America is re-industrializing…
South Korea’s Samsung Electronics Co Ltd is building a $25 billion semiconductor plant down the road from me in Taylor, Texas. Taiwan Semiconductor (TSM) is making a $40 billion investment in rural Arizona. And Toyota (TM) is currently building its 14th plant in North Carolina.
This is one of the most potentially profitable themes we track for you here at Wide Moat Research. That’s because trillions of dollars are quietly being invested all around us. The key is to know where to look – and know which companies are poised to profit the most.
So, when General Motors (GM) announced a new $500 million plant in Arlington, Texas, I wasn’t shocked…
… until I found out what GM will make there.
As you’ll see, it’s not a new kind of electric vehicle (EV) car. Or ground-breaking battery technology. It’s something more old-school than that.
And it shows why GM, not pure-play EV makers such as Rivian, Fisker, and Lucid, is the best way to safely play the EV megatrend.
An Old Name with New Tech
GM started selling EVs back in 1996 in California through a special EV1 leasing program.
GM’s EV1 was the first mass-produced EV.
GM’s EV1 Electric Car
Source: Wikipedia
It was followed up by the Chevy Bolt plug-in hybrid in 2016. To date, GM has sold over 100,000 Bolts.
And its Hummer EV is extremely popular.
Its new all-electric Hummer has 90,000 reservations. That’s years of production already sold. And that Hummer currently has a starting price of $110,295. So you’d be forgiven for thinking GMs plan in Texas is for EVs… or EV batteries. But it’s not…
GM will make internal combustion engines for its larger SUVs there.
That makes it a great way to hedge your exposure to the EV trend.
If it’s a flop, GM still has that plant in Texas making engines for gas and diesel trucks and SUVs. Pure EV companies don’t have that as a backstop.
Big Upside with Less Risk
Take Rivian (RIVN). It’s the pure-play EV make that went public in November 2021.
Since, then its stock is down 88%.
And Fisker (FSR), another pure-play EV maker, is down the same over the period.
Lucid (LCID) did a little better. But it’s still down more than 70% over that time.
These businesses aren’t profitable. To keep the lights on, they need a steady flow of investment dollars. If that dries up, they’ll go out of business.
GM is different. It has a reliable cash flow to fund new EV technology. In 2022, its revenue was $156.7 billion. And it made $9.9 billion in profits.
And the company plans to spend $35 billion in EVs and autonomous driving technology by 2025. That’s more than Rivian, Fisker, and Lucid –combined.
Even better, GM trades at less than 6x forward earnings. That makes it among the cheapest companies I follow. The S&P 500 trades at 20x forward earnings, so GM is 70% cheaper than the U.S. stock market.
GM’s stock price is up 10% so far in 2023.
If I’m right, the stock will reach our $60 per share target in 1-2 years. That’s 60% capital gains from current levels. And all without the high risk of failure associated with most EV makers.
So if you are looking to invest in the EV space, GM is a great upside play with less risk.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
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Source: Wide Moat Research