In this article, we discuss the 10 EV stocks to buy for long-term gains. If you want to skip our detailed analysis of these stocks, go directly to Forget Rivian Automotive Inc (RIVN): 5 EV Stocks to Buy for Long-Term Gains.
2021 was the year for electric vehicle stocks. In addition to a dramatic increase in the prices of existing EV stocks, many new EV firms debuted on the stock market and fetched valuations in the tens of billions. Rivian Automotive, Inc. (NASDAQ:RIVN) was one of these companies. The shares popped 29% on the initial offering in November 2021 and the company finished the first day of trading valued at more than $86 billion. This was remarkable considering the fact that Rivian Automotive, Inc. (NASDAQ:RIVN) was still not mass producing electric vehicles.
In addition to Rivian Automotive, Inc. (NASDAQ:RIVN), other expensive EV stocks also debuted on the market with promises of EV deliveries by 2023. As inflation batters EV stocks that have little to show for their valuations in early 20222, it has become apparent that promises of faster EV deliveries will be met with obstacles like supply chain problems, labor shortages, and mounting competition from the Chinese market in the coming months. Rivian Automotive, Inc. (NASDAQ:RIVN) is already down 32% year-to-date.
In this environment, it has become harder to identify EV stocks with long-term growth catalysts. For investors facing this problem, following the smart money might provide a way out. Some of the top EV stocks to buy for the long-term according to hedge funds include Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), among others discussed in detail below.
Our Methodology
The companies that operate in the electric vehicles sector and have long-term growth catalysts were selected for the list. The business fundamentals and analyst ratings for these firms are also discussed to provide readers with some additional context for their investment choices.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
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EV Stocks to Buy for Long-Term Gains
10. BYD Company Limited (OTC:BYDDF)
Number of Hedge Fund Holders: 2
BYD Company Limited (OTC:BYDDF) is a Chinese firm that markets automobiles. After steadily enhancing investments in EVs over the past decade, the company, already successful in China, is now making inroads into foreign markets with electric buses. A decision by the Chinese government late last year to scrap limits on foreign investments in auto firms will help BYD Company Limited (OTC:BYDDF) further expand production. In 2021, BYD Company Limited (OTC:BYDDF) made over 600,000 sales of new energy vehicles, up 218% year-on-year.
BYD Company Limited (OTC:BYDDF) is backed by legendary value investor Warren Buffett. A small number of other elite investors are also bullish on the stock. At the end of the third quarter of 2021, 2 hedge funds in the database of Insider Monkey held stakes worth $22 million in BYD Company Limited (OTC:BYDDF).
Investors eager to ride the EV boom should invest in top EV stocks like Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Tesla, Inc. (NASDAQ:TSLA), BYD Company Limited (OTC:BYDDF), and Ford Motor Company (NYSE:F).
9. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 12
Lithium Americas Corp. (NYSE:LAC) is a resource firm primarily focused on lithium deposits. The stock has returned more than 75% to investors over the past six months as the prices of lithium skyrocket due to near-term supply concerns. Lithium is an important raw material for the manufacture of EV batteries. The prices of lithium are expected to remain high as the demand for EVs rises without a noticeable increase in the supply of the raw material which is mined and refined using specialized processes that take years to perfect.
This is why top hedge funds hold large stakes in Lithium Americas Corp. (NYSE:LAC). Among the hedge funds being tracked by Insider Monkey, Singapore-based investment firm Himension Capital is a leading shareholder in Lithium Americas Corp. (NYSE:LAC) with 2.2 million shares worth more than $50 million.
In its Q1 2021 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Lithium Americas Corp. (NYSE:LAC) was one of them. Here is what the fund said:
“Lithium Americas: The volatility noted above in Lithium Americas Corp. (NYSE:LAC) has resulted in solid returns via our options trades around our core equity position. At the current time, we are short calls on LAC, as we have done multiple times throughout the position’s life, expiring on May 21, 2021, at a $17.5 and $22.5 strike price. The volume of contracts sold at each strike corresponds to the size of the equity position we want should the calls expire in the money, and the underlying equity gets called away from us. The thought process behind this trade construction is that if we know the size of the position we want at a particular price point, there is no reason not to accumulate additional returns by pre-selling the stock we would have sold anyway.
High levels of volatility positively impact the price of options, increasing the premium we can earn from selling covered calls. To date, we have sold covered calls on Lithium Americas Corp. (NYSE:LAC) that have expired worthless four times, yielding a roughly 7% return on the equity position’s current value or 71bps for the portfolio overall. The outstanding covered calls appear to be trending towards a similar worthless expiration. If they do, the covered call trades on LAC will result in us owning the shares with committed capital of -$0.28 per share.
Although we believe in the fullness of time Lithium Americas Corp. (NYSE:LAC) warrants a $30+ valuation, the prices achieved in early January of this year were not justified by the underlying fundamentals. Some will argue we should have sold down our position. We had already established our option positions and believe LAC is an emerging major in the lithium mining industry. Thus, we decided to maintain the position unchanged. Although still relatively high, the current $15 per share valuation is not crazy compared to where we think the firm should be trading based on fundamentals, so we are no longer overly concerned with the position as is.
