The world of electric vehicles (EVs) has been the latest boom coming from the economy's technology and artificial intelligence pockets. Where there is money to be made, you better bet a lot of new players will spur up like wildfire. Your job today is to move past the crowd and land a clear winner.
Everyone is aware of brands like Tesla (NASDAQ: TSLA) and other up-and-coming names like Rivian Automotive (NASDAQ: RIVN), who have made a splash all over the media outlets for their rapid growth and huge upside potential coming from Wall Street analysts all the way to retail investors advocating on Twitter.
A select few savvy, hyper-aware investors have found other names to their geographic markets and their exposure across time, a strategy only some are aware of, but you're not everyone else; you are part of the few.
Diversify Across Time
Looking at the timeline of EVs, Tesla is the clear favorite today, though a question comes to mind. Is it the favorite because it was the first to succeed or the first to achieve because it is the favorite? In either case, Tesla is a clear example of the path these business models may follow.
Step one: ensure you have enough runway to cover the production of the flagship vehicle that brought you to market; for Tesla, it was the first roadster. Step two is achieving economies of scale and getting incremental technology benefits at more accessible prices, A.K.A. the model 3.
Step three is where things get a little tricky, where the optimistic growth rates that Wall Street expected become questionable when the company gets so big that it is almost impossible to keep pumping double-digit percentage rates; this is where the stock begins to suffer.
As seen in Tesla's stock chart, it has been unable to push past the same prices it rose to in the first quarter of 2021. Why? Simply because more and more market participants realized that today's valuation is already priced in some of the most exuberant growth assumptions.
So, where does that leave you on the timeline side of things? Investing in Tesla means investing for the remainder of the 'mature' growth this business will see for the rest of time, and any stock price advance will reflect this 'mature' growth rate.
This is not bad, as it will likely bring more stability to your investment. However, you can also diversify your EV portfolio into another name, quietly pushing past step two (see above) and about to burst into the expectations of wild Wall Street growth assumptions.
At the Heels of Giants
Reportedly, BYD (OTCMKTS: BYDDF) is only 3,000 vehicle sales away from overtaking Tesla as the global leader in EV sales. Yet, nobody is pushing this stock down your throat, the first green flag implying there is no Wall Street greed behind this company.
While Tesla analysts see a net downside of 9.2% from today's prices, and perhaps rightly so, considering that most growth assumptions are priced in, BYD price targets and ratings have a different story to tell.
With a $44.0 consensus price target, roughly 23 analysts are rating BYD stock as a 'strong buy' and implying a 42% upside from today's prices. Too good to be true? Well, there is but one catch to this tremendous deal.
BYD is based in China, where high-quality stocks sell at dirt-cheap valuations due to the current bearish sentiment building up toward the nation's equities. However, some subtle signs from Wall Street's brightest minds imply this may no longer be the case.
Ray Dalio, a world-known investing legend who created the 'all-weather portfolio,' has invested a decent amount of money into Chinese ETFs that own names like Alibaba (NYSE: BABA) and BYD, a sign that the investor believes the best is yet to come.
As is typical for Warren Buffet, he has also been invested in BYD since 2008, spotting the massive growth opportunity before anyone even heard the word "EV" coming from the TV.
BYD has committed to keep expanding to Europe and is willing to share all the data and information necessary to move past concerns around Chinese-manufactured vehicles. But Europe is not known to be hypergrowth region, so where will all the excitement come from?
Strategically, BYD has made a presence in Chile, already becoming friends with President Gabriel Boric. Why is this significant? Chile is known to have massive lithium mines, the stuff every EV needs to run its batteries.
Diversifying its manufacturing facilities and becoming slowly entrenched with the world's largest lithium reserves will inevitably result in pricing power benefits. BYD stock is one quarter from taking over Tesla's Wall Street hype.
Once the market realizes that China's situation is not bad and that companies like BYD deserve a little more love, it will already be too late to jump in. You may want to start considering further due diligence into this potential EV world leader.