12 Best Autonomous Vehicle Stocks to Buy for 2021

In this article, we present to you the 12 Best Autonomous Vehicle Stocks to Buy for 2021.

An autonomous car is defined as a vehicle that is capable of functioning without any human involvement. The vehicle is able to sense any environment at any given time with the help of sensors, actuators, complex algorithms, and software execution. Basically, AVs are driverless cars.

Autonomous electric vehicles are not good for the environment (please also see 12 Best Climate Change Stocks to Buy Now) but also prevent one of the leading causes of death. According to a study conducted by the Center for Disease Control and Prevention, crash injuries are estimated to be the eighth leading cause of death globally. If we were able to switch to autonomous driving over night, we would save more than 1 million lives per year globally. Yet, we are still too scared of harming people during the development process of the autonomous driving technologies.

With the continuous advancement of technology, consumer interest in autonomous vehicles has grown significantly. Please all see 15 Best Tech Companies: How Big Can They Get? In a study conducted by Statista, 85 percent of US adults would feel safe sitting behind the wheel of a driverless vehicle. By 2030, the autonomous vehicle will become a large market at $60 billion worldwide. ARK Invest’s Cathie Wood thinks autonomous vehicles will capture a larger than estimated percent of the market. Wood’s biggest stock position in her portfolio is Tesla Inc. (NASDAQ:TSLA). She believes Tesla will beat GOOGL to self-driving car dominance.

As a result of recent activities relating to COVID-19 including the lockdown, there was a significant boost in interest for autonomous vehicles not only for transportation but for greater automation as well. Anjana Susarla, an accounting and information systems professor at Michigan State University mentioned,

“Part of the resurgence is coming from the fact that the pandemic has made companies realize the importance of investing in contactless technologies and greater automation. In China, for instance, driverless cars were used for disinfecting roads, driverless cleaning and disinfection vehicles for use within hospitals etc. Some airports have likewise installed autonomous disinfecting robotic vehicles. Some other applications are autonomous vehicles for contactless robot delivery systems for food delivery.”

The Biden Administration’s “Build Back Better” signals a strong digital infrastructure plan. The plan emphasizes clean energy in particular electrified vehicles. Garrett Nelson, a senior automotive analyst with CFRA Research mentioned,

“Traditional automakers with largely union workforces would likely be among the biggest winners from tax incentives that would further stimulate the production and consumption of EVs,”

Amazon (AMZN) has come up with its own self-driving vehicle company, Zoox. An electric, fully driverless vehicle that was built for ride-hailing. The company mentioned that this achievement marked a new key milestone for them,

“Zoox is the first in the industry to showcase a driving, purpose-built robotaxi capable of operating up to 75 miles per hour. While our vehicle is not ready for commercial use yet, this marks a key milestone towards our vision of building an autonomous robotaxi fleet and ride-hailing service.”

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In order to identify the 12 best autonomous vehicle stocks to buy for 2021, we started with the 76 holdings in the Global Autonomous & Electric Vehicles ETF (DRIV) as of December 24, 2020, and we were able to narrow down our list to 12 stocks by using our hedge fund sentiment scores.

So why did we use the sentiment scores of hedge funds as the key criteria to assess the best stocks of autonomous vehicles to buy for 2021? Our in-house research shows that we can use the hedge fund sentiment data to identify in advance a small group of stocks that can outperform the S&P 500 index on an average by double digits annually. For example, the portfolio of stock picks for our monthly newsletter has beaten the market by over 78 percent since March 2017 (see the details here). We have also shared some of the portfolio holdings of our monthly newsletter online. We shared this real estate stock in October and it’s been up more than 50 percent since then.

Based on our hedge fund sentiment data, we present to you, the 12 best autonomous and electric vehicle stocks to buy for 2021, among the 800+ hedge funds tracked by Insider Monkey:

12. Cisco Systems, Inc. (NASDAQ:CSCO)

No of HFs: 59

Total Value of HF Holdings: $3.93 Billion

In 2017, Cisco began working with Michigan DOT to build an autonomous driving infrastructure. In recent years, Cisco developed innovative data collection and analysis solutions in the smart car industry. Cisco aims to bring gigabit-speed Ethernet connectivity to smart cars allowing both the fastest air updates and laying the foundation for better self-driving technology. Cisco Systems Inc is in partnership with UK-startup Oxbotica in building a platform that runs a software built-in autonomous cars that would upload data to the cloud.

