In this article, we discuss 10 best EV materials stocks to buy now.
The electric vehicle industry has been battling with multiple challenges in the past few months. A post-pandemic rise in EV demand led to a semiconductor chip shortage around the world in 2021, resulting in a dramatic rise in chip prices and causing massive delays in production at even established EV manufacturers. The supply chain issues that led to the chip shortage also triggered soaring inflation, forcing the Fed to hike interest rates, creating an environment where recessionary fears hit the EV market just as production numbers were rising again.
Prominent EV materials stocks like Tesla, Inc. (NASDAQ:TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Freeport-McMoRan Inc. (NYSE:FCX) faced the brunt of this crisis, registering a 22%, 28%, and 26% year-to-date drop in the share price as of August 15, respectively. However, the tide is beginning to turn again. Inflation numbers are peaking just as steel and chip prices go down. The Russian war in Ukraine has resulted in a jump in fossil fuel prices, accelerating the shift towards electric vehicles.
S&P Global forecasts that electric vehicle sales in 2022 will nearly triple compared to 2020 numbers. This rise is forecast despite the fact that the prices of lithium, one of the most critical components of EV batteries, have increased seven times in the period between May 2021 and May 2022. The prices of nickel, another important EV component, have also increased due to the Ukraine war since Russia controls 20% of the global supply of the metal. The successful passage of the recent climate change bill in the US will also benefit EV stocks.
Our Methodology
The companies that operate in the EV materials sector were selected for the list. In order to provide readers with a more comprehensive overview of the companies, the analyst ratings for each firm are mentioned alongside other details. A database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to quantify the popularity of each stock in the hedge fund universe.
Photo by Kumpan Electric on Unsplash
Best EV Materials Stocks to Buy
10. QuantumScape Corporation (NYSE:QS)
Number of Hedge Fund Holders: 15
QuantumScape Corporation (NYSE:QS) makes and sells solid-state lithium batteries. In the past few months, German media has reported that the company is working with carmaker Volkswagen to integrate the batteries it makes into the Porsche cars of the latter. QuantumScape has been working on the development of batteries that deliver a combination of high energy density, or driving range, as well as fast charging capabilities, a feat that is difficult to achieve with conventional lithium-ion battery chemistries.
On July 14, Morgan Stanley analyst Adam Jonas maintained an Equal Weight rating on QuantumScape Corporation (NYSE:QS) stock and lowered the price target to $12 from $30, noting that slow growth and credit headwinds were hitting the auto industry.
At the end of the first quarter of 2022, 15 hedge funds in the database of Insider Monkey held stakes worth $117 million in QuantumScape Corporation (NYSE:QS), compared to 26 in the preceding quarter worth $157 million.
Just like Tesla, Inc. (NASDAQ:TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Freeport-McMoRan Inc. (NYSE:FCX), QuantumScape Corporation (NYSE:QS) is one of the EV stocks on the radar of elite investors.
9. Altair Engineering Inc. (NASDAQ:ALTR)
Number of Hedge Fund Holders: 18
Altair Engineering Inc. (NASDAQ:ALTR) provides software and cloud solutions. The software solutions provided by the firm are used by automakers around the world to accelerate a push into the digital world. The company also markets simulation and AI technology that electric vehicle manufacturers use for eMobility design and autonomous driving solutions. The data on efficiency, temperature, weight, and compactness gathered by the Altair software can help improve the range of EVs as well.
On July 26, Oppenheimer analyst Ken Wong initiated coverage of Altair Engineering Inc. (NASDAQ:ALTR) stock with an Outperform rating and a price target of $60, noting that the firm was finally on the right path to close the profitability gap to industry peers.
Among the hedge funds being tracked by Insider Monkey, Waltham-based investment firm Matrix Capital Management is a leading shareholder in Altair Engineering Inc. (NASDAQ:ALTR), with 8.6 million shares worth more than $553 million.
