Please join us for a review of the best alpha opportunities and catalysts in the EV and EV materials space tomorrow @ 12:30PM EST
While many of the EV and profitless ESG short opportunities have already underperformed, we see elements of our thesis playing out well. Lithium and rare earths do appear to be supply constrained inputs to the EV boom. EV competitive entrants have muddled the field for early movers, a dynamic that rhymes with competitive entry in handhelds or streaming services. While we suspect that Musk is politicizing himself amid various (and serious) legal and regulatory actions, the impacts on Tesla and his personal brand are unlikely to further Tesla investor interests. Nonetheless, EVs are increasingly mainstream. We are adding MP Materials back as a Best Ideas long and will throw LTHM on the Long Bench to accompany Best Ideas Long ALB. MP Materials has downstream processing launching in the near-term, an investment that will increase profitability and facilitate further downstream investments. Completion of these projects provides company specific upside in a difficult Quad 4 macro backdrop. We added FSR to the Short Bench, with many names in deep trouble, like GOEV, already crowded and small for a sustained short position. We see greater than 50% downside in shares of Tesla and Lucid and sustained/defensive outperformance from ALB and MP. We doubt many of the smaller EV entrants, like FSR, will survive.
We view much or the speculation in EV OEMs was driven by excess stimulus and lax securities regulation enforcement.
While the penetration of EVs is an ongoing reality increasingly driven by established OEMs.
We’ll review our recent survey data, the impact of the IRA and other catalysts in 2023, as well as some of our views on the penetration of EVs in a call tomorrow at 12:30PM.
