Are we in an Electric Vehicle Stock bubble or boom??
With EV stocks on a RAMPAGE UPWARDS from
Tesla & NIO, to workhorse & even all the hot new IPO’s such as Arrival.
Now this may seem like it’s just a major hype train & to be honest is does remind
me of the tech bubble in the late 90’s.
Where lots of new companies with no previous revenues wen’t public with nothing but a dream
& the word “internet” in there business plans!
Young startup companies such as Pets.com, went out of business just nine months after its much-hyped share sale.
& Many other tech companies followed suit & crashed massively
even AMAZON lost over 90% of it’s value!
Now it was that the “internet” wasn’t going to be EVERYWHERE, as we in know….in fact Jeff Bezos
stated he started Amazon after viewing a crazy statistic about the growth of the internet.
(INTERVIEW CLIP)
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(COMparing
SO WHY DID THE CRASH OCCUR??
Well Warren Buffett states: “Price is what you PAY & Value is What you get”
ANd even a Great company is a BAD INVESTMENT IF THE PRICE IS TOO HIGH.
So the further the disparity between Price & Value the greater the risk of a bubble.
(DIVING INTO THE CHART OF A BUBBLE)
(Explain)
(Where do you think we are now in this cycle?(
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So when we have stocks which are priced for perfection any earnings miss or bad news
may cause the stock to plummet.
In the Words of the Great Investor Howard Marks, “The Key to investing success is buying
things for less than they are worth”
and Then being patient enough to let value & price ALIGN. This is the essence of VALUE INVESTING.
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Now you may say “Ben, what about value investing?”
Well as Warren Buffetts business partner, the
LEGENDARY Investors Charlie Munger stated when asked about Growth investing.
He stated “All investing is Value investing” ….As the more you pay over a companies
value the higher the risk.
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SO ARE WE IN AN EV BUBBLE?
Well Similar the internet statistics in the late 90’s, EV’s also have some impressive economic growth
forecasts.
(MARKETS & MARKETS Research)
So far, Tesla has Definitely Led the CHARGE…. (Bad dum chi)
As the first-mover and leader in mass production.
While Chinese manufacturers are also growing sales, production volumes are much lower.
NIO (NYSE:NIO) reported July sales increased by 322% year over year, and followed
that up with record August deliveries that more than doubled versus 2019.
At almost 4,000 vehicles, however, that’s only about 10% of Tesla’s volume.
And newly public XPeng (NYSE:XPEV) has delivered barely
over 20,000 units of its electric crossover and sedan as of July 31.
There are several more companies which haven’t even started production yet:
“In the U.S., there are several more that plan to begin production in the near future.
These include Rivian, Fisker, Workhorse Group (NASDAQ:WKHS), Nikola (NASDAQ:NKLA), and Lordstown Motors. ”
VALUATIONS ARE MOST SHOCKING FOR EV STARTUPS:
As some don’t even have sales, let alone earnings.
Using those metrics for the companies that do shows price-to-earnings and price-to-sales ratios beyond what make sense
with the business fundamentals.
(GRAPH)
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So the prospects for the company are all based upon FUTURE POTENTIAL, now that doesn’t mean
these companies won’t succeed.
But as stated previously the HIGHER the DISPARITY between Price & Value, the GREATER THE RISK FOR INVESTORS.
Future Growth is hard to define & is categorised as more risky. This is why most value investors
just avoid companies with high valuations, despite future growth potential.
However, Growth investors aim to predict the future prospects of a company now this is a higher risk
strategy but with MUCH GREATER REWARDS.
—We saw this with TESLA Stock in 2018. Growth investors saw the future potential in Tesla as a
technology company & invested
despite Elon Musk even stating recently that Tesla was just one month away from Bankruptcy.
(DIVING INTO THE SHARE PRICE)
Ironically now alot of the FUTURE POTENTIAL FOR Tesla as a Technology company with autonomous vehicles is
baked into their share price.
So Investors are looking to new EV startups in niche areas such as Delivery in order to ACHIEVE MAJOR
RETURNS.
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FINAL THOUGHTS?
Overall, I think there is alot of froth right now in EV stocks & the tech space….does this mean
it’s a bubble that’s hard to define.
I would say there is alot of Bubble like investments in many EV startups…but only time will tell.
SO WHAT AM I DOING?
I am personally doing what I have have always DONE I have a diversified Investment portfolio across a range
of sectors including EV stocks.
I am even invested into a few speculative acqusitions but these make up less than 0.5% of my 6 figure portfolio.
So the KEY REALLY IS SELF AWARENESS….As long as you are aware of the speculative nature of certain
stocks such as the multitude of EV startups then you can allocate you capital accordingly.
SO KEEP CALM & KEEP INVESTING
