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Electric Vehicle Stock Investors Should Heed This Lesson From Warren Buffett

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6 min read


This story originally appeared on StockNews

Warren Buffett has done a great in the past highlighting the risks of investing in frothy sectors. The lessons apply to investors in stocks like Tesla (TSLA), NIO (NIO), Fisker (FSR), and Xpeng (XPEV).

Every bull market has different themes in regards to technology, demographics, geopolitical considerations, and government policy. However, they do tend to follow the same emotional trajectory – from fear to greed. In a way, it’s similar to how every hit song is unique but follows the same general structure in terms of its progressions, chorus, and themes.

Bull markets also tend to focus on certain industries that consist of stocks with huge valuations based on projections about future performance and market size. Currently, electric vehicles (EVs) are one such example. Despite the KraneShares Electric Vehicle and Mobility ETF (KARS) being down 20% over the past 2 and a half months, it’s up 150% since the March 2020 lows. 

Given the industry’s high valuations, it’s not surprising that value investors, like Warren Buffett, aren’t currently interested in investing in EV stocks. Although Buffett hasn’t commented too much on EVs, he did extensively discuss the massive risks of the dot-com bubble in Berkshire Hathaway’s (BRK.B) annual shareholder meeting last weekend. And, there are many similarities between the late 1990’s and now. Thus, I believe investors in stocks like Tesla (TSLA), NIO (NIO), Fisker (FSR), and Xpeng (XPEV) should consider Buffett’s previous insight on the subject.

Bezos and Buffett

During the 1999 Sun Valley Conference, Buffett called the bull market in technology stocks a bubble and compared it to other bubbles that previously burst, like airlines and auto stocks. 

Buffett:

“Well, I thought it would be instructive to go back and look at a couple of industries that transformed this country much earlier in this century: automobiles and aviation. Take automobiles first: … All told, there appear to have been at least 2,000 car makes, in an industry that had an incredible impact on people’s lives. If you had foreseen in the early days of cars how this industry would develop, you would have said, “Here is the road to riches.” So what did we progress to by the 1990s? … we came down to three U.S. car companies–themselves no lollapaloozas for investors. 

The other truly transforming business invention of the first quarter of the century, besides the car, was the airplane… So I went back to check out aircraft manufacturers and found that in the 1919-39 period, there were about 300 companies, only a handful still breathing today. 

Move on to failures of airlines. Here’s a list of 129 airlines that in the past 20 years filed for bankruptcy. The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.”

Of course, this quote took place with many tech leaders in attendance while Buffett was viewed as someone who “didn’t get” the Internet. The attendees included Jeff Bezos, the founder and CEO of Amazon (AMZN) who took it as a warning sign that his company’s success was by no means guaranteed. 

It’s probably not a coincidence that Amazon managed to survive the dot-com crash and then thrive while many dot-com stocks didn’t survive.

In an article about Amazon a few months later in Fortune Magazine: 

Bezos said of the speech: “When new industries become phenomenons, a lot of investors bet on the wrong companies,” [Referring to Buffett’s 70-page catalog of mostly dead car, airplane, airline and truck makes] “I noticed that decades ago, it was de rigueur to use ‘Motors’ in the name, just as everybody uses ‘dot-com’ today. I thought, “Wow, the parallel is interesting.” 

Bezos says, “Buffett’s analogies about bankrupt businesses ‘resonate deeply.’ Now Bezos is spreading the gospel according to Buffett and urging Amazon employees to run scared every day. “We still have the opportunity to be a footnote in the e-commerce industry,” he says.

What EV Investors Should Consider

The bubble that exists in the EV industry will probably play out in a similar way to previous industry bubbles. The overall EV market will grow but only a handful of companies will probably emerge as winners.

Click here  to checkout our Electric Vehicle Industry Report for 2021

There are many similarities to the previous bubbles in that there is so much new supply that is being absorbed at high valuations. Many of the companies don’t have significant production or are still in product development mode. These types of companies can only typically IPO in frothy markets. 

It’s also likely that most will fail due to the difficulties of scaling production, increasing distribution, and becoming profitable. All of these are difficult tasks that companies even with billions in the bank and decades of experience routinely fail at. 

