In this article, we discuss the 12 most undervalued EV stocks to buy according to hedge funds. To skip the detailed analysis of the EV industry, go directly to the 5 Most Undervalued EV Stocks To Buy.
Electric vehicles (EV) have become a significant disruptor in the automotive industry. EVs have almost completely taken over the internal combustion engine (ICE) vehicles market in some countries. For example, 79% of all the vehicles registered last year in Norway were pure electric. On the other hand, the pure ICEs only represented nearly 7% of the total vehicles sold in the country. There were over 10 million electric vehicles sold in 2022, including plug-in hybrid vehicles (PHEV). Around 7.657 million of them were battery electric vehicles (BEV).
According to the International Energy Agency (IEA), EVs are expected to cover 18% of the global vehicle market in 2023 with 14 million sales, compared to 14% in 2022. EVs have already shown their strength in the first half of 2023. In the first quarter, sales were up 25% year-over-year and according to a PwC report, the BEV sales alone went up by 52% in the second quarter of 2023.
Tesla, Inc. (NASDAQ:TSLA) has ruled the global EV market for over a decade. However, other companies are stepping in to put a stop to its undisputed dominance. Its closest competitor is the Chinese auto manufacturer, BYD Company Limited (OTC:BYDDY), which covered 11.9% of the total BEV market share in 2022, compared to Tesla, Inc. (NASDAQ:TSLA)’s 17.15%. Including BYD Company, most of the other major Tesla, Inc. (NASDAQ:TSLA) competitors are Chinese companies. On the other hand, behemoths of the automotive industry, such as Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), and Toyota Motor Corporation (NYSE:TM) have also started to increase their EV production over the years. Even the Italian supercar manufacturer, Ferrari N.V. (NYSE:RACE) is planning to unveil its first pure electric car in 2025. Nonetheless, Tesla, Inc. (NASDAQ:TSLA) is also making moves to retain its dominance. The company has cut its vehicle prices six times this year before May. The company also launched cheaper versions of Model S and X. According to the Chief Executive Officer, Elon Musk, interest rates were one of the driving factors of price cuts. At Tesla, Inc. (NASDAQ:TSLA) Q2 earnings call, he said:
“And, you know — and then, obviously, another challenge is the — the interest rate environment. As interest rates rise, the affordability of anything bought with that decreases, so effectively increasing the price of the car. So, when interest rates rise dramatically, we actually have to reduce the price of the car because the — the interest payments increase the price of the car. So — and this is at least — at least up until recently was to believe the sharpest interest rate rise in history.”
The latest to join the list of EV market competitors, VinFast Auto Ltd. (NASDAQ:VFS), launched its IPO on August 15 and reached a valuation of $86 billion on opening day and reached a market cap of nearly $160 billion by August 25. The Vietnamese EV maker is listed on NASDAQ and its stock has gone up by 346.56% between August 18 and August 25 market close.
The IEA estimates that 60% of all vehicles on the road will be electric. The prediction is dependent on broadening battery manufacturing and the constant supply of necessary minerals. However, Reuters reported that lithium producers are facing permit delays, labor shortages, and inflation, which may hinder battery production for EVs. On top of that, PwC believes that the electric charging market will have to grow tenfold by 2030 to meet the EV charging demand in the US.
During this high demand growth for EVs, Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F), and General Motors Company (NYSE:GM) are some of the most promising EV stocks.
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Our Methodology
For this article, we chose the 12 most undervalued EV stocks based on their hedge fund sentiment as of the second quarter of 2023. We only chose the companies that manufacture EVs and not just infrastructure or materials for the EV sector.
The hedge fund sentiment around the stocks was taken from Insider Monkey’s database of 910 hedge funds.
12 Most Undervalued EV Stocks To Buy According To Hedge Funds
12. The Shyft Group, Inc. (NASDAQ:SHYF)
Number of Hedge Fund Holders: 16
The Shyft Group, Inc. (NASDAQ:SHYF) is an American auto manufacturer headquartered in Michigan. The company’s latest addition to its EV portfolio is Blue Arc EV Solutions which focuses on electric delivery vans.
