In this article, we will take a look at the 11 most undervalued EV stocks to buy according to hedge funds.
The China Factor Affecting the EV Industry
The EV industry and its related segments almost always remain in the news amid the explosive growth potential and huge demand of electric cars in the world. However, lithium companies, which have a key role to play in the EV revolution, are in the news for a negative reason as their stock prices are falling after Chinese battery company CATL reportedly offered some discounts to EV makers. This comes as lithium prices struggle to post a comeback amid a supply glut. Some notable stocks taking it on the chin because of this news from China include Albemarle, Lithium Americas, Livent and SQM.
Some analysts also believe that pricing wars and oversupply in the market could spillover and affect major pure-play EV companies too, including Tesla Inc (NASDAQ:TSLA), Nio Inc – ADR (NYSE:NIO) and Xpeng Inc – ADR (NYSE:XPEV). Oversupply in China would translate to lower margins for these companies.
Despite all these headwinds, it’s almost a consensus among analysts that in a couple of decades electric vehicles will be widely popular among the masses. EV companies are already racing to build low-cost versions of electric cars to make them more accessible to the customer. Latest data from BloombergNEF shows that annual spending on passenger EVs touched a whopping $388 billion in 2022, up 53% from the year before.
Explosive Growth
If you look at this figure from a different angle, you can see the huge potential the EV industry has. The Bloomberg report said that global auto sales are worth about $2.5 trillion per year. EVs first popped up on the automotive industry radar about a decade ago. During this period, total car sales in the world had a worth of about $25 trillion. However, the total value of electric vehicles sold to date as of 2022 in the passenger vehicle segment is $1 trillion. In this context, the EV industry still looks in its early stages. Bloomberg’s data suggest that 60% of the total EV spending occurred in the last 18 months. This scale of growth will definitely take over the legacy car industry in the coming years.
The Customer Wins
Consumers are getting an abundance of choices when it comes to EVs. You no longer have to choose from just the two or three big names in the market (Leaf, Bolt, Tesla). Some new entrants in the market making waves among the masses include Nissan Ariya, Audi Q4 e-tron, Cadillac Lyriq, Mercedes EQB SUV, among others. Car companies are offering new designs, technologies, interior/exterior features and much more, pointing to the intense competition that is ultimately benefitting the consumer.
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Our Methodology
For this article we scanned Insider Monkey’s database of 943 hedge funds and their holdings tracked as of the end of the fourth quarter of 2022 and picked 11 EV stocks trading at PE ratios under 25 as of March 1. We picked pure play EV stocks and also the companies that have indirect exposure to the EV industry, including battery materials and EV technology and parts companies. The list is ranked in ascending order of the number of hedge fund investors.
Most Undervalued EV Stocks To Buy According To Hedge Funds
11. Sigma Lithium Corporation (NASDAQ:SGML)
Number of Hedge Fund Holders: 11
Sigma Lithium Corporation (NASDAQ:SGML) explores and develops lithium deposits in Brazil. Sigma Lithium Corporation (NASDAQ:SGML) says on its website that its mission is to “enable electric vehicle industry growth by becoming one of the world’s largest, lowest cost producers of high-purity, environmentally sustainable lithium products.”
Sigma Lithium Corporation (NASDAQ:SGML)’s forward PE ratio stands at 5.90, according to Yahoo Finance.
In December 2022, Sigma Lithium Corporation (NASDAQ:SGML) jumped after the company shared plans to triple its planned production of battery grade lithium concentrate to ~100K metric tons/year of lithium carbonate equivalent by 2024.
Sigma Lithium Corporation (NASDAQ:SGML) at the time also said that it signed agreements worth up to $100 million in senior secured pre-export financing with Synergy Capital, one of the company’s current shareholders.
Insider Monkey’s database shows that 11 hedge funds had stakes in Sigma Lithium Corporation (NASDAQ:SGML) at the end of the fourth quarter of 2022.
10. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)
Number of Hedge Fund Holders: 25
Chile-based lithium producer Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is one of the most undervalued EV stocks to buy according to hedge funds. As lithium demand booms all over the world, Sociedad Química y Minera de Chile S.A. (NYSE:SQM) will take benefit of its dominance in the sector and rake in profits. Recently, Scotiabank analyst Ben Isaacson called Sociedad Química y Minera de Chile S.A. (NYSE:SQM) and Lithium Americas (NYSE:LAC) his top picks amid “an increasingly bullish view the farther out we look.”
In November, Sociedad Química y Minera de Chile S.A. (NYSE:SQM) posted its Q3 results. GAAP EPS EPADR in the period came in at $3.85, beating estimates $0.47. Revenue in the period increased by a whopping 347% on a YoY basis to reach $2.96 billion, beating estimates by $180 million. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)’s gross profit in the quarter reached $1,632.7 million, much higher than the $224.8 million posted in the comparable period last year.
25 hedge funds tracked by Insider Monkey reported owning stakes in Sociedad Química y Minera de Chile S.A. (NYSE:SQM) at the end of the fourth quarter of 2022.
9. BHP Group Limited (NYSE:BHP)
Number of Hedge Fund Holders: 28
Mining giant BHP Group Limited (NYSE:BHP) has a lot to gain from the EV market due to its huge presence in the nickel industry. In February BHP Group Limited (NYSE:BHP) released its latest financial numbers. GAAP EPS for the first half of fiscal 2023 came in at $1.273. Revenue in the quarter fell about 16% on a YoY basis to reach $25.71 billion. Net operating cash flow in the period totaled $6.8 billion.
Back in 2021, BHP Group Limited (NYSE:BHP) and Toyota Australia partnered on a Light Electric Vehicle (LEV) trial at BHP’s Nickel West operations.
8. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Holders: 29
Mining giant Rio Tinto Group (NYSE:RIO) is one of the notable EV stocks due to its lithium operations. Last year, Rio Tinto Group (NYSE:RIO) and Ford Motor Company signed a non-binding MoU to jointly develop more sustainable and secure supply chains for battery and low-carbon materials to be used in Ford vehicles.
At the end of the fourth quarter of 2022, 29 hedge funds reported owning stakes in Rio Tinto Group (NYSE:RIO). The total value of these stakes was about $2.6 billion. The biggest stakeholder of Rio Tinto Group (NYSE:RIO) was Rajiv Jain’s GQG Partners which owns a $600 million stake in the company.
7. Livent Corporation (NYSE:LTHM)
Number of Hedge Fund Holders: 29
Pennsylvania-based Livent Corporation (NYSE:LTHM) sells performance lithium compounds that are used in lithium-based batteries, among other applications. Livent Corporation (NYSE:LTHM) ranks 7th in our list of the most undervalued EV stocks to buy according to hedge funds.
In January 2023, Livent Corporation (NYSE:LTHM) shares soared after BofA analyst Steven Byrne upgraded the stock to Buy from Underperform. The analyst said that the outlook for the lithium sector is “constructive” over the medium- to long-term. However, he noted that volatility in demand has driven price softness in the industry.
“We see current shares as pricing in too low of a lithium market price over the cycle, and thus rate shares Buy accordingly,” Byrne said.
However, the analyst slashed his price target on Livent Corporation (NYSE:LTHM) to $26.
At the end of the fourth quarter of 2022, 29 hedge funds tracked by Insider Monkey reported owning Livent Corporation (NYSE:LTHM) shares. The total worth of these stakes was over $250 million.
Carillon Eagle Small Cap Growth Fund made the following comment about Livent Corporation (NYSE:LTHM) in its Q4 2022 investor letter:
“Livent Corporation (NYSE:LTHM) is a pure-play, fully integrated producer of performance lithium compounds. The stock underperformed amid investor concerns about how a potential decelerating rate of growth in overall electric vehicle (EV) production and demand, primarily in China, would affect the future price of lithium. Despite these potential near-term headwinds, longer-term the global lithium market remains tight, and we believe Livent plays a critical role in the battery value chain and remains well- positioned for the overall continued global adoption of EVs.”
6. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 40
Ford Motor Company (NYSE:F) has pledged to become a leader in the EV revolution in America. Back in 2021 Ford Motor Company (NYSE:F) announced huge investments in the EV sector as it revealed plans to develop a complex dedicated to EV projects.
In February, Ford Motor Company (NYSE:F) announced that it signed a non-binding MoU with LG Energy Solution and Koç Holding to develop a new JV to create a commercial electric vehicle battery cell facility in Turkey. The facility, which will be among the largest in Europe, will be built near Ankara, Turkey’s capital.
At the end of the fourth quarter of 2022, 40 hedge funds tracked by Insider Monkey had stakes in Ford Motor Company (NYSE:F). The total worth of these stakes was about $1.4 billion. The biggest stakeholder of Ford Motor Company (NYSE:F) during this period was Ken Griffin’s Citadel Investment Group which had a stake worth about $204 million in the company.
Here is what Leaven Partners has to say about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
5. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 40
Connecticut-based Amphenol Corporation (NYSE:APH) makes electronic and fiber optic connectors, cable and interconnect systems such as coaxial cables. Amphenol Corporation (NYSE:APH) says it has also developed advanced technology solutions for hybrid and electric vehicles. Amphenol Corporation (NYSE:APH)’s parts and related technologies are expected to see an increased demand from EV companies in the future. Amphenol Corporation (NYSE:APH) is also a dividend payer. In February, Amphenol Corporation (NYSE:APH) declared a quarterly dividend of $0.21 per share, in-line with the previous dividend. Forward dividend yield came in at 1.02%. The dividend is payable on April 12 to shareholders of record as of March 21.
During the fourth quarter of 2022, Amphenol Corporation (NYSE:APH)’s adjusted EPS came in at $0.78, beating estimates by $0.03. Revenue in the quarter increased by about 6.9% on a YoY basis to reach $3.24 billion, beating estimates by $90 million.
Amphenol Corporation (NYSE:APH) is also popular among hedge funds. 40 hedge funds tracked by Insider Monkey as of the end of the fourth quarter of 2022 had stakes in the company. The total value of these stakes was $777 million.
Here is what Mawer Investment Management has to say about Amphenol Corporation (NYSE:APH) in its Q3 2022 investor letter:
“With the backdrop of a more uncertain economic environment, there were several companies in our portfolios that performed well over the quarter. Businesses we would define as “boring” were some of the stronger performing stocks in the quarter. Holdings such as manufacturer of electronic connectors and cables Amphenol (NYSE:APH), posted steady increases in revenues and operating profits reflecting the stability of their businesses.”
4. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 45
Netherlands-based NXP Semiconductors N.V. (NASDAQ:NXPI) is one of the most notable companies set to profit from the ongoing EV revolution. NXP Semiconductors N.V. (NASDAQ:NXPI)’s products and solutions span across the entire EV ecosystem, including batteries, fast charging, and load balancing across entire grids.
Last month, NXP Semiconductors N.V. (NASDAQ:NXPI) announced that it was partnering with e-mobility battery management software company Qnovo. According to the partnership, NXP Semiconductors N.V. (NASDAQ:NXPI) will offer Qnovo’s new SpectralX Battery Management Software in its e-mobility enablement solutions for electric vehicles, including two-wheeled and other EVs.
Earlier this year, NXP Semiconductors N.V. (NASDAQ:NXPI) announced a quarterly dividend of $1.014 per share, which was a massive, 20% increase from the prior dividend. The dividend is payable on April 15.
As of the end of the fourth quarter of 2022, 45 hedge funds tracked by Insider Monkey reported owning stakes in NXP Semiconductors N.V. (NASDAQ:NXPI).
3. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 46
Albemarle Corporation (NYSE:ALB) is one of the obvious names to profit from the EV boom in the world, thanks to its dominance in the lithium production space. Over the past 12 months, Albemarle Corporation (NYSE:ALB) has gained about 36%. Still, its PE ratio stands at 11, making it a relatively undervalued stock. Of the 943 hedge funds tracked by Insider Monkey, 46 hedge funds reported owning stakes in Albemarle Corporation (NYSE:ALB). The biggest stakeholder of Albemarle Corporation (NYSE:ALB) during this period was Ken Griffin’s Citadel Investment Group which had a $115 million stake in the company.