LAC management also took advantage of the volatility issuing stock on January 22 for $22 a share. The ~$400 million in proceeds will be used to develop Thacker Pass, the US-based clay lithium deposit, which will likely be the largest producing Lithium mine in America when turned on. In our opinion, the stock issuance could not have come at a better time. LAC management has advanced the project through various development stages (de-risking), but with the share issuance, they have significantly reduced the need to bring in an outside partner to develop the asset as the first phase of the project is expected to cost roughly $581 million. After-tax and at an 8% discount rate, the Thacker Pass project’s present value is approximately $2.6 billion (the firm’s current market capitalization is $1.5 billion). Although the share issuance was dilutive, increasing the total shares by 17%, we believe it will, in the long run, prove a forward-looking, value-additive decision by management.
The lithium market remains an area of interest and focus for us. This reflects our belief that the most exciting investment opportunities to capture secular trends in EV’s and batteries are found upstream in the mining industry. It is also a reflection that there is a greater diversity of lithium investment opportunities relative to other battery metals.”
8. ChargePoint Holdings, Inc. (NYSE:CHPT)
Number of Hedge Fund Holders: 18
ChargePoint Holdings, Inc. (NYSE:CHPT) provides electric vehicle charging networks. As the adoption of EVs increases across the world, government and private firms are scrambling to provide these cars with the infrastructure they need to weed out more energy-intensive alternatives from the road. On January 28, JPMorgan analyst Bill Peterson upgraded ChargePoint Holdings, Inc. (NYSE:CHPT) stock to Overweight from Neutral with a price target of $20, noting the firm was “well positioned to benefit from growth in all customer verticals in the US and Europe” in the coming years.
A growing number of top hedge funds now back ChargePoint Holdings, Inc. (NYSE:CHPT) to deliver for investors. At the end of the third quarter of 2021, 18 hedge funds in the database of Insider Monkey held stakes worth $97 million in ChargePoint Holdings, Inc. (NYSE:CHPT), up from 17 in the preceding quarter worth $149 million.
7. QuantumScape Corporation (NYSE:QS)
Number of Hedge Fund Holders: 25
QuantumScape Corporation (NYSE:QS) develops solid-state lithium batteries. The stock has declined sharply in recent weeks as growth stocks undergo a broad correction in value in light of inflation concerns and interest rate hikes. QuantumScape Corporation (NYSE:QS) is working on revolutionary new battery tech that promises to lower charging times, improve power delivery, and provide longer battery life. QuantumScape Corporation (NYSE:QS) has a partnership with reputable auto firm Volkswagen. The automaker hopes to put 29 million EVs on the road by 2029.
QuantumScape Corporation (NYSE:QS) has become increasingly popular in the hedge fund industry as the updates on the new battery development reach Wall Street. At the end of the third quarter of 2021, 25 hedge funds in the database of Insider Monkey held stakes worth $197 million in QuantumScape Corporation (NYSE:QS).
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and QuantumScape Corporation (NYSE:QS) was one of them. Here is what the fund said:
“QuantumScape Corporation is an early-stage developer of solid-state battery technology for electric vehicles aimed at improving key aspects of batteries, including safety, charging times, energy density, and cost. The company went public via a SPAC in November. After rapid appreciation, the stock came under pressure when the company raised additional capital to help accelerate its commercialization process. We exited our small position, as described below.
We sold QuantumScape Corporation, an early-stage solid-state electric vehicle battery innovator, because it was an undersized position with an ambitious valuation. We will continue to monitor QuantumScape’s developments and may revisit the company as an investment at a future point in time.“
6. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 26
Amphenol Corporation (NYSE:APH) markets electrical components. The company is a great way of playing the long-term trends in the EV industry as well as other sectors like the consumer electronics business. Amphenol Corporation (NYSE:APH) has a solid reputation with a legacy business and ten consecutive years of dividend growth. In earnings results for the fourth quarter, Amphenol Corporation (NYSE:APH) smashed market estimates on earnings per share and revenue by $0.06 and $260 million respectively.
Smart investors appreciate the healthy mix of growth and value that Amphenol Corporation (NYSE:APH) offers for the long-term. At the end of the third quarter of 2021, 26 hedge funds in the database of Insider Monkey held stakes worth $897 million in Amphenol Corporation (NYSE:APH).
The EV industry is thriving with market-leaders like Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Tesla, Inc. (NASDAQ:TSLA), Amphenol Corporation (NYSE:APH), and Ford Motor Company (NYSE:F) leading the way towards a zero-emissions future.
In its Q4 2020 investor letter, Richie Capital Group LLC, an asset management firm, highlighted a few stocks and Amphenol Corporation (NYSE:APH) was one of them. Here is what the fund said:
“Amphenol (APH – Up 18.7%) – In December, our high-speed, specialty connector manufacturer announced the acquisition of MTS Systems Corp for $1.7B to enhance their sensor products catalog. Having completed more than a dozen acquisitions since 2016, growth through acquisition is a key tenet of their business strategy and we view this transaction as business as usual. You can read more about our investment thesis for Amphenol here.”
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Disclosure. None. Forget Rivian Automotive Inc (RIVN): 10 EV Stocks to Buy for Long-Term Gains is originally published on Insider Monkey.
