10 Best EV Materials Stocks to Buy

Published on August 10, 2021 at 11:04 am by Usman Kabir in Hedge Funds, News

In this article, we discuss the 10 best EV materials stocks to buy.

The increase in demand for electric vehicles (EVs) around the world over the past few years has also given a boost to companies that sell products critical to the manufacture of these vehicles. In the mining sector, copper and lithium producing firms deal extensively with the EV industry. In the automotive field, firms that sell transmission and electrical systems have contracts with EV makers. Semiconductor manufacturers have also benefited from the rise in EV sales. According to the International Energy Agency, there were more than 10 million EVs on the roads in 2020.

In June, news publication Forbes reported that a group of EV materials stocks picked by a team of experts at the publication had registered year-to-date gains of 17%, comparing favorably to the 15% year-to-date rise in the industry benchmark S&P 500 over the same time period. Some of the prominent names in the electric vehicle industry presently include Tesla, Inc. (NASDAQ: TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), NIO Inc. (NYSE: NIO), and Freeport-McMoRan Inc. (NYSE: FCX), among others.

Despite the COVID-19 pandemic, electric vehicle makers had a better-than-expected fiscal year, with Tesla, Inc. (NASDAQ: TSLA) registering a record rally through the lockdown that shattered market records. In 2021, after a slow start to the year, EV sales are back on the growth trajectory, with EV makers like Tesla, Inc. (NASDAQ: TSLA) and NIO Inc. (NYSE: NIO) reporting record deliveries. Investment bank Citigroup claims EV makers delivered 227,000 new energy vehicles in China, a big EV market, in June this year, up 15% month-on-month and 166% year-on-year.

A report on the outlook for the electric vehicle industry by the IEA reveals that in the first quarter of this year, EV sales rose by 140% year-on-year. Most of this growth was attributed to the sales of EVs in China and Europe, accounting for 500,000 and 450,000 total deliveries respectively. If the sales of EVs continue to grow, the agency further notes, EVs could represent 7% of the road vehicle fleet by 2030, compared to the 12% goal (230 million EV vehicles on the road) that a Sustainable Development initiative has envisioned.

Nickel and cobalt, two key metals required for the production of EV batteries, as well as copper, used in a variety of EV components, have gradually seen demand rise as the sale and production of EVs accelerates. A report by Glencore, a mining firm, has forecast that the demand for these three metals will jump to 1.1 megaton, 314 kiloton, and 4.1 megaton by 2030. The company predicts that if 10 million EVs are sold every year by 2025, nickel demand will increase by 400 kilotons annually.

EV makers have disrupted the auto industry in much the same way as the rise of fintech has impacted the finance world. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Our Methodology

With this context in mind, here is our list of the 10 best EV materials stocks to buy. These were ranked keeping in mind analyst ratings, basic business fundamentals, and hedge fund sentiment.

Best EV Materials Stocks to Buy

10. Nano Dimension Ltd. (NASDAQ: NNDM)

Number of Hedge Fund Holders: 11

Nano Dimension Ltd. (NASDAQ: NNDM) is an Israeli firm that makes and sells additive electronics. It is placed tenth on our list of 10 best EV materials stocks to buy. One of the premier products of the firm is the DragonFly lights-out digital manufacturing system that produces circuit-boards, antennas, and sensors, among other things, for prototyping. The company markets these products to the electric vehicle industry as well. It has a market cap of $1.6 billion and posted $3.4 million in revenue last year.

In earnings results for the first quarter, posted on May 20, Nano Dimension Ltd. (NASDAQ: NNDM) reported a revenue of $0.81 million, up more than 15% compared to the revenue over the same period last year.

Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Nano Dimension Ltd. (NASDAQ: NNDM) with 6.6 million shares worth more than $57 million.

Just like Tesla, Inc. (NASDAQ: TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), NIO Inc. (NYSE: NIO), and Freeport-McMoRan Inc. (NYSE: FCX), Nano Dimension Ltd. (NASDAQ: NNDM) is one of the best EV materials stocks to buy.

