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The best time to save money is well in advance of the proverbial “rainy day.” Yet, that isn’t when people are naturally inspired to do so.
The best way to save money in the stock market is to get into sectors that are about to break out … just before mainstream investors get wind of these developing opportunities … and sell your shares to them for a handsome profit when they finally catch on!
Today’s lower oil and gasoline prices are prompting a slowdown in what should be a quickening race toward alternative transportation technologies. And the money you’re saving at the pump now can turn into some nice returns as that sector really starts to take off.
Americans may be keeping their cars longer for now. But here and especially in emerging markets, drivers are increasingly looking to buy cars that are more cost-efficient over the longer haul.
Just as — if not even more — importantly, emerging buyers are increasingly concerned about their carbon footprint.
These factors point toward two powerful trends that give us a chance to accumulate positions in the imminent stock market winners in the “electric” new e-vehicle race.
Keep in mind that “electric” is only one way to go with the cars not of the future, but of the present. From hybrids to partial zero-emissions vehicles, clean diesel cars, plug-ins or plug-in hybrids, car dealership lots and highways will be looking quite different in the next three to eight years. And you have the chance right now to take your portfolio along for the ride!
Each time I look into this, it seems like there is another breakthrough investing story just underneath the surface here. So if you’re in the market to get some high-caliber returns, today, I’d like to show you two ways to get your own entry into the new e-vehicle race.
E-Vehicle Race Track No. 1:
Lithium May Be the Next Big Investment Trend
Lithium has a number of uses, but one of the most-valuable is as a component of high-energy-density rechargeable lithium-ion batteries. About a third of lithium produced today is used for batteries.
There are limited supplies of lithium in just a few countries. According to the U.S. Geologic Survey, last year Chile was among the top producing countries for lithium with 7,400 tons. Australia also made the list 4,400 tons, China 2,300 tons and Argentina 2,200 tons, with worldwide estimates totaling 18,000 tons.
But it’s the positive outlook for lithium batteries that drives the demand side.
- There is a consensus in the industry that lithium batteries are the best option to store energy in electric and hybrid-electric vehicles (HEVs).
- Total world-wide production of e-cars using lithium-ion batteries is expected to reach 1.5 million to 3.0 million in 2015, and 5 million to 10 million in 2020.
- A battery for a hybrid or electric vehicle should contain between 1 and 5 kilograms of lithium-carbonate equivalent to support a 40-mile trip in an electric vehicle before requiring recharge. This could create a large demand for lithium.
- In 2020, total lithium demand is expected to reach more than double current annual production levels.
This is a clear trend, though estimates of future lithium demand vary depending on recycling, widespread public acceptance of electric vehicles, and government incentives for converting to lithium-ion-powered engines.
With a longer-term view, my favorite way to invest in this is through a Chilean company.
Sociedad Quimica y Minera de Chile S.A. (SQM) is the largest lithium producer in the world with a 31% market share. It’s based close to Bolivia, which is the “Saudi Arabia of lithium.”
While it’s the largest lithium provider, the company has other attractive features.
It has a leadership and cost advantage in specialty fertilizers including potassium nitrate, sodium nitrate and potassium sulfate for the agricultural industry.
It has a global reach, with sales in more than 100 countries. So, 90% of its sales are exports.
Its financial cash flow diversity and high (45%) margins facilitate a $500 million capital expenditure program focused on operational improvements for 2012.
Critics of this lithium-based approach might argue that, ultimately, increased electric usage could cause electricity prices to increase.
It could also make vehicle-makers more attractive.
E-Vehicle Race Track No. 2:
Buy into Makers that Offer Green Cars
Automakers can’t afford to be left behind when it comes to offering alternatives. Here are some names I would consider adding if I were looking to build a portfolio of “green” car-makers.
Toyota Motors (TM) is the leader in electric cars with its Prius model being the best-selling car in this category. It has sold more than 2.6 million Prius vehicles globally since Toyota launched the model in Japan in 1997. Hybrid sales accounted for 15% of Toyota’s global vehicle sales last year.
Ford (F) has made no secret that it’s targeting the Prius V with the gas-electric C-Max, trying to position the model as a more-fuel-efficient, less-expensive alternative.
In all, Ford will have eight models that will get at least 40 mpg (highway) for 2013, which the automaker says will be more than any other automaker. Six of its models will either be hybrids or plug-ins.
I think the current e-vehicle sales forecast is low. According to J.D. Power, battery-powered and hybrid-electric cars will only capture less than 10% of the market in 2020.
While I accept that concerns about electric-car looks, power and price may still keep buyers away, these projections assume very little in terms of technology changes and do not factor in the increasing high-design focus.
And that leads me to another stock in the e-vehicle sector that looks attractive here.
Tesla Motors (TSLA) just began deliveries of its latest Model S last month. The common consensus is that it can probably reach annual production of 10,000 units. What is not accepted is that Tesla has the capacity to produce much more than that.