For the second quarter of 2023, The Shyft Group, Inc. (NASDAQ:SHYF) posted a non-GAAP earnings per share (EPS) of $0.25, outperforming the estimates by $0.03. However, the company’s revenue of $225.1 million declined by 3% year-over-year and missed market expectations by $31.5 million. The Shyft Group, Inc. (NASDAQ:SHYF) also declared a $0.05 per share quarterly dividend in early August, payable by September 18 to the shareholders of record on August 17.
Heartland Advisors made the following comment about The Shyft Group, Inc. (NASDAQ:SHYF) in its Q4 2022 investor letter:
“The Shyft Group, Inc. (NASDAQ:SHYF) is a leader in specialty vehicles, including “last mile” delivery vans used in ecommerce. More than a year ago, the company announced plans to develop an electric parcel-delivery vehicle, investing $75 million at launch. Concern over the elevated operational risks and spending associated with the program weighed on the stock, sending shares down almost 49% this year.
The company has unique growth opportunities, and we believe the EV expenditures will ultimately be money well spent, as it expands the addressable market and protect against competitive offerings. The business is priced at only 8.2X our estimate for Enterprise Value to EBITDA, substantially below its intrinsic worth.”
11. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 17
XPeng Inc. (NYSE:XPEV) is a Chinese electric vehicle manufacturer. The company is headquartered in China but has offices in the United States. Its US subsidiary is named XMotors.ai. XPeng Inc. (NYSE:XPEV) is also trying to become one of the most prominent autonomous vehicle manufacturers with its XPILOT technology.
On August 21, XPeng Inc. (NYSE:XPEV) stock was upgraded to Buy from Neutral by Bank of America with a $22 price target. BoFA is optimistic about the company’s new deal with Volkswagen which was announced during the company’s Q2 2023 earnings call. The firm also predicts a sales volume growth for XPeng Inc. (NYSE:XPEV) due to its new model pipeline starting from 2H 2023 through 2025.
According to the Insider Monkey database, 17 hedge funds had a stake in XPeng Inc. (NYSE:XPEV). Citadel Investment Group was the most prominent stakeholder of the company in the second quarter after increasing its stake in the company by 104% to 2.6 million shares worth $35.112 million. D E Shaw also seemed to love the company’s stock as the firm increased its holdings in XPeng Inc. (NYSE:XPEV) by 2798% to 1.46 million shares worth $19.638 million.
10. Lucid Group, Inc. (NASDAQ:LCID)
Number of Hedge Fund Holders: 18
Lucid Group, Inc. (NASDAQ:LCID) is a California-based electric vehicle manufacturer focusing on luxury sports EVs and grand tourers. In the second quarter, the company’s stock was owned by 18 hedge funds with a combined stake value of $98.87 million, making it the 10th most undervalued EV stock on our list. In the previous quarter, 16 hedge funds owned Lucid Group, Inc. (NASDAQ:LCID) stock, valued at $21.725 million.
Lucid Group, Inc. (NASDAQ:LCID) earnings were not up to the mark in the second quarter of 2023 and missed the analyst estimates for earnings and revenue. However, the company’s Q2 revenue was up 55% year-over-year and it more than doubled its car deliveries to 1,404 units, compared to 679 in Q2 2022. Lucid Group, Inc. (NASDAQ:LCID) management believes it is on track to produce 10,000 vehicles in 2023, compared to 7,180 vehicles in 2022.
9. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 19
NIO Inc. (NYSE:NIO) is a Chinese EV company that was founded in late 2014. Most of the company’s cars are sold in China. Nevertheless, the company also has operations in other countries and plans to expand its operations to 25 regions by 2025.
In July, NIO Inc. (NYSE:NIO) reported record deliveries of 20,462 vehicles, up 103% year-over-year. The company’s month-over-month deliveries increased by 91% from 10,707 units in June. As of July 31, NIO Inc. (NYSE:NIO) has already delivered 364,579 vehicles, crossing its 2022 numbers by a huge margin. In 2022, the company had delivered 122,486 EVs.
On August 22, NIO Inc. (NYSE:NIO) signed a deal with the Norwegian taxi company, Oslo Taxi. The taxi company has made the EV manufacturer its first choice supplier. This holds significant promise for NIO Inc. (NYSE:NIO) as internal combustion engine taxis will no longer be allowed in Oslo after November 1, 2024.
