Electric Battery Investment Opportunities to Make Nikola and Tesla Proud

LCG
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Electric Battery Investment Opportunities to Make Nikola and Tesla Proud

by Max Ziegler

2020s: The Great Reset

Ten years from now, the world might look back on Covid as our ‘great reset’ moment, similar to how Americans describe their “Pearl Harbor moment” in the 40s, which marked a moment in US history which saw dire adversity, and it sparked innovation to address the era’s biggest problems.

At the time of Pearl Harbor, artilleries were mainly horse drawn – 80% of the German military depended on horses and the majority of the US artillery was horse drawn. Take a moment to let this sink in: In 1941, major artilleries depended on horses. Yet, by the end of the war, the world had entered the atomic age. The continued threat of ever evolving weapons, and increasing tension like the cold war, which is similar in its continuity to the threats pandemics and climate change pose to us now, gave way to an incredible period of innovation and economic growth. ‘History doesn’t repeat itself, but it often rhymes’, as Mark Twain put it, and the electric car industry could be one of the more interesting horses to place bets on this decade. 

Riding the EV trend into 2035

One of the most outspoken and iconic ‘problem solvers’ Elon Musk, is looking to make us a multi planet species, deploying rockets to Mars, and, most notably to traders, his company ‘Tesla’ had a meteoric rise in 2020.  As per the BNEF 2020 forecast below, the trend of electric vehicles becoming the first choice for transport is deemed to continue this decade, however, please bear in mind, past performance is not indicative of current of future performance as investments can go down as well as up.

The BBC recently published an article that highlighted the infrastructure inversion that is currently happening in relation to charging cars. The narrative went from ‘you will never be able to charge your car with electricity anywhere’ to ‘you might not be able to fill your car with petrol or diesel by 2035’. The 2020s have been hauled as the great reset, and the electric vehicle industry is one industry to watch. 

The next step: Battery stocks

Electric car stocks are those of companies that focus primarily on manufacturing electric cars. However, companies that manufacture the components used in electric cars — like batteries – are also part of the wider electric vehicle industry and could outpace the car manufacturers this year. Question is, how are the prices related, and are we in a super cycle rotation right now?

Bullish catalysts for battery stocks

1 Installation of charging station at home 

You can have a charging station installed in your garage at home for your electric vehicle, which can usually be done  within 8 hours. So, you can leave your car plugged in and wake up in the morning to have it ready.

2 Long battery lifespan 

Research has shown that the average electric vehicle battery will retain at least 90% of its battery life after six years and six months of usage. Most electric vehicle manufacturers offer a service warranty of 8 years to 10 years for their batteries. 

3 Battery swap technology 

Tesla and other car manufacturers offer battery swap technology that allows one to swap batteries in less than 2 minutes. That way, you do not have to spend extra time charging your battery.    

4 Regenerative Braking 

Some electric vehicles have regenerative braking, whereby the car brakes by converting its kinetic energy to another form of energy that can be stored until when it is needed. This reduces friction on the tires, elongates the lifespan of the braking system, and makes for energy efficiency. 

5 Battery price

The batteries of electric vehicles are expensive. Battery price amounts to about 25% of the cost price of an electric vehicle. 

Yet, private and government researchers are working on reducing the prices of these vehicles. A lot of progress has been made on this. According to IHS Markets, the average price of batteries dropped 82% from 2012 to 2020. Based on its data, by 2023, when batteries are expected to cost less than $100/kWh, the drop will be 86% in a decade. Mass production of batteries and improvements in battery technology will drop the costs further. 

6 Reusable batteries 

Electric vehicle batteries can be reused for home energy storage, backup for large buildings, electric bikes, electric scooters, backup power for data centres, backup power for telecommunication base stations, etc. 

The residual capacity of these batteries is still very valuable.    

7 Recyclable batteries

Old batteries from electric vehicles can be recycled. The batteries could also be reduced to constituent metals and elements for usage elsewhere.   

Potential risks for battery bulls

1 Global chip shortage

The global semiconductor chip shortage that has hit automakers around the world and constrained vehicle production will easily drag into next year, the chief executive of the world’s No. 4 automaker, Stellantis warned, which could hamper production and profitability of electric vehicle makers.

2 Cost and environmental impact of raw materials

Materials for battery production are of finite supply. The chemicals and processes used in mining lithium create air, water, and soil pollution; Less than 5% of lithium-ion batteries are recycled. If thrown in landfills, EV batteries can leach chemicals into the ground and into water, potentially causing serious environmental damage, or even cause toxic chemical fires.