In its Q4 2021 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and Altair Engineering Inc. (NASDAQ:ALTR) was one of them. Here is what the fund said:
“Michigan-based Altair Engineering Inc. (NASDAQ:ALTR) was founded in 1985 to provide structural simulation and modeling to the automotive industry, beginning with software that simulated the effects of a car crash. Now, Altair’s HyperWorks suite of software is used extensively by automakers throughout the design and engineering process, including for elimination of noise and vibration, understanding fluid dynamics, and thermal management. Carmakers use the software to design components that are lighter and more aerodynamic to respond to tightening regulatory standards for gas mileage and carbon emissions, and in electric vehicle (EV) design where lighter-weight parts are even more critical (for extending battery range) and noise reduction is even more of an issue (in the absence of engine noise to mask sounds). HyperWorks users can compare the performance level of different design features and identify the most optimal. It also offers a toolset for durability analysis including an embedded materials library to predict fatigue life under a range of conditions. Similar types of engineering challenges occur in other industries, and Altair Engineering Inc. (NASDAQ:ALTR) works with many of them, including aerospace, heavy equipment, industrial machinery, rail, and marine companies.” (Click here to see full text)
8. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 26
NIO Inc. (NYSE:NIO) makes and sells smart electric vehicles. On August 1, the company announced that it had delivered 10,052 vehicles in the month of July, up more than 26% compared to the deliveries for July 2021 but down 22% compared to June 2022. Premium smart electric SUVs dominated the deliveries, with electric sedans following close behind. So far in 2022, the company has delivered 60,879 vehicles, up 22% compared to the deliveries over the same period in 2021.
On August 1, Morgan Stanley analyst Tim Hsiao maintained an Overweight rating on NIO Inc. (NYSE:NIO) stock with a price target of $31, backing the firm to achieve 50% quarter-over-quarter volume growth in the coming months.
At the end of the first quarter of 2022, 26 hedge funds in the database of Insider Monkey held stakes worth $716 million in NIO Inc. (NYSE:NIO), compared to 30 in the preceding quarter worth $813 million.
7. Garmin Ltd. (NASDAQ:GRMN)
Number of Hedge Fund Holders: 30
Garmin Ltd. (NASDAQ:GRMN) makes and sells electronic components and devices. On July 27, the company posted earnings for the second quarter of 2022, reporting earnings per share of $1.44, beating market estimates by $0.04. The revenue over the period was $1.24 billion, down close to 7% compared to the revenue over the same period last year and missing market estimates by $130 million. The firm also disclosed that gross and operating margins were 58.7% and 23.6% respectively during the period.
On August 5, Tigress Financial analyst Ivan Feinseth maintained a Strong Buy rating on Garmin Ltd. (NASDAQ:GRMN) stock and lowered the price target to $165 from $208, noting that the firm had an industry-leading and diversified product portfolio.
At the end of the first quarter of 2022, 30 hedge funds in the database of Insider Monkey held stakes worth $486 million in Garmin Ltd. (NASDAQ:GRMN), compared to 34 in the previous quarter worth $579 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Garmin Ltd. (NASDAQ:GRMN), with 987,042 shares worth more than $117 million.
6. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 40
Amphenol Corporation (NYSE:APH) markets electrical components and fiber connectors. The firm has one of the most reliable dividend histories in the EV sector. It has consistently paid a dividend to shareholders over the past sixteen years. In the past decade, these payouts have registered consecutive growth as well. On August 4, the firm declared a quarterly dividend of $0.20 per share, in line with previous. The forward yield was 1.04%. The dividend is payable to shareholders by the end of September and early October.
On July 28, Baird analyst Luke Junk maintained an Outperform rating on Amphenol Corporation (NYSE:APH) stock and raised the price target to $81 from $76, appreciating the second quarter earnings results of the firm.
At the end of the first quarter of 2022, 40 hedge funds in the database of Insider Monkey held stakes worth $939 million in Amphenol Corporation (NYSE:APH), compared to 28 in the previous quarter worth $1 billion.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Select Equity Group is a leading shareholder in Amphenol Corporation (NYSE:APH), with 6 million shares worth more than $455 million.
Along with Tesla, Inc. (NASDAQ:TSLA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Freeport-McMoRan Inc. (NYSE:FCX), Amphenol Corporation (NYSE:APH) is one of the EV stocks that hedge funds are buying.
