Analyst Arthur Lai recently stated in a note that tech sales to the auto industry are likely to outnumber sales to manufacturers of smartphones, computers, tablets, and wearables in as little as four years. According to McKinsey, the electric vehicle and software markets could be worth $362 billion by 2025.
“Transformed from a mere passenger vehicle into a moving mass of advanced electronics, complete with infotainment hub,” Lai wrote in the note, “the smart car will dramatically expand the addressable market for tech companies after saturation of the mobile economy.” “Smart-car adoption will be heavily, if not entirely, influenced by rapidly rising electric vehicle penetration, creating a high-growth opportunity for the tech supply chain.”
Predicting winners in original equipment manufacturers would be premature, according to Lai, but the company has identified computing hardware, sensors, software, and services as the segments that it believes will benefit the most. Here are five of its top recommendations:
Among the stocks is chipmaker Nvidia, whose in-vehicle computer platform, according to Citi, is seeing widespread adoption across the country. Nvidia’s existing wins in the auto industry are expected to ramp up in the coming years, resulting in a revenue inflection point.
According to the Citi note, “with software content potentially costing thousands of dollars per vehicle, this could be a multi-billion dollar revenue opportunity” for both Nvidia and Mercedes. Mercedes-Benz has partnered with the software company to enable in-vehicle computing and automated driving across its next-generation fleet, which will be available in 2024.
According to Citi, “100 million cars are sold globally each year, and we believe that over time, all vehicles will be autonomous, software defined, and upgradeable.” “We see the possibility of similar agreements with other automakers.”
According to the firm, the automotive industry accounts for approximately $8 billion in revenue for the semiconductor company KLA, or 5-10% of total sales. According to the note, the company’s management anticipates near-term growth of 40-50 percent. Citi has set a price target of $398 on the stock.
Auto represents less than 5% of total sales for Cree, a manufacturer of LEDs and semiconductors, but Citi sees it as the largest growth opportunity. Citi has set a price target of $110 on Cree.
Citi believes Corning, a glass-focused technology company, will benefit in the long run. Its target price is $50.
“Auto exterior continues to be a limited opportunity thus far, with traction in a few very high end cars,” Citi said. “Looking further ahead, Corning expects future innovations in lighting and sensors to drive an additional $30 content per car, bringing the total content in car opportunity to $100/car.”
Analysts at investment bank UBS have identified a series of top global stock choices in regions like Asia, Australia, and Europe, with its “highest ranked” firms including those in semiconductors, technology and health care.
The analysts also used a machine-learning technique called “random forests” to predict stock returns, which they claim automatically adapts to changing market conditions.
UBS analysts led by Paul Winter wrote the note, which detailed the bank’s “best style ideas.” According to the analysts, “UBS presents our best regional alpha ideas in one place.” We show the most recent performance for each model, as well as the highest and lowest-ranked picks for that idea.” Alpha is a term used by investors to describe market-beating returns.
“For Australia and Europe, we present a combined screen containing our 50 best picks based on an average ranking across the models,” the analysts explained. Sonic Healthcare ranked first in its Australian list, while steel firm Voestalpine ranked first in Europe.
Other prominent European companies included Admiral Group, LVMH and L’Oreal in France, and Kuehne & Nagel in Switzerland. Three health-care companies are also among the top ten in Europe: Merck KGaA of Germany, Sartorius of France, and DiaSorin of Italy. High-ranking stocks in technology include semiconductor supplier ASML and autonomous software firm Hexagon.
The fund manager is ‘extremely bullish’ on these three U.S. energy stocks.
Biotech firm CSL, container manufacturer Brambles, and mobile network Telstra are among the top ten on its Australian list, which also includes mining firm BHP, drinks company Treasury Wine Estates, and packaging firm Amcor.
The bank’s top-ranking company in Asia (excluding Japan) is China’s Luxi Chemical Corp. This was followed by the oil company PetroChina, the Taiwanese semiconductor firm United Microelectronics, and the Hong Kong-based auto supplier Xinyi Glass. Powertech Technology, a semiconductor supplier, Kia, and Taiwanese firm Formosa Plastics round out the top ten.