3 Governments slow to create infrastructure

While governments have pledged to employ funds to build up the infrastructure, actual progress has been slow, and Biden’s multi trillion dollar infrastructure plan only ended up with a fraction of the originally pledged amount for electric vehicle infrastructure.

4 Competition Risk

As for with most emerging industries, there is a risk of betting on a company that will lose out to the competition.

5 Risk/reward ratio

When stocks have risen quickly, there is always a risk of pullback, and battery stocks are no exception to this.

6 Competition pressure on prices

Prices for batteries are expected to keep falling, which will be good for profit margins. However, there could also be increased pressure to offer batteries cheaply, which would decrease profit margins for the battery stock firms.

3 battery stocks that are worth a look

  1. Tesla 

Tesla is not only producing cars but is also heavily invested in the production of batteries. The Q2 earnings report revealed that, in short, Tesla managed to get some progress done, yet they still have more work to do before achieving any volume production on their batteries.

Past performance is not an indicator of current or future performance

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2. Energizer Holdings, Inc. ENR 

ENR is a leading manufacturer of batteries and automotive care products globally and produces lithium-ion batteries. Is the share price increasing or decreasing amid the effect of Tesla’s earning call?

Past performance is not an indicator of current or future performance

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3. FMC Corporation FMC

Similarly, the chemical company FMC Corporation, which is involed in the production of Lithium for batteries, has been cycling for around one year. The , questionsis whetherthe support lines as indicated below hold despite the global chip shortage, and whether we will then see another leg up as per the previous months?.

Past performance is not an indicator of current or future performance

Open a free demo account with charting tools here

The world is changing at an ever-faster pace, and while it is impossible to predict which technologies will rise the most, electric car batteries continue to be worth watching.

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Investors look back on performances year-to-date as FTSE 250 stands out

Liam Roche
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Investors look back on performances year-to-date as FTSE 250 stands out

A number of key markets in Europe and Asia were quiet on Friday, with the FTSE 100 slipping 0.0056% to 7,120 and Asian stocks gave away ground.

“US non-farm payroll figures could put a bit of life in the markets later today, with forecasts for 925,000 jobs to have been added in July and unemployment at 5.6%. A worse than expected figure might trigger a positive market reaction as it would suggest the economy is not overheating,” says Russ Mould, investment director at AJ Bell.

“Conversely a better-than-expected figure might trouble investors if it suggests the economy is racing ahead, which would stoke fears of interest rate hikes happening sooner than currently guided by the US Federal Reserve.”

With the markets now entering the quiet summer period, investors will be looking back over their year-to-date performance and creating a strategy for the autumn onwards.

US stocks continue to be the place to be for many, with the S&P 500 index up 19.7% year to date, closely followed by the Dow Jones which has advanced 16%.

“Joe Biden’s $1 trillion infrastructure plan will provide impetus, together with the fact that businesses and consumers are busy spending, all creating a tailwind for economic growth. Equally there is also a headwind in the form of inflationary pressures which is starting to eat into corporate profit margins. For now, investors seem happy to stick with the US market in the search for investment returns,” said Mould.

The UK market has also done well, especially compared to its performance over the past decade.

“The FTSE 250 has been the star performer, up 14.1% so far this year, helped by a swathe of takeover activity as private equity and overseas trade buyers start to capitalise on the value still to be found among UK stocks,” Mould said.

“The FTSE 100 has lagged the UK’s mid cap index, but still delivered an 8.2% gain year-to-date. That’s slightly better than the historical annual returns seen from the market and we still have the best of five months to go.”

Asia has been the laggard, with a regulatory clampdown in China putting investors off the region. Hong Kong’s Hang Seng index has fallen 4.6% so far this year, and China’s SSE index is down 1.3%.

“Japan’s Nikkei 225 index has bucked the negative trend in Asia with a 2.1% gain since the start of January, but hardly a reason to celebrate. The IMF recently downgraded its 2021 economic forecast for Japan as it struggles to deal with Covid. It now expects 2.8% growth this year, the weakest of all the advanced economies.”

UK house price growth slows to 7.6% annually

Liam Roche
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UK house price growth slows to 7.6% annually

Changes to the stamp duty holiday came into effect last month

Average UK house prices rose in July by 7.6% compared to the year before, however, the rate of growth has slowed down.

This is according to Halifax, the mortgage lender, which said that the average property price is now at £261,221.

The July figure is 0.4% higher than the month before when the annual growth rate was higher at 8.7%.

Changes to the stamp duty holiday came into effect last month as buyers will now get less favourable terms.

However, a shortage of homes is likely to continue to support house prices, according to Halifax.

At 7.6%, the growth in house prices is still easily exceeding wage growth, as has been the case for the majority of the past decade.

