Forget Tesla. Portfolio manager names another way to play EV market
When it comes to investing in the electric vehicle market, Tesla is a popular investment target. But growing competition has called into question the company’s continued dominance. Brian Arcese, a portfolio manager at investment firm Foord Asset Management, said he is “much less committed” to Tesla remaining dominant than his preferred investment path in the electric vehicle market. He told CNBC Pro Talks last week that he takes two “slightly unconventional” approaches to investing in the space. The first is traditional regulated utility investing. Arcese noted that this was the first time since the 2008 global financial crisis that electricity had “little to no growth” as the economy shifted from manufacturing to services. “Before data centers really took off, capacity on the power side was already declining,” he said. “Ultimately, as electric vehicles come out, as they become a bigger and bigger component… you’re going to get a decent amount of volume growth. So these utilities, the regulated utilities, are more or less ignored by the market, And it’s trading at a pretty cheap valuation right now that will actually provide investors with growth in the 5% to 7% range.” Arcese said that coupled with a 3% to 5% dividend, investors could get continued “double-digit growth. ” and “much lower risk” than investing in pure play companies. He singled out Edison International, a U.S. stock, as one of the U.S. regulated utilities riding the electric vehicle trend. The second approach is to invest in the materials needed to produce electric vehicles, such as copper and lithium, which Arsese said he already has invested in. But he said that in this area, he is focusing on the lowest-cost producer companies. “I don’t know where copper prices are going to be… but in the medium to long term, we know we need more copper, so if you invest in the lowest cost producers, then that’s one way to participate in that space. , ” He said. Arcese delivered a speech at the first CNBC Professional Lecture held on November 22 at INSEAD Asia Campus Business School in Singapore. CNBC’s Tanvir Gill spoke with him and two other experts – James Sullivan, managing director and head of Asia Pacific equity research at JPMorgan and Allianz Global Investors) Jenny Zeng, chief investment officer of fixed income in Asia Pacific. Sullivan pointed out that the sales volume of the electric vehicle market is “very, very large.” “Frankly, you see design and technology quickly becoming world-class,” he said. “At JPMorgan, the way we think about this is we try to understand the fundamentals of businesses that can make money at a given price point, and the answer is China, and then to some extent South Korea, and then not really the U.S. given the price point. ,” Sullivan said. Production costs will be a key variable, he added.
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