5. Autodesk, Inc. (NASDAQ:ADSK)
Number of Hedge Fund Holders: 50
Autodesk, Inc. (NASDAQ:ADSK) provides design and engineering software services. The software services of the firm include products that cater to the specific computer numerical control machining, inspection, and modeling for the manufacturing needs of the electric vehicle sector. For example, the company offers customers the chance to use Fusion 360, a cloud-based product development software that combines design, engineering, and manufacturing in a single package.
On July 26, Oppenheimer analyst Ken Wong initiated coverage of Autodesk, Inc. (NASDAQ:ADSK) stock with an Outperform rating and a price target of $320, backing the firm to deliver durable earnings gains and consistent margin expansion in the coming years.
At the end of the first quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $1.9 billion in Autodesk, Inc. (NASDAQ:ADSK), compared to 52 the preceding quarter worth $1.7 billion.
In its Q4 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Autodesk, Inc. (NASDAQ:ADSK) was one of them. Here is what the fund said:
“We added to Autodesk, Inc. (NASDAQ:ADSK) on share price weakness. Near-term concerns have made the valuations of the company quite attractive in our view. Autodesk has consistently reported solid results, but management recently provided lower than expected guidance, noting supply chain issues, inflation squeezing its customer margins, global labor shortages, and complications from rolling and unpredictable COVID lockdowns globally. In aggregate, these issues mean that fewer client projects have been completed, despite high endmarket demand. Ultimately, many of these productivity pressures will likely drive the need to digitize further.
To be clear, much of the pressure on Autodesk’s share price recently was due to expectations, not a decline in the fundamentals of the business. Autodesk, Inc. (NASDAQ:ADSK) continues to grow revenues at greater than mid-teens rates while simultaneously enjoying record renewal rates. While each of the noted factors present real challenges in the near term, we think the lower share price provides long-term investors an opportunity. Given the secular trend towards digitization and the ever-increasing mission-critical nature of Autodesk’s products, we are confident in the long-term investment case.“
4. Honeywell International Inc (NASDAQ:HON)
Number of Hedge Fund Holders: 50
Honeywell International Inc. (NASDAQ:HON) is a diversified technology and manufacturing company. The company makes and sells electric and hybrid-electric propulsion systems that are used in electric engines. These engines are used in electric vehicles. In late July, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $2.10, beating analyst expectations by $0.07. The revenue over the period was $8.9 billion, beating analyst estimates by $280 million.
On July 29, JPMorgan analyst Stephen Tusa maintained an Overweight rating on Honeywell International Inc. (NASDAQ:HON) stock and raised the price target to $190 from $180, appreciating the second quarter earnings beat of the firm.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Honeywell International Inc. (NASDAQ:HON), with 2.1 million shares worth more than $415 million.
3. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 68
Freeport-McMoRan Inc. (NYSE:FCX) is an Arizona-based minerals and mining firm. The company mines and produces copper, a metal used extensively in the manufacture of electric vehicles. It also has interests in other materials used in EVs, like cobalt and lithium mining. These materials are used in the manufacture of EV batteries. The copper marketed by the firm is used in transmission lines for electricity, coils for electric motors, and battery components. All are used in EVs.
On July 22, RBC Capital analyst Sam Crittenden maintained a Sector Perform rating on Freeport-McMoRan Inc. (NYSE:FCX) stock and lowered the price target to $35 from $46, noting that a slowdown in demand was going to weigh on the shares in the near-term.
At the end of the first quarter of 2022, 68 hedge funds in the database of Insider Monkey held stakes worth $4.1 billion in Freeport-McMoRan Inc. (NYSE: FCX), compared to 66 in the preceding quarter worth $3.7 billion.
In its Q4 2021 investor letter, Horizon Kinetics LLC, an asset management firm, highlighted a few stocks and Freeport-McMoRan Inc. (NYSE:FCX) was one of them. Here is what the fund said:
“Those were some ideas about copper demand. Here are some specifics about supply. Global copper mine production in the 10 years from 2005 to 2015 rose 2.45% annually. In the next 5 years, to 2020, it increased by only 0.9% annually. Even ignoring the 2020 pandemic year, for the 4 years from to 2019, the expansion rate was 1.66%. We already have the historical context for this: the commodity price collapse prior to 2015, from a position of excess capacity.
