Albemarle, BorgWarner: Best Stocks To Play The Electrification Of The Auto Industry?

Albemarle, BorgWarner: Best Stocks To Play The Electrification Of The Auto Industry?

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Albermale

Our indicative theme of Electric Vehicle Component Supplier Stocks - which includes stocks of companies that make EV components and raw materials for batteries - has fared reasonably well in recent weeks. The theme is up by about 9% year-to-date, compared to the S&P 500 which is up by about 10% over the same period. The theme has also returned about 45% since the end of 2019, compared to a return of about 28% on the S&P 500.



While EVs are no doubt the future, investing in OEMs is somewhat tricky in our view. Pure play EV names such as Tesla and Nio have grown quickly with well received products, but their stocks look pricey after rallying by over 5x and 13x, respectively, over the last year. On the other side, automotive industry incumbents such as GM and Volkswagen are also investing large sums in electrifying their line-ups, but it is not clear that this will compensate for eventual declines in gasoline vehicle sales, as the playing field is getting more crowded. The barriers to entry into the EV market are not too high, and many new players are looking to