There are a number of factors that appear to have caused the dramatic rise in house prices even in the face of the pandemic. Firstly, the cost of borrowing is historically low. Secondly, there is pent-up demand following a temporary slowdown. Lockdowns have created a desire among people to have more space. Finally, sizeable government subsidies have played their part.

Russell Galley, a managing director at Halifax, said

“Recent months have been characterised by historically high volumes of buyer activity, with June the busiest month for mortgage completions since 2008. This has been fueled both by the ‘race for space’ and the time-limited stamp duty break. With the latter now entering its final stages, buyer activity should continue to ease over the coming months, and a steadier period for the market may lie ahead,” said Galley.

“Latest industry figures show instructions for sale are falling and estate agents are experiencing a drop in their available stock. This general lack of supply should help to support prices in the near-term, as will the exceptionally low cost of borrowing and continued strong customer demand.”

CyanConnode looks ahead as losses narrow

Liam Roche
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CyanConnode looks ahead as losses narrow

CyanConnode has signed a number of important partnerships

CyanConnode (LON:CYAN), the IoT technology innovator, confirmed on Friday that its operating loss for the financial year to March 2021 narrowed by 57% to £2.7m.

However, CyanConnode’s revenue jumped to £6.4m from £2.5m a year prior.

The board of the company remains optimistic regarding its outlook approaching the remainder of 2022.

CyanConnode signed a number of important partnerships, as well as winning two new orders since the beginning of the year.

The AIM-listed firm also confirmed the appointment of a new senior management team in India, where a number of projects will begin following the easing of restrictions.

“We look forward to further order announcements during this financial year, and to delivering the backlog of orders won in previous periods,” CyanConnode said.

The CyanConnode share price is down by 2.13% during the morning session on Friday following its results.

“The market in India is picking up again after its second lockdown during April and May 2021, and we were pleased to receive a contract from Schneider in August 2021 for 152,000 Omnimesh modules and associated gateways, services, Head End Software and support and maintenance services. This further increases the backlog we are delivering in India,” said John Cronin, Executive Chairman of CyanConnode.

“Along with the orders received for Thailand in July 2021 and an African deployment in August 2021, we look forward to an even more successful financial year ahead.”

Earlier this week CyanConnode confirmed it received a contract for a smart metering deployment in Africa.

The firm said it would supply 100,000 ‘Omnimesh’ modules together with advanced metering infrastructure, services, Omnimesh head-end software, a perpetual licence, and an annual maintenance contract.

Asian shares lose ground as Delta variant remains a concern

Liam Roche
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Asian shares lose ground as Delta variant remains a concern

Investors are also unclear about China’s policies in dealing with the pandemic

Asian stocks gave away ground on Friday due to the spread of the Delta variant of the coronavirus raising concerns over the country’s economic recovery.

The move came as US stocks posted strong gains.

Investors are also unclear about China’s policies in dealing with the pandemic, creating a sense of hesitancy, especially after the CCP came down on the technology sector.

The MSCI Asia ex Japan index is down by 0.19% on Friday, while the CSI 300 index (Chinese blue chips) and KOSPI 200 Index (Korea) have lost 0.55% and 0.33% respectively.

“There are two main drivers of volatility in the market this week, firstly everything surrounding the Chinese regulatory drive…and secondly the severity of Delta outbreaks around the region,” Carlos Casanova, senior economist Asia at UBP, told Reuters.

“International investors are still wrapping their head around what happened in the education sector (in China). I expect that will continue to drive sentiment. The regulatory drive is not over yet, it should continue to be a factor in the next three to six months or so,” he said.

China today reported 124 confirmed new cases for 5 August, the country’s highest daily count for new cases in the recent outbreak.

Additionally, Malaysia and Thailand reported record daily cases on Thursday.

The MSCI world shares index is just short of an all-time-high as stock markets from other parts of the world take the load off of Asia.

Following a flurry of robust earnings announcements, the Nasdaq and S&P 500 closed at record levels yesterday, as eyes will now turn to the upcoming jobs report.

“Asian and emerging markets have gone from strength to strength,” says Kate Marshall, senior investment analyst at Hargreaves Lansdown. “Rapid industrialisation, growing populations, and a desire to succeed have helped transform developing countries into economic superpowers. Domestic consumption is set to be a key driver of growth over the coming years, helped by a young and growing population, and rising wealth.”

“These countries have also become hotbeds of innovation. Some countries are at the forefront of technology and many companies located there are overtaking Western competitors,” Marshall added.