Heartland Opportunistic Value Fund mentioned in an article that they believe positive strides from CSCO made in previous quarters will resume post-pandemic

“A handful of Information Technology (IT) names have been grabbing most of the investment headlines lately, however, as a whole, the sector has been a mixed bag from a performance standpoint. The Russel 3000® Value Index highlights the dynamic where the group ended the period mostly flat. Our holdings in the space outperformed marginally but also contained a key detractor, Cisco Systems, Inc. (CSCO).

Cisco, the world’s leading computer networking provider, was down for the period after revenues from its Products and Applications business lines weakened as IT departments postponed network spending in response to COVID-19. Sales from its security line were up roughly 14% but strength in the segment wasn’t large enough to offset weakness elsewhere. Impressively, they held operating margin on a 9% revenue decline.

Wall Street’s reaction to the weak results were mixed. Some credited the company for executing well in the face of an unprecedented macro pressure on its clients, while others cited results as an indicator that Cisco is struggling in its transformation from a predominantly hardware-oriented business to one that generates recurring-revenue through software and services.

The challenges faced by Cisco strike us as a temporary setback to what has been ongoing progress in its transition to a model that generates recurring revenue and is less tied to the IT spending cycle.

We believe the positive strides made in previous quarters will resume. With the recent setback, shares are trading at an attractive 12x earnings, while generating a nearly 4% dividend yield and a free cash flow/enterprise yield of nearly 10%.”

11. General Motors Company (NYSE:GM)

No of HFs: 60

Total Value of HF Holdings: $4.78 Billion

GM ranks 11th in our list of the best autonomous vehicle stocks to buy for 2021. If you own a Chevy, GMC, or a Cadillac, your car is definitely from General Motors Co. General Motors Co. is one of the biggest automotive companies not only in the US but also globally that specializes in designing, manufacturing, and selling cars, trucks, and automobile parts. Recently, General Motors and Honda announced to team up on new models for North America, foreseeably sharing platforms for electric and internal combustion vehicles with a variety of body styles. Earlier this year, GM unveiled the design of the ultimate ride-sharing driverless car in San Francisco. GM and Honda unveil “Origin”, an all-electric, driverless shuttle, that can seat up to 6 people in the car of tomorrow. Could Origin wipe up the ride-sharing giant, Uber? One thing is for sure, now we’ll keep an eye on you, GM.

In an article, Greenlight Capital’s highlighted a few stocks and GM was one of them,

“We have owned GM for a number of years and our investment has underperformed the market (our return to date has been 10.6%, annualized). Every year the shares seemed cheap on an earnings basis, but cash flow ultimately came up short for one reason or another. An unprofitable region or two was sold or restructured, investments were made in new technologies, plants and product lines required capital investment, GM Financial required capital to grow, and pension plans were funded. All of these steps have led to a stronger company that can better face future economic and business challenges. However, the net result of so many cash needs is that while earnings have been good, cash flow has lagged.

Management recognizes this disconnect, and in early 2019, the company emphasized that cash flow must better match earnings. As we looked at the company’s forecast, we saw no more regions requiring expensive restructuring, and the above-normal capital and strategic investments appeared to be paid for. As such, we believed that by late 2019 the cash flow would again be significant enough to allow GM to recommence its share repurchase program. We half-asked and half-joked, what would cause cash to come up short in 2019? We couldn’t think of anything. And then a six-week-long strike hit that caused GM to miss its earnings forecast and come up woefully short on free cash flow – again.

10. Intel Corporation (NASDAQ:INTC)

No of HFs: 66

Total Value of HF Holdings: $4.34 Billion

INTC ranks 10th in our list of the best autonomous vehicle stocks to buy for 2021. Intel-based technologies are being promoted by Intel Corp in autonomous vehicles for sensor processing, general computation, and connectivity. In 2017, Intel Corp acquired Mobileye, a leader in computer vision for autonomous driving technology, for $15.3 billion. The company was mentioned as one of the 10 Best Dividend Stocks to Buy Under $50 and one of the 10 Most Profitable Companies in America in 2020.

