5 Most Undervalued EV Stocks To Buy According To Hedge Funds

In this article, we discuss the 5 most undervalued EV stocks to buy according to hedge funds. To read the detailed analysis of the EV industry, go directly to the 12 Most Undervalued EV Stocks To Buy According To Hedge Funds.

5. Stellantis N.V. (NYSE:STLA)

Number of Hedge Fund Holders: 27

Stellantis N.V. (NYSE:STLA) is a multinational automotive company headquartered in the Netherlands. The company owns multiple famous car brands such as Alfa Romeo, Chrysler, Dodge, and Maserati. In November 2022, Stellantis N.V. (NYSE:STLA) bought an autonomous vehicle technology company, aiMotive. The acquisition was made to expand the company’s footprint in the autonomous vehicle industry.

Stellantis N.V. (NYSE:STLA)’s dividend yield is one of its most attractive metrics. As of August 25, the company has a dividend yield of over 8%. Despite the high dividend yield, it has a forward payout ratio of 26% which isn’t likely to affect the company’s cash flows in a notable way.

As of the second quarter of 2023, Stellantis N.V. (NYSE:STLA) has 25 battery electric vehicles in its product portfolio and plans to add 23 more through 2024.

In Q2 2023, Stellantis N.V. (NYSE:STLA)’s stock was owned by 27 hedge funds, making it the 5th most undervalued EV stock to buy according to hedge funds.

Miller Value Partners made the following comment about Stellantis N.V. (NYSE:STLA) in its second quarter 2023 investor letter:

“We initiated a starter position in Stellantis N.V. (NYSE:STLA), which makes Jeep, Dodge and Fiat cars. The company has a nearly 8% dividend yield with enough net cash (cash minus debt) on the balance sheet to cover the dividend for almost five years. The company trades at 1.7x operating profits, which means the market is already expecting a likely drop in cash flow. Still, the shares appear to be worth meaningfully more than where they trade, and management is heavily aligned with stockholders with a 14% stake. They share our view that the valuation is compelling, as the company plans on repurchasing ~3% of shares outstanding this year.”

4. Rivian Automotive, Inc. (NASDAQ:RIVN)

Number of Hedge Fund Holders: 37

Rivian Automotive, Inc. (NASDAQ:RIVN) is an American auto manufacturer headquartered in California. The company launched its IPO in November 2021, raising over $13.5 billion in financing. Rivian Automotive, Inc. (NASDAQ:RIVN) primarily focuses on electric vehicles.

Rivian Automotive, Inc. (NASDAQ:RIVN) posted a non-GAAP loss per share of $1.08 while the market expected it to report a net loss of around $1.39 per share. The company’s revenue increased by nearly 208% to $1.12 billion. 

In the second quarter, Rivian Automotive, Inc. (NASDAQ:RIVN) delivered 50% more vehicles than Q1 2023 after producing 13,992 units and delivering 12,640 vehicles. The company also boosted its production guidance for 2023 from 50,000 units to 52,000 units.

Baron Funds made the following comment about Rivian Automotive, Inc. (NASDAQ:RIVN) in its second quarter 2023 investor letter:

“During the second quarter, we also added to our position in EV manufacturer Rivian Automotive, Inc. (NASDAQ:RIVN). After a complex period since the company’s IPO, in which Rivian tried to ramp multiple vehicles simultaneously while struggling to overcome unprecedented supply-chain bottlenecks, the company seems to have turned the corner. Production is now starting to scale up, which should help the company improve its plant utilization and subsequently help gross margins. The company is making notable progress in cost improvements by renegotiating with its suppliers, utilizing its larger scale to get better pricing, as well as, incorporating various technological advancements that would improve its cost structure while also improving the vehicles’ performance (for example it’s Enduro drive unit which is progressing ahead of plan).”

3. Ford Motor Company (NYSE:F)

Number of Hedge Fund Holders: 40

Ford Motor Company (NYSE:F) is one of the most famous American automotive brands in the world. It was founded in 1902 by Henry Ford. Despite it being a publicly traded company, it is majorly controlled by the Ford family. Ford Motor Company (NYSE:F) has been actively involved in the production and sale of battery electric vehicles and plug-in hybrid vehicles for over a decade.

On August 18, it was announced that Ford Motor Company (NYSE:F) has partnered with the South Korean battery makers, EcoPro BM and SK On, to invest C$1.2 billion in a battery materials production plant in Canada. The plant production will receive C$644 million in funding from the Canadian government. The plant is expected to start production in 2026.