So, EV investors take note of this important lesson from the Oracle of Omaha. Though the EV industry will surely continue to see impressive growth, it’s likely many of the EV companies with sky-high valuations today won’t exist within a decade. 

Discover Today’s Best Growth Stocks

This article was written by Jaimini Desai, Chief Growth Strategist for StockNews.com.  Jaimini has been dialed into the hottest trends in investing:

  • Electric Vehicles
  • 5G
  • Internet of Things
  • Cloud Computing
  • Genomics
  • And Much More

If you would like to see more of his best growth stock ideas, then click the link below.

See Jaimini Desai’s Favorite Growth Stocks


TSLA shares . Year-to-date, TSLA has declined -4.54%, versus a 11.53% rise in the benchmark S&P 500 index during the same period.


About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of POWR Growth newsletter. Learn more about Jaimini’s background, along with links to his most recent articles.

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Tesla vs. Geely: Which Electric Vehicle Manufacturer is a Better Buy?

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4 min read


This story originally appeared on StockNews

The electric vehicle industry is growing at a rapid pace and as such is attracting the entrance of established manufacturers, such as the China-based Geely (GELYY). But are these new entrants in general, and Geely specifically, be able to threaten Tesla’s (TSLA) leadership position?.

One of the hottest industries in which to invest currently is electric vehicles (EVs). As the globe inches towards clean energy production and consumption, companies within the EV space are  poised to grow at an accelerating pace. 

While 2020 was a breakthrough year for EV stocks, several EV companies have underperformed the market this year, allowing investors to buy growth stocks at more attractive valuations.

Here we compare two popular EV stocks. One is a market leader, Tesla (TSLA), and the other is Geely (GELYY), a company that is domiciled in the country with the world’s largest  EV market—China.

Click here to checkout our Electric Vehicle Industry Report for 2021

Let’s see which stock is a better EV buy right now:

Tesla continues to surprise Wall Street

In the first quarter, Tesla sales were up 74% year over year, driven primarily by a  109% increase  in vehicle deliveries. Its net income also surged to record highs on the back of regulatory credits.

In Q1, Tesla increased deliveries of its low-cost Model 3 and Y by an impressive 140% year over year to 182,338 units. However, deliveries of its  higher-priced Model S and X vehicles were down 83%, at 2,030 units,  in Q1 because Tesla put the production of these vehicles on hold and aims to launch newer versions of the models in coming months.

Tesla reported $438 million in  net income, or $0.93 per share, in the first quarter. This  included a $101 million gain associated with its  sale of Bitcoin. It also reported $518 million in sales of regulatory credits. Tesla bought $1.5 billion worth of digital assets in the quarter. Absent the  above-referenced sales, Tesla would have reported a $181 million loss in  Q1.

Tesla has pumped in $1.35 billion in capital expenditures and began construction in two new factories in Berlin and Texas. Once these projects are complete the company should benefit from positive free cash flows over time.

Even though  Tesla continues to use   unconventional methods to boost  its bottom-line, it remains one of the best stocks in the EV sector. It is on track to increase its vehicle deliveries by more than  50% year over year in 2021. The company’s management also confirmed it has sufficient liquidity to fund its expansion plans without having to raise additional capital.

Geely stock is down 42% from 52-week highs

An investment holding company, Geely operates as an automobile manufacturer in China. It develops , produces, markets, and sells automobiles and  automobile parts and related components. Geely manufacturers sedans, wagons, and sport utility cars.

Geely is an established  automobile manufacturer that  is now eyeing the  lucrative EV space. Earlier this year, China’s tech giant Baidu disclosed that it will partner with Geely Automobiles to manufacture smart EVs. Baidu will provide intelligent driving capabilities while Geely will leverage its design and manufacturing expertise.

But while Tesla is growing its top line at an enviable pace, Geely has seen its sales decline to RMB 92 billion in 2020 from RMB 106.59 billion in 2018. Its EBITDA has also fallen, to RMB 11.83 billion in this period from RMB 17.24 billion.  And Geely’s EBITDA margin has fallen to 12.8% in 2020  from 16.2% in 2018.Geely has attributed the sales decline to China’s weak passenger vehicle market. While its sales volume was down 10% year over year in 2019, it fell by another 6% in 2020. This is in-part why its stock is trading 42% below its 52-week high.