The top hedge fund holder of this stock is Ken Fisher’s Fisher Asset Management which had over $1.46 billion invested in the stock at the end of September.

9. Tesla, Inc. (NASDAQ:TSLA)

No of HFs: 67

Total Value of HF Holdings: $8.17 Billion

TSLA ranks 9th in our list of the best autonomous vehicle stocks to buy for 2021. The California-based autonomous vehicle producer swept our feet off the ground with its electric-fueled, sexy-looking, driverless cars. Tesla, Inc. is the crowd’s favorite because it’s the opposite of the boring; its products are innovative with a touch of luxury and fit with the right market. During the third quarter of 2020, the company reported a net income of $331 million on revenue of $8.77 billion. Tesla was mentioned as one of the 5 Best Auto Stocks to Buy Now and ranked as one of the Top 10 Stocks Americans Searched the Most in 2020.

In an article, Baron Opportunity Fund mentioned their comments on TSLA,

“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, and energy storage solutions. The company reported robust second quarter results, solidly ahead of market expectations, despite the impact of the COVID-19 pandemic and associated macro-economic challenges. Indeed, in the second quarter, Tesla delivered almost 91,000 total vehicles – with strong unit level economics of 25.4% GAAP automotive gross profit margins – and another quarter of GAAP profitability and solid free cash flow (above $400 million). Moreover, Tesla recently announced a record of nearly 140,000 total vehicle deliveries for the third quarter. Despite global COVID-19 disruptions, our long-term expectations remain high due to Tesla’s differentiated products and healthy unit economics. Tesla has announced capacity expansions in Shanghai, China; Berlin, Germany; and Austin, Texas to support its short-term path to 1 million vehicles and its long-term goal of 20 million. Just a couple of weeks ago, Tesla held its Battery Day event, and presented a grand vision around its battery innovation and expanding its competitive advantages, including massively increasing internal battery production capacity (100 gigawatt-hours by 2022 and 3,000 by 2030), improving battery range (about 50%), and significantly lowering battery costs (cost per kilowatt-hour to decline by over 50%). We remain confident that Tesla will leverage its brand, technology leadership, and the electric vehicle secular trend to achieve sustainable long-term growth.”

8. NXP Semiconductor NV (NASDAQ:NXPI)

No of HFs: 68

Total Value of HF Holdings: $1.63

NXPI ranks 8th in our list of the best autonomous vehicle stocks to buy for 2021. The Company offers high-performance mixed-signal and regular product solutions for the automotive, personal security and identification, wireless and wireline infrastructure, mobile communications, multi-market industrial, consumer, and computing industries. NXP’s innovations include functional safety and automotive security, powertrain and vehicle dynamics, versatile body interior, and highly automated driving systems.

The top hedge fund holder of this stock is Alex Sacerdote’s Whale Rock Capital Management which had over $1.46 billion invested in the stock at the end of September.

7. Advanced Micro Devices, Inc. (NASDAQ:AMD)

No of HFs: 71

Total Value of HF Holdings: $5.08 Billion

AMD ranks 7th in our list of the best autonomous vehicle stocks to buy for 2021. Advanced Micro Devices, Inc. based in Santa Clara, California was founded in 1969. The company focuses on high-performance computing and visualization products used in computer processing. During the third quarter, the company reported a revenue of $2.80 billion.

The company was mentioned as one of the Top 10 Stocks New Mets Owner Steve Cohen was Buying in Q3.

6. Micron Technology, Inc. (NASDAQ:MU)

No of HFs: 79

Total Value of HF Holdings: $4.57 Billion

The Embedded Business Unit sector of Micron Technology Inc focuses on developing memory and storage products sold into automotive, industrial, and consumer markets. Micron’s automotive memory is the key to the intense memory needs of today’s and tomorrow’s self-driving cars.

Is MU a compelling investment case? Check out our article where Bonsai Partners mentioned MU,

If there’s one investment mistake I’ve made multiple times in my career it’s accepting lower quality businesses available at attractive prices. I hope I’m not repeating this mistake again with Micron.

Acquiring a low-quality business at a great price usually does not lead to great investment returns, but neither does a great business at a low-quality price. You have to have both to earn superior returns.