And buyers are ready to take that capacity off its hands. In fact, the terms of its lithium-ion cells battery deal call for Japan’s Panasonic to supply Tesla with enough li-ion cells for 80,000 Model S sedans over the next four years.
Now in full disclosure, my first car as a teenager was a hand-me-down Chevy Impala. Today it’s a “flex-fuel” vehicle that uses ethanol and/or gasoline.
I miss the ethanol tax subsidy that expired in 2011. You know, the one that provided $6 billion to corn farmers, blenders and refiners annually.
However, and I can’t believe I’m saying this, but letting it die was the right thing to do.
Since then, ethanol prices quickly fell — removing this hidden federal tax and maybe making the need to shift to more-economic models less apparent, which leads to the last pick today.
General Motors (GM) produced 24 different models of flex-fuel vehicles (cars and light trucks) in 2011 — double what it did in the prior year.
The total number of flex-fuel models offered to the public doubled from 2010 to 2011. The manufacturers receive credits in the Federal Corporate Average Fuel Economy (CAFE) program for producing flex-fuel vehicles, which run on E-85, a blend of 85% ethanol and 15% gasoline, and/or gasoline.
But GM is not just about ethanol.
The General Motors EV1 was a lead-acid-battery, electric car produced from 1996 to 1999. It was the first mass-produced and purpose-designed electric vehicle of the modern era from a major automaker, and the first GM car designed to be an electric vehicle from the outset.
Today, General Motors wants to be the plug-in leader with the Chevrolet Volt, a plug-in hybrid with 40 miles of electric range and 500 miles per gasoline fill-up range.
I don’t anticipate Ford and GM to gain dominate the world as they once did. That’s because they face a lot more competition globally from Tata Motors (TTM) and a growing list of Asian automakers.
The e-vehicle revolution changes the whole auto industry and creates a new set of winners geared toward changes in buying patterns … and in buyers themselves. There are more emerging-market buyers with different driving patterns and needs.
In closing, let me add last thing to remember. While the car makers are making it easier for us to access the newest technologies, the real winners are investors who can spot the agile players in emerging markets. I’ll be watching these developments and encourage you to join my Emerging Market Winners readers in getting the latest ideas in this sector.
Best wishes,
Rudy
{ 2 comments… read them below or add one }
I don’t know if Ford,GM or Toyota would be great bets on electric cars,specifically.Tesla seems like a better bet.I believe Tesla is manufacturing in the old GM/Toyota NUMMI plant in California and is partially owned by Toyota.So Tesla should be getting some useful info from Toyota,who has the most experience with electric hybrids.Another interesting thing is that,for some unknown reason,Tesla seems to get much more range than everyone else’s electrics.Don’t know what they know,but range is a huge issue for electric cars.So,in my opinion,if Tesla really has 250 mile range and can get the price down,they look really appealing.
Dear Rudy, I think it would be useful to have a more substantive discussion for your readers on advanced vehicle technology to guide their investment choices. In terms of efficiently using the battery building capacity hybrids are much better than full electric vehicles. Longer term, once battery technology has improved very substantially all electric vehicles will make sense. There are notch applications today where they make sense. Electric bicycles, and scooters, motor bikes in areas like Thailand, India and China, etc. are terrific reducing a huge amount of pollution. TESLA is a superb technical accomplishment, but the vehicle as designed now, even the Model S is for the rich, and not the mass market. At the $70K prize range it has a 300 mile range, with fuel air-conditioning or heating maybe 200 miles. But that is meaningful, for the wealthy. Fuel Cell EVs are on their way. 2015 Toyota, Honda, GM and many others are ready to introduce them. They run on pure H2, which can be reformed from natural gas and their emission is H2O, water. They have been moving down on a prize curve that puts them below LiIon battery EVs. The investment opportunity is in H2 dispensing, production and storage and in creating the H2 highway. The test fleets are starting up next year with a few thousand vehicles.
Another massive technology is using natural gas as vehicle fuel. Some of your colleagues have talked about this and have identified the players. So I will foci on another technology, specifically stop-and-go. This is one that has significant deployment in Europe already. When the vehicle stops at a red light, or anywhere the engine shuts down, similar to what it does on many hybrids Then when you put your foot on the accelerator the engine starts up instantly and you are on your way. The technology works, and it is practical for both gasoline and diesel engines. Stopping the fuel waste while idling saves huge amount of fuel. Stop-go can save as much as 30% fuel. It is critical for OEMs to meet the high fuel efficiency standards recently put in place.The details on how it work are different of course. This creates tremendous pressure on the on-board energy storage, one that is quite different than all EV require. The batteries have to be able to handle repeated huge impulse of energy, and be recharged rapidly. The key technologies that investors need to keep their eyes on are JCI, MXWl, AXION as specific examples. There are others, e.g. A123 should be looked at as well.
Writing on this topic should have some priority since the transportation business is undergoing huge technological challenges and changes, much of it in the formative stages but a lot of it already in place.