The final takeaway

While Tesla is the largest EV manufacturer in the world, Geely is still trying to gain a foothold in this nascent industry. In terms of valuation, Tesla is trading at a far higher multiple than  Geely. For example, Tesla’s trailing price to sales multiple stands at 20.5x, while Geely is valued at less than two times trailing sales.

But Tesla’s robust revenue forecast and expanding profit margins can support this lofty valuation, making it a better investment bet right now.


TSLA shares . Year-to-date, TSLA has declined -5.97%, versus a 12.45% rise in the benchmark S&P 500 index during the same period.


About the Author: Aditya Raghunath

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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Former Olympic Boxer Felix Verdejo-Sanchez Arrested for Kidnapping and Killing Pregnant Woman

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“I commend our partners in the FBI, the Puerto Rico Police Bureau, and the Puerto Rico Department of Justice for their dedicated and tireless efforts that led to the charges and arrest of the defendant,” said United States Attorney Muldrow in a written statement. “We will continue working towards the ending of gender-based violence, and we offer our deepest condolences to the family of the victim.”

Verdejo-Sanchez was arrested on a federal criminal complaint charging him with: (1) kidnapping resulting in death, in violation of Title 18, United States Code, Section 1201; (2) carjacking resulting in death, in violation of Title 18, United States Code, Section 2119(3); and (3) intentionally killing an unborn child, in violation of Title 18, United States Code, Section 1841, also known as the “Unborn Victims of Violence Act of 2004” or “Laci and Conner’s Law.” The penalties for the kidnapping and carjacking statutes include life in prison or the death penalty, and life in prison for the intentional killing of an unborn child.

“Puerto Rico mourns Keishla Rodríguez’s death. Our deepest condolences to her family and friends. The Puerto Rico Police Bureau and the federal agencies have worked long hours collaborating as a team to solve this cold murder expeditiously. Our police officers’ dedication, passion, and experience were essential in solving this murder in 48 hours. It demonstrates how the collaboration of efforts is essential for our public safety. We’ll keep on working together and we will seek justice for Keishla,” said Alexis Torres, Secretary of the Department of Public Safety.

“I congratulate the policemen, prosecutors, and forensic sciences personnel, who, as a single team, tirelessly and with the greatest of commitments, put their hearts to solve Keishla’s case in an agile and precise way. Our commitment to her family, from day one, was to do justice to Keishla and we have already begun to do so,” said Antonio López, Puerto Rico Police Bureau Commissioner.


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Google sued for ‘pirating’ Mexican movies on YouTube

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Spanish producer Carlos Vasallo filed the lawsuit against the two Alphabet companies in Florida.


2 min read

This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.


This story originally appeared on Cine Premiere

Google faces a lawsuit, in a federal court in Florida, by the Spanish audiovisual producer Carlos Vasallo , who accuses the company of allegedly exploiting the piracy of his films on the famous video website. According to information issued by reporter Peter Hayes from the Bloomberg portal, Vasallo claims to have “the world’s largest collection of Mexican and Latin American films.”

Within the lawsuit filed last Monday, May 3, Carlos Vasallo’s company, whose name responds to Athos Overseas, affirms that Google has allowed the films of its property to be shown on the YouTube platform to generate income without making any license payment . “The films have been viewed countless times on YouTube and have generated significant income for the defendants,” the lawsuit document said. ” Google and YouTube have been unfairly enriched by the intentional misappropriation of the films , causing Athos to suffer a loss in the value of the collection,” adds ( via ).

In the lawsuit, it can also be read that said collection of films are “a valuable part of Mexico’s Golden Age” and that Carlos Slim had even offered Vasallo more than $ 100 million for the entire series of films ( via ).

Who is Carlos Vasallo?

Currently, Carlos Vasallo is CEO and president of América CV Network. But since 1975 he has been in charge of founding and directing various companies focused on audiovisual production such as American General Films USA, Mexican Home Video, Video Universal México, América Home Video, Films Nacionales, Cinematec Video, Connoisseur Video, Top Entertainment, Cine Estelar, Cinema Nostalgia and the television channel Vasallo Vision ( via ).

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