I view Micron’s share price is quite attractive, but I also believe the business is transitioning from being mediocre to rather good. If that happens, attractive returns should follow.

Historically, Micron has not been kind to shareholders, and its shares are currently priced to reflect this. However, I believe that the nature of the DRAM industry has structurally changed for the better.

From a high-level, what makes Micron attractive is how essential it is to human progress. Without getting too professorial, humanity has had multiple waves of productivity gains over the past 12,000 years.

The first big improvement in productivity came from the agricultural revolution, which allowed humans to shift from hunting and gathering into high productivity farming and the division of labor.

The second wave of human productivity came from the industrial revolution, which harnessed machines to perform repetitive tasks on our behalf.

We are now in the third wave of human productivity: the information age. Like the machines of the industrial revolution, silicon chips are now automating and simplifying information-driven tasks.

Click to continue reading and see the

5. Nvidia Corporation (NASDAQ:NVDA)

No of HFs: 82

Total Value of HF Holdings: $7.67 Billion

We rank Nvidia Corporation as the top five autonomous vehicles to buy for 2021. The American multi-national company specializes in programmable GPUs that have led breakthroughs in parallel processing which made supercomputing inexpensive and widely accessible. Nvidia was also mentioned as one of the Top 5 Video Gaming Stocks to Buy Now and one of the Top 10 Robotics and Artificial Intelligence Stocks to Buy.

In an article, Wedgewood Partners mentioned that the NVDA acceleration platform can double over the next five years,

“NVIDIA is a pioneer in the development of the graphics processing unit (GPU) – a semiconductor traditionally utilized for rendering computer graphics – and has extended the GPU beyond the graphics domain into “general purpose computing.” We attribute NVIDIA’s success in general purpose computing to their proprietary computing platform and programming model, known as CUDA.

NVIDIA’s compute acceleration platform forms the backbone of a unique value proposition for steadily emerging compute-intensive applications, such as image processing, natural language processing, assisted driving, and ray tracing (the latter relates to the video game domain). The central processing unit (CPU) has been the workhorse of general-purpose computing for decades, as reliable, almost annual efficiency gains helped drive the development of increasingly complex computing applications. As those CPU efficiency gains have slowed over the past several years, developers have begun utilizing GPUs to accelerate applications. While a CPU usually has between a couple and a few dozen cores that are very fast at computation, that contrasts with a CUDA-based NVIDIA GPU that breaks a computation down across hundreds or even thousands of cores and completes it in a fraction of the time. Yet similar to CPUs, and much like Intel’s x86 standard, virtually any industry application can utilize NVIDIA’s GPUs to accelerate performance, thanks to CUDA’s programmability and rich library of software that has been developed for more than a decade.

We expect that the total addressable market served by NVIDIA’s acceleration platform can double over the next five years as data science is increasingly applied in the enterprise, similar to how it has been applied at hyperscale (e.g., Facebook, Google) and scientific computing domains, where NVIDIA has over 90% market share, we estimate. NVIDIA maintains a very high market share in PC and cloud gaming, scientific computing, and hyperscale domains as there are no other GPU-based general compute platforms with software and standardized architectures to rival NVIDIA. Of course, there will be plenty of competitive attempts from alternative silicon providers to accelerate specific computing workloads, namely field-programmable gate arrays (FPGA) as well as other application specific integrated circuits (ASICs); however, we think these offerings lack the standardization and compatibility inherent to NVIDIA’s platform.

The stock has pulled back nearly -40% from its 2018 highs, after growth decelerated from unsustainable levels – driven by a small number of hyperscale operators building inventory. Further, a not insignificant amount of NVIDIA’s revenue over the past few years was generated by cryptocurrency mining applications. As capital fled from cryptocurrency applications, NVIDIA’s revenue from crypto-mining has approached zero and should not be much of a risk going forward. Overall, we think NVDA’s business has bottomed and should be able to sustain faster growth over the next few years. As such, NVIDIA’s fiscal 2021 priceto-earnings multiple is 24X and trading well below its 5-year average of 29X.”

