement table. At current levels, BMW is at a discount to book value, and it sells for less than six times earnings (a five-year low) and 55% of sales, while offering a dividend yield of around 5.6%. What's the problem here? For starters, after years of growth, car sales in the United States have stalled lately. In addition, carmakers must now spend vast sums on technology. Regulators are pushing them toward electric vehicles -- while Silicon Valley pushes them toward driverless cars. To top it off, President Trump is threatening tariffs on European cars if a new trade deal isn't reached soon. Still, there is plenty of good news here, too. For starters, each of these factors is well known and fully reflected in the current share price. Also, BMW is already a leader in electric cars. It normally invests around 5% of sales on research and development. Last year, it spent 7%. The result? Sexy new models are loaded with high-tech features. That won't hurt sales any. And factor in that the average age of vehicles on U.S. roads just hit an all-time high of 12.1 years. That means there is plenty of pent-up demand here. This is a classic value trade: a fine company, facing short-term issues (that are already reflected in the stock and likely to be resolved soon), trading at a dirt-cheap valuation and with a fat yield. Carl Delfeld, Cabot Emerging Markets Investor Nio was founded just four years ago and pulled off a U.S. initial public offering (IPO) in September, three months after starting deliveries of its first electric model, the ES8 sport utility vehicle. Currently, the ES8 is this Chinese automaker's only mass-production automobile -- it's an SUV similar to Tesla's Model X. Nio launched the ES8 in December 2017 and began deliveries on June 28, 2018. In December of last year, NIO launched its second electric SUV, the ES6, during its NIO Day 2018 event. The ES6 comes with a lower price tag than the ES8, and it's a five-seat SUV compared to the seven-seat ES8. The company claims that the ES6 base model can deliver up to 410 km (255 miles) and the high-end variant can deliver up to 510 km (317 miles) of range in a single charge. What makes Nio interesting is its huge potential, likelihood of favorable attention from the Chinese government, and its influential investors. The lead shareholder is William Li, the founder of Bitauto Holdings , an Internet marketing, content and transaction company for the Chinese auto market. The second-largest stake is held by Tencent Holdings and the third-largest investor is the well-respected investment management firm Baille Gifford. Interestingly, both have a stake in Tesla. This is an aggressive idea for sure, but I like the rapid growth, the huge potential and the stock's big post-IPO bottoming action. And, recently, the stock has come to life, suggesting it's ready for an uptrend. Jim Powell, Global Changes & Opportunities Report Volkswagen AG is laying the groundwork for a major move into electric cars. The company recently created a universal chassis, called the MEB, that will be the platform for over a dozen electric vehicles to be introduced by 2025. The efficiencies offered by building the MEB chassis for multiple uses should give Volkswagen vehicles significant price advantages in their markets. Volkswagen has sold more vehicles globally than any other company for four straight years. The company's ambitions for its electric vehicles are even greater. I think the company -- which trades in the U.S. -- will remain very successful. Meanwhile, Volkswagen and Ford Motor have decided to join forces to make commercial vehicles for each other. The deal is expected to be expanded soon to include electric cars that both companies expect will become the biggest part of their businesses. The companies are talking about long-term joint ventures, not a merger. I think the Ford-Volkswagen deal will benefit both companies. The new technologies that are transforming the vehicle industry are too expensive for any single company -- even one of the giants -- to develop on their own. In addition, no company is likely to create everything it will need to make the new vehicles possible. I think joining forces will prove to be the new trend in many industries that are being driven by advanced technologies. Patient investors should see exceptional profits from Volkswagen. Tony Daltorio, Growth Stock Advisor There are six levels of autonomy for driverless vehicles, from zero for absolutely no autonomy to Level 5, which would be complete autonomy. In other words, completely controlled by computers. This technology is probably a decade away. Many auto companies are reluctant to even move to Level 3 autonomy. And it's easy to see why; that's the first point at which full responsibility -- and legal liability -- shifts from the driver to the car. But now, as the next step in driving automation comes closer to reality, some auto industry executives seem keen to back away from implementation and move directly on to the next step. So what companies seem best poised to benefit from the move toward greater autonomy for vehicles? I do like Toyota Motors because it seems to be moving on its own independent path, separate from the other automakers with regard to new technologies. Their skepticism toward electric vehicles is also interesting. Instead, it is concentrating its efforts on both solid state batteries and fuel cell vehicles. I find solid state batteries fascinating. They are capable of holding more electricity and recharging more quickly than their lithium-ion counterparts. I also like Daimler AG . Its Freightliner Cascadia will go on sale this year and be the first truck in North America to feature partially automated driver assistance. And Daimler is heading straight from level two to level four, in which a truck can operate without user intervention on specific routes because the company says level three does not offer truck customers a substantial advantage. Unlike Tesla, it considers Level 3 to be a dead end since it would have to rely on human attention during the crucial 1% of the time after telling the driver not to pay attention 99% of the time. With truckers on long haul routes, I see sleep and Level 3 not being compatible.

5 Global Stock Plays on Electric and Self-Driving Vehicles

What makes Nio interesting is its huge potential, likelihood of favorable attention from the Chinese government, and its influential investors.

Columnist Conversation

This Weekend on Real Money

Big Earnings Beat From Interface (TILE)

Thursday Morning Fibocall for 8/6/2020

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.