Last month, Wells Fargo added Albemarle Corporation (NYSE:ALB) to its Signature Picks. The bank said that its “materials sector reshuffling is driven by relative attractiveness and upside potential.”
Albemarle Corporation (NYSE:ALB) recently declared a quarterly dividend of $0.40 per share, which was a 1.3% increase from the previous dividend. The dividend is payable on April 3 to shareholders of record as of March 17.
Carillon Tower Advisors made the following comment about Albemarle Corporation (NYSE:ALB) in its Q4 2022 investor letter:
“Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The stock gave back some of its recent gains amid investor concerns about how the future price of lithium could be affected by a potential decelerating rate of growth in overall electric vehicle (EV) production and demand, primarily in China. Despite these potential near-term headwinds, longer-term the global lithium market remains tight, and Albemarle plays a critical role in the battery value chain and remains well-positioned for the overall continued global adoption of EVs.”
2. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 62
Even though Intel Corporation (NASDAQ:INTC) is under pressure amid rising competition and challenging industry conditions in the semiconductor space, the company is set to see a huge demand of its products from the EV sector. Last year, Intel Corporation (NASDAQ:INTC) announced to form a new division to design and sell chips and processors for electric and autonomous cars.
At the time Intel Corporation (NASDAQ:INTC)’s CEO Pat Gelsinger said that the company was making a foray into the EV space because the demand for automotive silicon is expected to nearly double to $115 billion by 2030.
As of the end of the fourth quarter of 2022, Intel Corporation (NASDAQ:INTC) was one of the most popular semiconductor stocks among the 943 hedge funds tracked by Insider Monkey. 62 hedge funds had stakes in Intel Corporation (NASDAQ:INTC) at the end of the last quarter of 2022. The biggest stakeholder of Intel Corporation (NASDAQ:INTC) was D E Shaw which had a $354 million stake in the company.
ClearBridge Investments made the following comment about Intel Corporation (NASDAQ:INTC) in its Q3 2022 investor letter:
“Also on the detractor side, Intel Corporation (NASDAQ:INTC) delivered a disappointing revenue miss and lowered full-year revenue and earnings guidance as COVID-19-driven demand for PCs abated (where Intel enjoys half its sales) and a delay in its flagship Sapphire Rapids CPU hurt its data center business. Despite these issues, we still believe Intel is an economically sensitive turnaround story with substantial upside.”
1. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 80
General Motors Company (NYSE:GM) is among the biggest car companies in the world that have committed to the all-electric future of the mobility segment. General Motors Company (NYSE:GM) already has several electric vehicles available for customers. Recently, it was reported that General Motors Company (NYSE:GM) was cutting about 500 executive-level jobs as it prepares for the electrification transition from legacy cars business.
General Motors Company (NYSE:GM) is taking notable steps to increase its presence in the EV sector. General Motors Company (NYSE:GM) recently became the biggest stakeholder of Lithium Americas (NYSE:LAC) through its investments that will accelerate the development of the Thacker Pass project in Nevada.
In February, it was reported that General Motors Company (NYSE:GM) was mulling buying a stake in Vale’s (NYSE:VALE) base metals unit.
General Motors Company (NYSE:GM) ranks 1st in our list of the most undervalued EV stocks to buy according to hedge funds.
Diamond Hill made the following comment about General Motors Company (NYSE:GM) in its Q3 2022 investor letter:
“Most recently, we initiated a position in General Motors Company (NYSE:GM), one of the largest automakers in the United States. Over the past several years, GM has taken steps necessary to focus the company on the most profitable segments and move into position to compete in an electrified and autonomous world. With the recent rise in interest rates there was a meaningful selloff in the auto industry, which presented us an attractive entry point to a name we know well.”
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Disclosure: None. 11 Most Undervalued EV Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