4. Qualcomm, Inc. (NASDAQ:QCOM)

No of HFs: 87

Total Value of HF Holdings: $2.58 Billion

Next-generation vehicles are more safe, wired, intelligent, and location-conscious than ever before thanks to Qualcomm Automotive Wireless Solutions. Qualcomm aims to provide the most powerful 4G/5G, cellular vehicle-to-everything (C-V2X), Wi-Fi, and Bluetooth communication systems, as well as accurate positioning and computing technologies. QCOM was mentioned as one of the 10 US Companies with highest Revenue Exposure To China.

Check out this article where Del Principe O’Brien Financial Advisors mentioned a few comments on the stock,

“When Qualcomm was trading in the low $50s, we bought every share we could. Qualcomm stock rose to around $70 when Broadcom was set to acquire the company, but ultimately the deal did not go through. In April of this year, Qualcomm ended a lengthy and complicated legal battle with Apple over the licensing of Qualcomm’s chip technology in Apple’s mobile devices, including its iPhones. The settlement included a payout from Apple to Qualcomm rumored to be around $6 billion, as well as a six-year licensing agreement and a supply agreement guaranteeing that the chipmaker continue to provide its products to the largest company in the world. With this settlement and the expected increase in product shipments, Qualcomm anticipates an incremental earnings per share of $2. As Qualcomm shareholders, we were able to realize a gain of 54% over a short period of time.”

3. Apple, Inc. (NASDAQ:AAPL)

No of HFs: 134

Total Value of HF Holdings: $127.3 Billion

The biggest tech company in the world, Apple Inc is pushing ahead with self-driving car technology and is targeting 2024 to manufacture a passenger vehicle that could have its own advanced battery technology. Could Project Titan be the main rival of Tesla? We heard the news about Elon Musk reached out to Apple’s CEO Tim Cook for possible acquisition of Tesla’s company shares way back in 2018. This offer from Musk didn’t materialize as Tim Cook snubbed the deal. Apple’s car venture, dubbed Project Titan, has been an open secret in the automotive and technology world since its inception in 2014. The company was mentioned as one of the Top 10 Best Magic Formula Stocks to Buy Now and Top 10 Stocks Americans Searched the Most in 2020.

In an article, Qualivian Investment Partners mentioned their comments on the stock,

“Apple: From a product standpoint, iPhone sales in AAPL’s fiscal Q4 quarter (calendar Q3) missed consensus estimates as customers deferred iPhone 11 purchases in anticipation of the launch of the 5G-enabled iPhone 12 in October, however, iPad and Mac sales continued to benefit from COVID-related work/learn from home trends, with each posting the fastest top line growth rates in the last 5 years. This in combination with continued long-term strength in wearables and services revenue, more than made up for the weakness in iPhone sales, allowing AAPL to beat on the top and bottom lines when they reported the quarter in late October. While the market was somewhat disappointed in AAPL’s lack of iPhone 12 guidance for the upcoming fiscal Q1 2021 quarter, we are optimistic that the iPhone 12 will represent a strong upcoming iPhone sales cycle for AAPL, and that the continued strength in its noniPhone product and service revenue categories (which represented 47% of revenue in the quarter, the highest it has ever been) supports the stock’s rerating and its continued outperformance in the coming years.”

In a separate article, RiverPark Advisors, LCC also highlighted a few stocks and AAPL was one of them,

“Apple: AAPL shares were a top contributor as the company reported record fiscal third quarter results, with revenue up 11% to $60 billion and EPS up 18% to $2.58 – both well ahead of expectations. Revenue was driven by double-digit growth in both Products (up 10%) and Services (up 15%), as well as growth in every geographic segment.

We believe that Apple remains one of the most innovative, best positioned and most profitable companies in what are still the early innings of the mobile technology revolution. Additionally, a fall 5G launch should benefit the company, COVID has highlighted the opportunity for the Apple Watch to be an essential health monitoring device, and the company has rapidly diversified into new high growth and high margin products. AirPods, which were launched only three years ago, are on track to generate $15-$20 billion in revenue this year, 5%-8% of total company revenue. iPhones continue to represent a progressively smaller portion of total revenue (44% of the company’s third quarter revenue, down from 48% a year ago), which should help to lessen the impact of year-to-year iPhone refresh cycles.