What producers must do in that situation, because they have high fixed costs and debt expense, is curtail their exploration and development expenditures and reduce operating costs. They rely on existing mines, instead, and on their highest-grade ores and lowest-cost production. They might not actually reduce current production, but they aren’t replacing the reserves that are being slowly drawn down. You can see this at work at the individual company level.
Freeport-McMoRan Inc. (NYSE:FCX) will illustrate. It is the world’s third-largest copper producer, closely following Chile’s Codelco and Australia’s BHP Group. In 2014, even though Freeport sold more copper than the prior year, its revenues dropped by over 25%, and it went from $4.8 billion of operating earnings (a 22% margin) to a $(0.2) billion loss. The company’s capital expenditures peaked in 2014 at $3.86 billion and will be about $1.72 billion in 2021, meaning the company is spending 55% less now than it was seven years ago. In inflation-adjusted terms, it’s spending 61% less today than seven years ago…” (Click here to see the full text)
2. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 80
Tesla, Inc. (NASDAQ:TSLA) makes and sells electric vehicles and clean energy equipment. The firm is the largest EV firm in the world, both in terms of market capitalization and production numbers, although Chinese automakers like BYD have been catching up to it in recent months. The firm also aims to make its own EV batteries. The firm is expected to benefit from a recent climate change bill passed by US lawmakers that has extended tax credits for EV owners and provided more subsidies to EV firms.
On August 8, Canaccord analyst George Gianarikas maintained a Buy rating on Tesla, Inc. (NASDAQ:TSLA) stock and raised the price target to $881 from $815, noting that the firm had momentum and competitive lead from manufacturing to overshadow price concerns.
At the end of the first quarter of 2022, 80 hedge funds in the database of Insider Monkey held stakes worth $11.2 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 91 in the previous quarter worth $12.9 billion.
Here is what ClearBridge Investments had to say about Tesla, Inc. (NASDAQ:TSLA) in its Q4 2021 investor letter:
“Within the growth universe we target, emerging growth stocks – the category with the highest revenue growth rates – significantly underperformed the overall growth categories in 2021 after leading performance in 2020. The pull-through effect on digitization, online access across industries, and spending to modernize outdated corporate infrastructures accelerated trends in a highly compressed time frame. Much of that trend slackened in 2021 and shares of these companies, while showing good top-line growth, saw slowing appreciation from the blistering pace in the prior year. With that moderating growth, multiples decelerated from 2020 highs. Bucking the headwinds among our emerging growth names was Tesla, Inc. (NASDAQ:TSLA) which saw continued sales momentum from their leadership positions in the key growth areas of electric vehicles.”
1. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 81
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. Semiconductor chips are one of the most critical components in an EV. This can be understood better after considering that a chip shortage over the past few months has resulted in large delays in EV production around the world. TSM, one of the largest chipmakers, has gained from the resulting chip price increases. These shortages are expected to last until 2023.
On July 14, Susquehanna analyst Mehdi Hosseini maintained a Neutral rating on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stock and lowered the price target to $88 from $90, noting the revenues of the firm in 2022 made 2023 guides challenging.
At the end of the first quarter of 2022, 81 hedge funds in the database of Insider Monkey held stakes worth $10.1 billion in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), up from 72 in the preceding quarter worth $10.9 billion.
In its Q1 2022 investor letter, Baron Funds, 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:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) detracted in the first quarter due to rising geopolitical tensions, macroeconomic uncertainties, and concerns over softening demand for consumer electronics. We retain conviction that Taiwan Semi’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, and IoT, will allow the company to deliver above its 15% to 20% revenue growth target over the next several years.”
You can also take a peek at 10 Best Stocks for Animal Lovers and 10 Best Nickel Stocks to Buy Now.
Follow Insider Monkey on Twitter
Suggested Articles:
- 10 Best Roth IRA Stocks to Buy According to Reddit
- 10 Best Dividend Stocks for Roth IRA
- 10 Best Money Saving Tips According to Experts
Disclosure. None. 10 Best EV Materials Stocks to Buy Now is originally published on Insider Monkey.