Insider Monkey data shows that Ford Motor Company (NYSE:F)’s stock was owned by 40 hedge funds in the second quarter of 2023 and Two Sigma Advisors was its most prominent stakeholder. The firm owned over 28.9 million shares of Ford Motor Company (NYSE:F), valued at $437.378 million.

Here is what Leaven Partners has to say about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:

“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”

2. General Motors Company (NYSE:GM)

Number of Hedge Fund Holders: 72

General Motors Company (NYSE:GM) is the largest automotive company in the US and the second largest in the world. The company is headquartered in Detroit, Michigan, and serves its customers globally. 

General Motors Company (NYSE:GM) has joined hands with the Chinese state-owned SAIC Motor Corp., Ltd. company and another Chinese auto manufacturer, Liuzhou Wuling Automobile Industry to create the SAIC-GM-Wuling Automobile. The partnership mainly focuses on electric vehicle production. As of 2022, it has managed to capture the third-largest market share in the EV sector.

General Motors Company (NYSE:GM) has been covered by 15 analysts in the last three months with 7 analysts keeping a Buy rating on the stock. The average analyst price target of $50.33 shows an upside of nearly 15% to General Motors Company (NYSE:GM)’s stock price of $32.95 at the time of market close on August 25.

Diamond Hill Capital made the following comment about General Motors Company (NYSE:GM) in its Q3 2022 investor letter:

“Most recently, we initiated a position in General Motors Company (NYSE:GM), one of the largest automakers in the United States. Over the past several years, GM has taken steps necessary to focus the company on the most profitable segments and move into position to compete in an electrified and autonomous world. With the recent rise in interest rates there was a meaningful selloff in the auto industry, which presented us an attractive entry point to a name we know well.”

1. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 79

Elon Musk’s Tesla, Inc. (NASDAQ:TSLA) tops our most undervalued EV stocks list. The company held a 17.15% market share of the battery-electric vehicle segment in 2022, making it the largest EV manufacturer in the world.

On August 25, Wedbush Securities analyst Dan Ives maintained an Outperform rating on Tesla, Inc. (NASDAQ:TSLA)’s stock with a $350 price target compared to its stock price of $238.59 on that day. The analyst believes that Tesla, Inc. (NASDAQ:TSLA)’s supercharger business could bring in $10 billion to $20 billion in revenue by 2030.

ARK Investment Management held the most significant stake in Tesla, Inc. (NASDAQ:TSLA) in the second quarter of 2023 with 4.84 million shares worth $1.268 billion.

Baron Funds made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2023 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells EVs, related software and components, and solar and energy storage products. Following a sharp decline at the end of 2022, Tesla’s stock rebounded in the first quarter of 2023 on investor expectations that Tesla will continue to grow vehicle deliveries and maintain solid gross and operating margins despite a potential recession, competition in China, and vehicle price reductions. We wrote a long piece on Tesla last quarter and refer readers back to it, because for long-term investors not much has changed over the last three months. Tesla did hold its first Investor Day in March, and several Baron analysts and portfolio managers attended. We toured the Austin Gigafactory, drove in a Cybertruck, boarded a Semi truck, and spoke with a wide swath of Tesla senior managers. During the formal presentation, Tesla highlighted, among other things: (1) its broad and deep bench of executive talent supporting CEO Elon Musk; (2) its “Master Plan 3–Sustainable Energy for All of Earth,” which featured EVs, renewable power from solar and wind, and stationary electric storage; (3) its vehicle assembly innovations, including massive casted parts (building Model Y bodies with single front and rear castings, replacing a substantial number of parts and fastening steps), a stainless steel exoskeleton (for Cybertruck), and its next-generation highly efficient “unboxed process” for its next-gen $25,000 vehicle; (4) a future permanent[1]magnet electric motor that will not require any rare earths; and (5) the massive untapped market opportunity for commercial stationary electric storage, branded Megapack, as the world steadily shifts to renewable energy. As long-term shareholders, we have witnessed Tesla exploit its innovative Model 3/Y now-global mass-market platform to increase vehicle deliveries from barely a standing start to over 1.3 million units, while achieving industry-leading margins and reinforcing its iron-clad balance sheet to almost $23 billion in cash (and effectively no recourse debt). We expect Tesla’s next-generation EV and Megapack products to have a similar impact on company results.”

You can also look at Ken Fisher’s Top 15 Growth Stock Picks and the 13 Best Defensive Stocks To Buy Now.

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.