At the same time, Services provides robust growth for the company ($13 billion, up 15% yearover-year, and 22% of revenue in the June quarter, and more than $39 billion so far in Apple’s fiscal 2020, is accretive to the company’s margins (Services gross profit grew 20% for the quarter and accounts for 39% of total company gross profit) and adds a large, recurring revenue segment to the company’s business mix. The company maintains a fortress balance sheet with $193 billion of cash, $80 billion net of debt. We expect excess cash flow of more than $60 billion per year, which has been increasingly returned to shareholders through both a growing dividend and increased share repurchases. The company also recently completed a 4 for 1 stock split that was well received by investors.”

2. Alphabet, Inc. (NASDAQ:GOOG)

No of HFs: 162

Total Value of HF Holdings: $14.7 Billion

Alphabet, Inc is headquartered in Mountain View, California. The company has a host of apps and tools tht many consumers use on a daily basis such as google search and google drive.

Check out Tao Value Fund’s comments on GOOG in this article.

“Alphabet (ticker: GOOG) I remain very positive on the long-term future of GOOG. However, I decided to trim slightly to reflect our newest evaluation of the socioeconomic expense (elaborated in our 2019 Q2 letter “General and Market Commentary” section, p3-5). It is still among our top 3 position after the trimming.”

In a separate article, we also mentioned, Baron Opportunity Fund’s comments on the stock,

“Considering solid Fund inflows, we added to long-term holding Alphabet Inc. to maintain its weighting in the portfolio. Alphabet is the parent company of Google, the world’s largest search and online advertising company. We increased our position in Alphabet this quarter as a protracted COVID-19-related recovery in travel and brand advertising presented an attractive buying opportunity. We are encouraged by improving trends in both search and YouTube, driven by durable tailwinds to e-commerce and local advertising, as well as the continued shift of video advertising dollars away from linear television as consumers increasingly cut the cable TV cord. We believe Google is becoming slightly more disciplined in capital allocation than it has been historically. Lastly, Google Cloud, which this quarter achieved a $12 billion revenue run rate under the leadership of Thomas Kurian, is having increasing success competing with larger vendors, due to its strengths in security, open-source, and data analytics.”

Pixabay/Public Domain

1. Microsoft Corporation (NASDAQ:MSFT)

No of HFs: 234

Total Value of HF Holdings: $42.1 Billion

Microsoft Corporation ranks number one on our list of the 12 best autonomous vehicle stocks to buy for 2021. The company produces and markets computer software, personal computers, and related services. MSFT was mentioned as one of the Top 5 Earnings Growth Stocks with Dividends for 2021.

In an article, we mentioned RiverPark Advisors comments on MSFT,

“Microsoft: Microsoft shares were our next top contributor driven by the company’s solid fiscal third quarter results, as well as the strong rebound in technology shares during the month (especially for those firms, like MSFT, that are not currently targets of antitrust investigations ). For its fiscal third quarter (ending March), MSFT’s Commercial Cloud revenue grew 41% yearover-year to $10 billion, generating more than 30% of Microsoft’s total revenue. The company’s two other segments, Productivity and Business Processes and More Personal Computing, grew a combined 14% as overall company revenue grew 16% and Non-GAAP EPS grew 20%.

Microsoft has, we believe, entered a second chapter of market-leading growth that will drive the company’s revenue and profits for years to come. Microsoft’s Cloud Infrastructure offering is in the fastest growing segment of the cloud services market (including software-as-a-service (SaaS)), a market that is characterized by recurring revenues, strong pricing, high levels of customer engagement and high margins. The overall Infrastructure-as-a-Service (IaaS) industry is growing more than 30% per year and is forecast to reach $100 billion of revenues by 2021. We believe that cloud-based services can become the company’s largest revenue and earnings producer and expect Microsoft to generate significant and growing free cash flow ($11 billion last quarter, up 19% year-over-year). The company should deliver at least mid-to-high teens EPS growth, with upside from deploying its $134 billion cash balance ($7 billion was returned to shareholders in the quarter through dividends and share buybacks). We trimmed our position on strength, and Microsoft remains a top five position in in the Fund.”

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Disclosure: None. 12 Best Autonomous Vehicle Stocks To Buy For 2021 is originally published at Insider Monkey.