Cyber Security stands out in July amid disappointing month for equities

Liam Roche
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Cyber Security stands out in July amid disappointing month for equities

Saxo, the online trading platform, revealed that its top performing equity-themed basket in July was ‘Cyber Security’, returning 5.1% last month.

An equity basket, according to Saxo, is a collection of stocks thematically identified by the company’s analysts to isolate an area of the market and act as inspiration for investors.

However, July was broadly a bad month for Saxo Group’s equity baskets with only two, ‘Cyber Security’ and ‘Battery’, outperforming the global MSCI World index.

July’s Saxo Group top performing Equity Themed Baskets

Equity Theme BasketJuly Return (%)
Cyber Security5.1%
Battery3.1%
MSCI World (USD)1.8%
India (GDRs)1.3%
Financial Trading-0.2%
Semiconductors-0.4%
Green Transformation-1.2%
Commodity Sector-1.2%
Mega Caps-1.7%
Logistics-2.9%
Crypto & Blockchain-5.0%
Travel-5.6%
MSCI EM (USD)-6.7%
Cannabis-7.1%
NextGen Medicine-7.2%
E-commerce-7.3%
Gaming-8.7%
Bubble Stocks-10.7%
3D Printing-11.1%
China Consumer & Technology-11.9% 

The low performance across the board came about mainly due to concerns over the Delta variant of Covid-19 and its impact on the global economy.

Peter Garnry, Head of Equity Strategy at Saxo Group, said the platform’s Cyber Security basket performed well in July for two key reasons: “The first was a strong earnings momentum for the industry. The second reason is that American President Joe Biden in July signed an official agreement, pledging to strengthen the US’ cyber security efforts and ensure that the country is prepared for future cyber attacks.”

The US 10-year yield fell during July, as did ‘Bubble’ stocks, making it an usual month. At the same time, the earnings season started strong as some of the world’s major companies companies beat estimates. However, global supply chains are still being paced by supply chain challenges.

The worst performing basket of all was ‘China Consumer and Technology’, after the CCP cracked down an certain sectors over fears they were getting too much power.

“We have also recently seen China crack down on its for-profit education industry and its wider technology industry as well as on Chinese listings in the US,” said Garnry. “It seems as though this is due to a desire to move the country’s industry towards other technologies within renewable energy and semiconductors.”

“China is moving away from a strategy of growth at all-costs and instead looks towards more high-end technology development. Global investors, which have recalibrated their exposure to emerging markets and China, sending the China Consumer & Technology basket South.”

Rolls-Royce share price well positioned to take off again as travel sector recovers

Liam Roche
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Rolls-Royce share price well positioned to take off again as travel sector recovers

Rolls-Royce Share Price

The Rolls-Royce share price (LON:RR) is up by 3.46% on Thursday as the engineering company confirmed it returned to a profit. Unless there are some dramatically unforeseen circumstances, the Rolls-Royce share price will close out its third consecutive week in the black on Friday evening.

The Rolls-Royce share price has struggled throughout 2021 as the outlook for the aviation industry has remained cloudy. Since the beginning of the year, the Rolls-Royce share price is up by 4.90%. Investors will hoping the FTSE 100 company’s recent update, along with the continued easing of restrictions across the world, will bode well for the Rolls-Royce share price.

Return to Profit

Rolls-Royce made a profit for H1, confirming an underlying operating profit of £307m. This compares favourably to the same period a year ago when the engineering company made a £1.63bn loss.

In further positive news, Rolls said it is expecting to turn free cash flow positive during H2. However, its free cash flow target of £750m is not likely to happen until 2022, beyond the initially expected time period.

Warren East, chief executive, said: “We are making disciplined investments in the new opportunities to drive future growth, particularly in net zero power where we are leading the way with innovation and engineering excellence.”

James Andrews, senior personal finance expert at money.co.uk, said: “After 2020 saw an almost £4 billion year loss for Rolls-Royceamidst the COVID-19 pandemic, investors could be forgiven for cheering today’s profit of 114 million (before tax).”

“The company, which makes more money the more long-haul flights take place, is suffering a long Covid recovery as international air travel remains depressed.”

Actions taken early on in the pandemic, including shedding 9,000 staff and selling off part of the firm to free up cash, seemed to have positioned Rolls well to take off again as the travel sector recovers.

“And with share prices less than a third of their 2018, peak several experts rate the stock as a strong medium to long-term prospect,” Andrews said.

Bank of England holds rates at 0.1% despite change of tone

Liam Roche
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Bank of England holds rates at 0.1% despite change of tone

MPC says inflation is likely to reach 4% towards the end off 2021

The Bank of England confirmed on Thursday that there may need to be some “modest tightening of monetary policy” over the next two years in order to minimise the potential impact of high inflation.

