We recently published a list of 11 Hot EV Stocks to Buy Now. In this article, we are going to take a look at where Lumentum Holdings Inc. (NASDAQ:LITE) stands against the other hot EV stocks to buy now.
Just like any new technology, there is a lot of skepticism about the electric vehicle (EV) industry as well. Some believe that the technology is not viable while others are worried if the infrastructure will be enough to meet the charging demand and so on.
However, the electrification of vehicles is inevitable in the future. While there has been a slowdown in EVs in the US and Europe, China’s dominance and growth in the industry are a testament to the fact that the technology will take over internal combustion engines relatively soon.
We discussed the dominance of the Chinese EV industry in our article, 11 Small Cap EV Stocks to Invest In. Here is an excerpt from the article:
“While the growth in the US and Europe is slowing down, China is picking up a significant pace and dominating the EV landscape. According to a World Economic Forum report, Chinese EVs are much cheaper than their Western counterparts, with an average price of $34,400, compared to $55,242 in the U.S. The price gap is driven by lower labor costs, favorable government subsidies, and more affordable battery sourcing.
Chinese automakers now produce more than half of the world’s EVs and are using their cost advantages to potentially dominate the global market. As Chinese brands gain scale and expertise, their competitive pricing could allow them to challenge Western automakers.”
A lot of the EV slowdown in the West is attributed to the removal of subsidies, higher prices compared to gas-powered cars, and limited charging infrastructure. Nevertheless, some governments are now considering reinstating subsidies, and automakers are working to introduce more affordable EV models to boost demand and recover market share.
Burning Question: Is EV and Battery Manufacturing Worse for Climate?
While it is clear that EVs are better for the environment, many people have raised questions about the impacts of EVs and battery production on the environment. According to a report posted on the MIT Climate portal in 2022, Sergey Paltsev from MIT’s Joint Program on the Science and Policy of Global Change explained that despite the manufacturing emissions, EVs have a significantly lower environmental impact compared to gasoline-powered cars.
The higher emissions from manufacturing EVs, especially due to the production of their lithium-ion batteries, are offset by the cleaner operation of EVs over their lifetime. Charging emissions vary depending on the energy source.
In regions using clean energy like hydropower, EVs have a very low carbon footprint, while in areas reliant on coal, the emissions are higher. However, even in the worst scenarios, EVs generally outperform gasoline vehicles in terms of emissions.
Moreover, studies from MIT and the U.S. Department of Energy show that EVs consistently produce less carbon dioxide per mile driven than hybrids or gas-powered cars. For example, the average EV emits 25% less CO2 than hybrids when using the U.S. grid’s energy mix, and this gap widens in regions with cleaner energy.
Our Methodology
For this article, we scoured stock screeners and ETFs to identify nearly 50 stocks that were involved in the EV industry in a significant capacity. Next, we narrowed our list to 11 stocks that had double-digit year-to-date share price growth as of September 30 and were most widely held by institutional investors. It is important to note that the share price returns were calculated while the market was open which could result in fluctuations compared to the provided data. Finally, we listed the 11 hot EV stocks to buy in ascending order of their hedge fund sentiment, which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a technician calibrating a laser beam.
Lumentum Holdings Inc. (NASDAQ:LITE)
Year-to-date Share Price Returns: 20.93%
Number of Hedge Fund Holders: 32
Lumentum Holdings Inc. (NASDAQ:LITE) is a global manufacturer specializing in optical and photonic products and providing its products and services to markets across the Americas, Asia-Pacific, Europe, the Middle East, and Africa. It is among our hot EV stocks to buy now.
It provides essential components that advance the manufacturing and operation of EVs. It focuses on key areas such as sensing, communication, and data processing, all crucial for the evolution of electric and autonomous vehicles.
At a stake value of $702.421 million, 32 hedge funds tracked by Insider Monkey held positions in Lumentum Holdings (NASDAQ:LITE) in the second quarter. As of Q2, Point72 Asset Management is the top shareholder in the company and has a position worth $164.366 million.
One of the important EV-related offerings from the company is its high-performance laser systems and optical components, which are important to 3D sensing technologies used in autonomous vehicles.
The technologies facilitate necessary features like obstacle detection and navigation, which contribute to the safe operation of self-driving cars. Furthermore, the company’s optical communication solutions are designed to enable high-speed data transfer, a necessity for the connectivity features found in modern EVs.
As the production of lithium-ion and solid-state batteries expands, its laser technologies address several manufacturing challenges. The lasers assist in various stages of battery cell production, including electrode cutting, laser patterning, ablation, notching, slitting, and surface structuring.
By implementing these solutions, manufacturers can reduce costs and produce battery cells with higher energy and power density, which is critical for improving the performance and efficiency of EVs.
In 2023, Lumentum Holdings (NASDAQ:LITE) partnered with Lumotive to launch the M30 Reference Design, a cutting-edge sensor technology aimed at improving vehicle perception. The design merges Lumotive’s advanced beam-steering chip with Lumentum’s laser array, specifically engineered for 3D LiDAR systems.
The systems are essential for self-driving cars and other advanced mobility applications. The company’s multi-junction VCSEL arrays included in the M30 design provide significant benefits. They are more energy-efficient than traditional lasers and offer advanced scanning precision, which ensures effective operation in various lighting conditions and over different distances.
Overall LITE ranks 3rd on our list of hot EV stocks to buy now. While we acknowledge the potential of General LITE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LITE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.