Is Fast-Driving Tesla The Next Apple…or Blackberry?
A month ago, I noted the soaring popularity of electric vehicle (EV) makers including Tesla (NSDQ: TSLA), Nikola (NSDQ: NKLA), and Nio (NYSE: NIO). As I stated then: “It’s too late to get in on Tesla (and most other EV stocks) at a reasonable price.”
Instead, I suggested buying shares of the exchange-traded fund Amplify Advanced Battery Metals and Materials ETF (BATT). I reasoned that if people will be buying a lot more EVs, then the companies that produce the metals going into all those batteries should also appreciate in value.
I concluded that article by positing: “Logically, one of two things should happen over the next 12 – 18 months. Either BATT’s share price should move considerably higher or EV stocks such as Tesla will crash.”
It’s far too soon to say if that prediction will prove true, but thus far it appears to be going as I expected. Since then, two of those EV companies have already seen their share prices backslide. Tesla is down 22% since peaking near $1,800 that day, while Nikola has shed 25% of its value.
Only Nio has continued to appreciate, gaining 10% after a big jump on August 11 following the release of its Q2 results. Headquartered in Shanghai, Nio has an inside track on the rapidly expanding EV market in China.
At the same time, BATT has risen 6% and is now in positive territory for the past 12 months. Half of its 10 largest holdings are domiciled in China, which has rallied strongly in the wake of the coronavirus pandemic.
In this case, it appears Nio’s success has trickled down to its local suppliers. That means a bet on BATT is currently a bet on Nio, but at considerably less risk. If Nio falters, Tesla and Nikola will step in to pick up the slack. Either way, BATT comes out on top.
I like that approach to investing in a growth market in its nascent stage. To be sure, the EV market is only going to grow. Eventually, most vehicles on the road will be some form of EV.
That’s an easy prediction to make. However, correctly identifying the ultimate winners is considerably tougher. Sure, Tesla looks like a slam dunk to remain a market leader. But that may not always be the case, as illustrated by the smartphone market over the past 13 years.
In 2007, the first year Apple (NSDQ: AAPL) introduced its iPhone, the clear market leader was Blackberry (NYSE: BB). Back then, the company was known as Research in Motion (RIM). Its ubiquitous phone was in the pocket of every self-respecting business person.
That year, RIM sold nearly 12 million Blackberry phones compared to 1.4 sales of the Apple iPhone. It was not until 2011 that iPhone sales eclipsed Blackberry purchases; 72 million iPhones sold versus 51 million Blackberry units.
Despite its huge “first mover” advantage, Blackberry ultimately succumbed to Apple’s superior product and marketing. In a similar vein, Tesla has also benefited from its early lead in the EV market. Last year, Tesla vehicles accounted for roughly 80% of all battery EV sales in the United States.
That’s a huge advantage and one that will continue to benefit Tesla for years to come. But if someone else comes up with a better product, the EV landscape might look quite different five years from now.
Ride the Wave
I view the rapidly emerging 5G (fifth generation) communications market as being similar to the smartphone market a decade ago. We know its impact will be huge, but we aren’t sure exactly how it will play out.
For that reason, betting on a single company to deliver the next “killer app” is a risky proposition. That’s why I prefer buying into the “pick and shovel” plays that should benefit no matter which way consumer sentiment goes.
For example, last October I added PC peripheral manufacturer Logitech International (NYSE: LOGI) to the Personal Finance Growth Portfolio. I reasoned that sales of its video gaming equipment, webcams, and other hardware would soar as 5G technologies increase demand for more robust products.
Since then, LOGI has gained 80%. The company knows that to keep up that pace it will need to grow its revenue at a rapid clip. To that end, Logitech has made clear that it intends to expand its product lineup this year.
That probably means that Logitech will soon be making an acquisition. You could make a lot of money if you can correctly guess who the takeover target will be. That’s not my area of expertise but it is for my colleague, Nathan Slaughter.
Nathan Slaughter is chief investment strategist of Takeover Trader and he’s an expert on mergers and acquisitions and corporate takeover initiatives.
Nathan is adept at digging up the inside data on pending takeovers. Along those lines, he’s about to go on camera to reveal a startling development. If you watch his presentation and follow his advice, you could reap a huge investment bonanza.
Nathan intends to answer the most urgent questions for investors in the second half of 2020:
- Why are CEOs at America’s most flush-with-cash companies raising even more cash right now?
- What hidden asset class are they gearing up to invest in, at historic levels?
- How can you beat them to the punch?
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