The Monetary Policy Committee (MPC) said that inflation is likely to reach 4% closer to the end off 2021, alongside a robust recovery, as the committee agreed at its latest meeting that conditions have been met to examine the possibility of hiking interest rates.

However, the MPC does not feel compelled to act with speed by any stretch of the imagination.

The committee voted unanimously to keep interest rates at the historic low of 0.1%, while all but one member out of eight voted to keep the £150bn programme of purchases of government debt in place.

The Bank of England referenced the efficiency of the vaccine roll-out in changing the outlook of the UK economy, as restrictions have been lifted on a number of key industries.

Subsequently, consumer spending bounced back since April, along with output, meaning the need for stimulus is less acute.

Ed Monk, associate director, Personal Investing at Fidelity International, believes the mood at the Bank of England appears to be changing.

“This is yet to translate into any change in monetary policy and rate-setters voted 7-1 to keep rates and asset purchases at their current levels, but the minutes from the August meeting reveal that some members now believe the conditions for some tightening have been met,” said Monk.

“The labour market remains key with recent wage rise and unemployment data turning out stronger than expected. That points to a broad-based rise in demand that may not recede as the economy recovers from the pandemic.”

“While the Bank rate is still likely to remain at its current 0.1% this year, expectations of a future rise have come in somewhat and markets may have to process a quicker return to more normal monetary policy. The Bank may soon have to balance the need to control inflation with the potential for instability created by imposing higher borrowing costs. Younger generations in particular have never experienced high inflation and rising rates, and will be unused to feeling the effects of a rise in the mortgage payments,” said Monk.

Will the Chancellor and Prime Minister’s challenge to pension investors unleash UK ‘investment big bang’?

Liam Roche
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Will the Chancellor and Prime Minister’s challenge to pension investors unleash UK ‘investment big bang’?

Prime Minister Boris Johnson and Chancellor Rishi Sunak have penned an open letter calling on UK pension schemes to spur a UK ‘investment big bang’.

The duo issued a call with the aim of igniting “an Investment Big Bang” that would “unlock the hundreds of billions of pounds sitting in UK institutional investors”.

Johnson and Sunak argued in their joint letter that British pensioners are at risk of losing out on more prosperous retirements as their allocations towards investment in long-term UK assets is not big enough.

“The United Kingdom’s economy possesses a rich pool of assets ripe for long-term investment and bolstered by a world-leading research sector, commitment to the green technologies of the future, and British entrepreneurial spirit,” the letter read.

“Yet while global investors, including pension funds from Canada and Australia, are benefiting from the opportunities that UK long-term investments afford, UK institutional investors are under-represented in ownership of these assets.”

Tom Selby, head of retirement policy at AJ Bell, suggested that Johnson and Sunak are banking on retirement investors to deliver an ‘investment big bang’ and power the UK economy back to health.

“Given their long-term focus and scale, defined benefit and automatic enrolment pension schemes might seem ideal candidates to support UK companies. There is also more than a whiff of patriotic fervour in this latest drive to ‘Build Back Better’.”

However, it may not be soo easy for the pair to influence pension investors’ decision making so easily.

“However, just because the PM and Chancellor click their fingers doesn’t mean pension investors will flock to illiquid UK investments in their droves.”

“The reality is that pension scheme trustees have a duty to invest members’ hard-earned retirement pots sensibly, considering various factors including risk appetite, cost and, increasingly, impact on the environment.”

“Institutional investors also need to prioritise diversification when choosing how to put members’ money to work, both in terms of the type of company they invest in and the country in which it resides. Ultimately, the main job of pension schemes is to invest in a way that maximises returns for their members, not in the way the Prime Minister tells them to,” Selby said.

Health, Wealth and Cryptocurrencies with Digital Asset Management’s Sam Buxton

UK Investor Magazine
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Health, Wealth and Cryptocurrencies with Digital Asset Management’s Sam Buxton

The UK Investor Magazine Podcast is joined by Sam Buxton, CEO and Co-Founder of Digital Asset Management.

DAM is dedicated to making the ownership and management of Digital Assets simple and secure, utilising distributed ledger technologies. Established in 2017 DAM has traded €350+ million from inception to March 2021, and has built a variety of digital asset solutions operating within a regulated framework.

We explore the story behind DAM how they plan to provide a cryptocurrency trading and payments platform that rewards healthy lifestyles with favourable financial products.

DAM are currently raising funds through Crowdcube and Sam discusses how funds will be utilised to achieve Dam’s goals.

Find out more about DAM’s Crowdcube campaign here: crowdcube.com/dam

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