9. BorgWarner Inc. (NYSE: BWA)

Number of Hedge Fund Holders: 27

BorgWarner Inc. (NYSE: BWA) is a company that provides solutions for electric vehicles globally. It is headquartered in Michigan and is ranked ninth on our list of 10 best EV materials stocks to buy. Some of the products that the firm markets include turbo chargers, timing systems, transmission chains, electric air pumps, among other things. In earnings results for the second quarter, posted on August 4, the firm reported earnings per share of $1.08, beating predictions by $0.28. The revenue over the period was $3.7 billion, up 162% year-on-year.

On June 9, investment advisory Baird maintained an Outperform rating on BorgWarner Inc. (NYSE: BWA) stock and raised the price target to $59 from $53, noting that the firm was a top pick of patient value investors.

Out of the hedge funds being tracked by Insider Monkey, Ohio-based investment firm Diamond Hill Capital is a leading shareholder in BorgWarner Inc. (NYSE: BWA) with 7.9 million shares worth more than $369 million.

In addition to Tesla, Inc. (NASDAQ: TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), NIO Inc. (NYSE: NIO), and Freeport-McMoRan Inc. (NYSE: FCX), BorgWarner Inc. (NYSE: BWA) is one of the best EV materials stocks to buy.

In its Q4 2020 investor letter, Ariel Investments, an asset management firm, highlighted a few stocks and BorgWarner Inc. (NYSE: BWA) was one of them. Here is what the fund said:

“BorgWarner, Inc. was essentially flat in the quarter, underperforming a strong market. Many believe BWA will be hurt by a transition from gas powered cars to electric vehicles (“EV’s”). The company’s turbochargers and powertrain products rely on intellectual property tied to petroleum-based technology. Although the company has worked hard to increase its market share in the EV powertrain market, particularly with the acquisition of Delphi Technologies, we believe the company does have negative exposure to the rapid conversion to an all EV new car fleet. But we believe that this conversion will be gradual, giving BorgWarner time to alter its product offerings accordingly. We continue to monitor developments closely.”

8. MP Materials Corp. (NYSE: MP)

Number of Hedge Fund Holders: 29

MP Materials Corp. (NYSE: MP) is placed eighth on our list of 10 best EV materials stocks to buy. The firm operates from Nevada and engages in rare earth mining and processing. These rare earth metals are used in a variety of products related to electric vehicles. Some of the rare earths marketed by the firm include neodymium and praseodymium, among others. In earnings results for the second quarter, posted on August 5, the firm reported earnings per share of $0.15, beating expectations by $0.04.

On July 23, investment advisory DA Davidson initiated coverage of MP Materials Corp. (NYSE: MP) stock with a Buy rating and a price target of $45, noting that the firm controlled 15% of the global rare earth supply and was poised for growth.

At the end of the first quarter of 2021, 29 hedge funds in the database of Insider Monkey held stakes worth $2.6 billion in MP Materials Corp. (NYSE: MP), down from 32 in the preceding quarter worth $2.7 billion.

Alongside Tesla, Inc. (NASDAQ: TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), NIO Inc. (NYSE: NIO), and Freeport-McMoRan Inc. (NYSE: FCX), MP Materials Corp. (NYSE: MP) is one of the best EV materials stocks to buy.

7. Allison Transmission Holdings, Inc. (NYSE: ALSN)

Number of Hedge Fund Holders: 30

Allison Transmission Holdings, Inc. (NYSE: ALSN) is ranked seventh on our list of 10 best EV materials stocks to buy. The firm makes and sells automatic transmissions for commercial vehicles and is based in Indiana. It was founded in 1915 and has a market cap of over $4 billion. The company serves the electric vehicle industry as well, offering a suite of specialty products. On July 28, the firm posted earnings for the second quarter, beating market expectations on earnings per share and revenue.

In March, investment advisory Citi maintained a Neutral rating on Allison Transmission Holdings, Inc. (NYSE: ALSN) stock but raised the price target to $46 from $44, underlining that strong demand would boost machinery stocks in the post-pandemic economy.

At the end of the first quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $498 million in Allison Transmission Holdings, Inc. (NYSE: ALSN), up from 25 in the previous quarter worth $609 million.