8. Polaris Inc. (NYSE:PII)
Number of Hedge Fund Holders: 21
Polaris Inc. (NYSE:PII) is an American automotive manufacturer that produces snowmobiles, boats, all-terrain vehicles, and commercial vehicles. The company also makes ultra-light tactical vehicles for the defense segment. In 2020, Polaris Inc. (NYSE:PII) announced a partnership with Zero Motorcycles to produce off-road EVs and electric snowmobiles.
Along with being an undervalued EV stock, Polaris Inc. (NYSE:PII) is also on our list of undervalued dividend stocks. The company has increased its dividend for the past 28 years and announced its latest quarterly dividend of $0.65 on July 28. Polaris Inc. (NYSE:PII)’s next quarterly dividend will be payable by September 15 to the shareholders of record on September 1.
In the second quarter, 21 hedge funds had a stake in Polaris Inc. (NYSE:PII), compared to 20 in the previous quarter. Alyeska Investment Group increased its holdings in the company by 54% to 674,455 shares worth $81.56 million and was the largest hedge fund holder of the company. It was the second quarter in a row where the hedge fund had increased its stake in Polaris Inc. (NYSE:PII) by over 50%.
Diamond Hill Capital made the following comment about Polaris Inc. (NYSE:PII) in its Q3 2022 investor letter:
“Other top contributors included Polaris Inc. (NYSE:PII), BOK Financial, and Webster Financial. Polaris, a market leader in off-road vehicles, benefited from a restocking opportunity — inventory at dealers remains depleted, which can serve to offset near-term macroeconomic headwinds. The company also is perceived to be somewhat recession-resilient given its strong financial performance during and after the 2008 financial crisis. We took the opportunity to conclude our investment as we have increased concerns over rising competition, supply chain issues related to sourcing semiconductors and the business’s higher-than-perceived cyclicality.”
7. Li Auto Inc. (NASDAQ:LI)
Number of Hedge Fund Holders: 25
Li Auto Inc. (NASDAQ:LI) is a Chinese automotive company. It sold over 130,000 EVs in 2022 and has already crossed that mark after selling over 30,000 vehicles for 4 months in a row according to its July sales data. With 34,134 units in July, Li Auto Inc. (NASDAQ:LI) recorded a 227.5% year-over-year increase in deliveries.
In the second quarter, Li Auto Inc. (NASDAQ:LI) reported earnings per American depositary share of $0.36 to beat the market expectations by $0.17. Its revenue was up a staggering 228% year-over-year at $3.95 billion and Li Auto Inc. (NASDAQ:LI)’s vehicle deliveries were also over 200% up from Q2 2022 deliveries.
On its earnings day, Li Auto Inc. (NASDAQ:LI) provided guidance for the third quarter of 2023. It expects its revenues to be between $4.46 billion and $4.59 billion. Moreover, the company predicts its vehicle deliveries to be between 100,000 units and 103,000 units, up 277% to 288% year-over-year.
6. Oshkosh Corporation (NYSE:OSK)
Number of Hedge Fund Holders: 25
Oshkosh Corporation (NYSE:OSK) is an Oshkosh, Wisconsin-based company that builds heavy goods vehicles, military vehicles, vehicle bodies, and other industrial equipment. The company’s production portfolio also has EVs, including mail trucks and refuse collection vehicles.
On August 2, Baird analyst Mircea Dobre upgraded Oshkosh Corporation (NYSE:OSK)’s stock to Outperform from Neutral after robust Q2 results. The analyst raised his price target to $137 from $89.
Oshkosh Corporation (NYSE:OSK) was owned by 25 hedge funds in both quarters of the first half of 2023. However, the total hedge fund investments in the company increased from $295.240 million in Q1 to $478.664 million in Q2. Greenhaven Associates was the company’s largest stakeholder in Q2. The firm increased its stake in Oshkosh Corporation (NYSE:OSK) by 21% in the quarter to nearly 2.358 million shares worth $204.164 million.
Here is what First Pacific Advisors specifically said about Oshkosh Corporation (NYSE:OSK) in its Q2 2023 investor letter:
“Oshkosh Corporation (NYSE:OSK) makes trucks and specialty vehicles in four segments: Access Equipment (aerial work platforms and telehandlers), Defense, Fire and Safety, and Commercial. The company has suffered from component shortages and supply chain issues, but we think it has generally performed well otherwise. We remain positive on the company’s long-term prospects.”
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Disclosure. None. 12 Most Undervalued EV Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
