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A Play on Electric Vehicles: Buy Livent into Any Near-Term Weakness

11/08/2018 3:22 pm EST

Focus: STOCKS

Jon Markman

Editor, Tech Trend Trader, The Power Elite, and Strategic Advantage

Motoring is changing faster than you think. It is going to be everything promised in the movies — exhilarating, futuristic and eerily quiet. writes Jon Markman. How you can play the electric vehicles field.  He's presenting at TradersExpo Las Vegas Nov. 14.

The 2021 BMW i4 is a real looker. It is a welcomed, total revamp of what the Bavarian automaker has been doing with electric vehicles.

It is sleek, sporty and sublimely fast.

It is also the future of cars, with big implications for investors.

car

In many ways, the BMW i4 is emblematic of Germany waking up to Tesla (TSLA). The Silicon Valley company is eating the lunch of its Deutschland rivals in the luxury car market.

As CNN Business reported on Oct. 4, “The Tesla Model 3 is the best-selling luxury car in the United States. By a lot.

The Model S was supposed to be a mass-market vehicle. In theory, its $35,000 sticker price would attract the EV-curious and suburbanites looking for a second car.

But the company has produced no cars at that price point. The average selling price is almost double that figure.

Its gaudy 400,000-unit waiting list meant Tesla could pick and choose what vehicles it wanted to make first. It should surprise no one that the company chose to make the most expensive, spec’d-out versions.

The company sold 55,840 Model 3s in the third quarter at an average selling price of $59,000.

As a point of reference, the next best-selling luxury car in the U.S. is the Audi Q5. The gas-guzzling SUV sold 21,000 units in the third quarter.

Model 3s are outselling their Cadillac, Buicks, Acura, Lincoln, Lexus, BMW and Mercedes brethren — of any model. Again, by a lot.

What Tesla got right was making an electric vehicle without compromises. Yes, the cars are environmentally friendly, but they are also incredibly quick and fun to drive. Elon Musk, chief executive officer, says he wanted to build cars that made people happy. He succeeded. Tesla ranks first in customer satisfaction, according to a survey from Consumer Reports.

Related story: Tesla’s over-the-air software updates are a big reason people love them

And with the Model 3’s fantastic acceleration and minimalist interior, the car feels like something from the future.

Related story: Tesla names new chair Robyn Denholm to replace Elon Musk.

Prior to Teslas, EVs were sensible but underpowered. The Toyota Prius and BMW i3 were built to appeal to hardcore conservationists, and they show it. They are all utility and no fun.

German carmakers are learning the lesson of Tesla’s success. They are now building vehicles without compromises that are more in tune with their history of performance.

Visually, the i4 is a stunner. It has a big double kidney grille and muscular lines that seem to make it look fast, even when it’s standing still. The company will pack an electric motor on each axle.

Executives promise the car will redefine what is possible today in terms of acceleration. Considering that Teslas can scream to 60 mph in 2 seconds, the i4 should be plenty fast.

Investors tend to view EVs as a niche market. Don’t listen to them; they are missing the point. As battery prices drop, most vehicles are headed toward electric propulsion, and soon. EVs are more efficient than internal combustion engines, easier to service, offer better performance, and ultimately are more fun to drive.

Ford (F) and Volkswagen announced Oct. 31 they were in exploratory talks to jointly develop EVs. The companies are already working together with BMW and Mercedes to develop a network of European fast-charging stations. In September, Volkswagen launched an electric car platform and promised to make 10 million EVs by 2025.

Volvo plans to electrify all of its vehicles by 2019, according to Business Insider. Jaguar’s I-Pace electric SUV is available now, and it’s winning rave reviews. Audi, Mercedes, Porsche and Cadillac will offer speedy EVs within the next two years.

One of the best ways for investors to play this big trend is with Livent Corp. (LTHM) …

Related story: Why carmakers are in a death spiral

The business is a recent spin-off from FMC Corp. (FMC), a diversified chemicals company. Livent has become a leading producer and manufacturer of lithium — a critical component in batteries used for EVs, consumer electronics and energy storage solutions.

chart

Prior to the Livent IPO last month, FMC Corp. had been investing aggressively to increase lithium production. The business had sales of $108 million in the fiscal second quarter, an increase of 46% year-over-year.

The company forecast full-year 2018 sales of $430 million to $460 million. In fiscal 2017, the unit had sales of $347.4 million.

The market capitalization is currently only $2.3 billion. Long-term investors could buy Livent into any near-term weakness.

Best wishes,

Jon D. Markman

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