Tesla, Inc. (NASDAQ: TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), NIO Inc. (NYSE: NIO), and Freeport-McMoRan Inc. (NYSE: FCX) are some of the best EV materials stocks to buy, just like Allison Transmission Holdings, Inc. (NYSE: ALSN).

6. Albemarle Corporation (NYSE: ALB)

Number of Hedge Fund Holders: 31

Albemarle Corporation (NYSE: ALB) is a North Carolina-based firm that makes and sells specialty chemicals. It is placed sixth on our list of 10 best EV materials stocks to buy. The firm is one of the top producers of lithium compounds that are used in electric vehicle batteries. As the demand for EV batteries rises, the demand for lithium compounds has skyrocketed. The firm beat marker expectations on earnings per share in the second quarter. It has a market cap of $26 billion and posted $3 billion in revenue last year.

On August 6, investment advisory Deutsche Bank reiterated a Buy rating on Albemarle Corporation (NYSE: ALB) stock and raised the price target to $245 from $190, noting the strong earnings beat by the firm in the second quarter.

At the end of the first quarter of 2021, 31 hedge funds in the database of Insider Monkey held stakes worth $262 million in Albemarle Corporation (NYSE: ALB), up from 21 the preceding quarter worth $126 million.

5. TE Connectivity Ltd. (NYSE: TEL)

Number of Hedge Fund Holders: 39

TE Connectivity Ltd. (NYSE: TEL) is a Swiss company that makes and sells connectivity and sensor solutions. It is ranked fifth on our list of 10 best EV materials stocks to buy. Some of the products that the firm markets to the electrical vehicle industry include terminals, connector systems, antennas, and relays, among others. In earnings results for the second quarter, posted on July 28, the firm reported earnings per share of $1.79, beating market estimates by $0.21. The revenue over the period was $3.8 billion, up 52% year-on-year.

On July 29, investment advisory Truist kept a Hold rating on TE Connectivity Ltd. (NYSE: TEL) stock but raised the price target to $149 from $139, noting the earnings beat posted by the company in the third fiscal quarter.

Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in TE Connectivity Ltd. (NYSE: TEL) with 9.7 million shares worth more than $1.2 billion.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and TE Connectivity Ltd. (NYSE: TEL) was one of them. Here is what the fund said:

“The portfolio’s quality bias and valuation discipline have generated compelling returns over time with typically strong relative results in more challenging environments as it did through the first three quarters of 2020. However, that same quality bias tends to create a more challenging relative performance environment for the Strategy during periods of sharp economic acceleration, which tend to benefit stocks that are more commodity linked or of lower quality. This has been the case during the vaccine- and stimulus-driven rally experienced late last year and during the most recent quarter. Sectors that lagged in the quarter included information technology (IT), where TE Connectivity performed well but trailed the sector in the first quarter after a strong 2020.”

4. Amphenol Corporation (NYSE: APH)

Number of Hedge Fund Holders: 42

Amphenol Corporation (NYSE: APH) is placed fourth on our list of 10 best EV materials stocks to buy. The company operates from Connecticut. It makes and sells electrical, electronic, and fiber optic connectors. These are used by the EV industry in the manufacture of the vehicles. In earnings results for the second quarter, posted on July 28, the firm reported earnings per share of $0.61, beating market estimates by $0.05. The revenue over the period was $2.6 billion, up 33% year-on-year.

On August 3, investment advisory Cowen maintained an Outperform rating on Amphenol Corporation (NYSE: APH) stock and raised the price target to $80 from $75, underlining that the firm was well-positioned across a variety of megatrends.

At the end of the first quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $1.07 billion in Amphenol Corporation (NYSE: APH), up from 41 in the previous quarter worth $1.04 billion.

In its Q4 2020 investor letter, Richie Capital Group LLC, an asset management firm, highlighted a few stocks and Amphenol Corporation (NYSE: APH) was one of them. Here is what the fund said:

“Amphenol (APH – Up 18.7%) – In December, our high-speed, specialty connector manufacturer announced the acquisition of MTS Systems Corp for $1.7B to enhance their sensor products catalog. Having completed more than a dozen acquisitions since 2016, growth through acquisition is a key tenet of their business strategy and we view this transaction as business as usual. You can read more about our investment thesis for Amphenol here.”

3. Aptiv PLC (NYSE: APTV)

Number of Hedge Fund Holders: 50

Aptiv PLC (NYSE: APTV) is ranked third on our list of 10 best EV materials stocks to buy. The firm makes and sells different vehicle components. It is headquartered in Ireland. The firm has a market cap of over $44 billion and posted more than $13 billion in revenue last year. Some of the products that the firm markets to the electrical vehicle industry include connectors, wiring assemblies, electrical centers, and safety distribution systems, among others. The firm beat market expectations on revenue in the second quarter earnings posted on August 5.

On August 6, investment advisory Barclays maintained an Overweight rating on Aptiv PLC (NYSE: APTV) stock and raised the price target to $174 from $164, highlighting that the firm was posting strong organic growth and healthy order intake.

Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Impax Asset Management is a leading shareholder in Aptiv PLC (NYSE: APTV) with 2.9 million shares worth more than $402 million.

In its Q1 2021 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Aptiv PLC (NYSE: APTV) was one of them. Here is what the fund said:

“Aptiv approached our estimates of intrinsic value and was, therefore, eliminated during the period. The company was longstanding investment of the Fund and produced successful outcomes. We continue to believe that Aptiv is a well-positioned auto supplier that is likely to continue outgrowing light vehicle production for the foreseeable future, but this dynamic is now more fully appreciated by the market.”

2. Freeport-McMoRan Inc. (NYSE: FCX)

Number of Hedge Fund Holders: 68

Freeport-McMoRan Inc. (NYSE: FCX) is an Arizona-based mining company. It is placed second on our list of 10 best EV materials stocks to buy. One of the premier products of the firm is the metal copper, which is used extensively in the manufacture of electric vehicles. The firm was founded in 1987 and has a market cap of over $54 billion. In earnings results for the second quarter, posted on July 22, the firm reported earnings per share of $0.77, beating market predictions by $0.02.

On July 23, investment advisory Deutsche Bank reiterated a Buy rating on Freeport-McMoRan Inc. (NYSE: FCX) stock but lowered the price target to $47 from $50, noting that the firm would increase investments in growth projects.

At the end of the first quarter of 2021, 68 hedge funds in the database of Insider Monkey held stakes worth $3.2 billion in Freeport-McMoRan Inc. (NYSE: FCX), down from 71 in the preceding quarter worth $2.6 billion.

1. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM)

Number of Hedge Fund Holders: 76

Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) is a company that makes and sells integrated circuits and semiconductors. It is headquartered in Taiwan and is ranked first on our list of 10 best EV materials stocks to buy. The circuits and semiconductors made by the firm are used by EV firms. The company beat market expectations on earnings per share in the second quarter. It has a market cap of over $550 billion and posted more than $47 billion in revenue last year.

On June 22, investment advisory Argus initiated coverage of Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) stock with a Buy rating and a price target of $150, noting that the firm was emerging as a solutions provider in the global electronic industry supply chain.

At the end of the first quarter of 2021, 76 hedge funds in the database of Insider Monkey held stakes worth $10.8 billion in Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), up from 72 in the preceding quarter worth $11.8 billion.

In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) was one of them. Here is what the fund said:

“Taiwan Semiconductor is the world’s largest outsourced foundry of logic semiconductor chips. TSMC’s shares appreciated 8.9% during the quarter.

Similar to last quarter, the supply-demand imbalance in semiconductor chips continues to benefit TSMC. To fuel new technological advances and meet the current supply imbalance, we see significantly increased capital spending across the industry over the coming years.

TSMC has an extraordinary track record of return on these large investments despite their rapid historical cadence of expansion. I remain hopeful that the large capital expenditure plan they now have ($100 billion of investment over the next three years) will be money well spent and not lead to industry oversupply in the medium term. Hopefully, future returns on these investments will look as good as those of the past.”

You can also take a peek at 10 Best EV Stocks To Buy Now and 10 Best EV Startups to Watch.

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10 Best EV Materials Stocks to Buy

Published on August 10, 2021 at 11:04 am by Usman Kabir in Hedge Funds, News