Top ‘cheap’ global stocks
According to investment bank Berenberg, medium-sized global companies they believe are selling at a discount and have better-than-expected growth potential have been added to their top choices.
“Stocks in our EU Mid-Cap team’s coverage are expected to grow faster than the market in the near and medium term. Berenberg analysts stated in a research note published on September 2 that “there are some very attractive single stock opportunities in European small- and mid-cap land.”
According to the analysts, the group is currently trading at a 10% discount to larger peers.
“During the 1990s, European large cap stocks outperformed large caps for a decade; this reversed at the turn of the century – small and mid-caps have outperformed large caps since,” the analysts wrote.
Berenberg ran several stock screens, one of which was labeled “value+.” “The screen looks for cheap stocks by screening for stocks trading on a P/E [price-to-earnings] multiple that is less than a 10% premium to their five-year average, as well as stocks with decent dividend yields,” the analysts wrote. The price-to-earnings ratio is a method for evaluating a company’s stock and comparing it to others.
According to the analysts, the picks also have “decent dividend yields, positive recent earnings momentum, strong expected medium-term earnings growth, and low PEG ratios.” The price/earnings to growth ratio (PEG) is used by investors to assess a company’s performance and risk.
Picks for stocks
Irish bank AIB Group, British insurer Beazley, and Spain’s Banco de Sabadell are among the stock picks in the value+ screen. The list also includes French auto suppliers Valeo and Faurecia, as well as SAF-Holland, a Dutch auto parts company. Analysts also liked the British energy companies John Wood and Centrica.
They also chose Zeal Network, a German lottery company, Maisons du Monde, a French interiors company, Wacker Neuson, a German construction equipment company, and Vesuvius, a British engineering firm.
“We believe stocks with these characteristics look appealing in equity markets that are currently trading near all-time highs, with the upside potential to participate in a continued recovery in corporate profits,” the analysts said of the value+ screen picks.
Best stocks of the decade
Each of these companies has a stock that has returned more than 4,000% in the last decade, as described by Bespoke Investment Group.
The firm examined which stocks in the broad Russell 3,000 index had returned the most over the previous ten years. The results are in, and one name increased by a whopping 100,000%.
According to the firm, the Russell 3,000 index accounts for roughly 98 percent of publicly traded market capitalization in the United States. In the last ten years, just over 450 stocks have returned more than 500 percent on average, and only 151 have returned more than 1,000 percent. Only 38 stocks have returned more than 2,000%, and only 13 have returned more than 4,000%, according to Bespoke.
Here is a list of the ten best performing Russell 3,000 stocks in terms of total return over the last ten years.
According to Bespoke, Xpel ranks first with a return of 106,028.6 percent since 2011. Xpel makes a film that protects surfaces such as car paint, home windows, and boat interiors.
In 2021, Xpel shares are up nearly 49 percent. Xpel reported second-quarter revenue of a record $68.7 million earlier this month. Revenue increased 32.5 percent from the previous year’s first-quarter record level.
Celsius Holdings, a maker of energy drinks, has risen 31,452.2 percent in a decade. The company now sells its beverages at 82,000 locations in the United States, including Kroger, CVS, Rite Aid, and SpeedWay.
Tesla, the popular electric vehicle stock, has returned 14,673.7 percent in the last ten years.
The vehicle manufacturer reported a net income of more than $1 billion in the second quarter of this year, a tenfold increase over the same period last year. Tesla reported $1.14 billion in (GAAP) net income for the quarter, the company’s first time exceeding $1 billion. Net income was $104 million in the previous quarter.
′′@elonmusk’s legendary Model S was still ten months from launch ten years ago in August 2011, when TSLA shares were under $5 on a split-adjusted basis,” Bespoke tweeted.
GreenBox, a cryptocurrency stock, has risen 13,891.8% in the last decade. According to the company, it is “revolutionizing cashless transactions with Blockchain.” Repligen, a healthcare company, and Patrick Industries, a manufactured home company, are up 8,125.9 percent and 9,630.5 percent, respectively, in the last ten years.
Nvidia’s chip stock has risen 7,282.9 percent in a decade. According to Bespoke, Nvidia’s market capitalization is now 2.5 times that of Intel’s.
Nvidia shares are up 75% this year, and Wall Street believes the stock will continue to rise.
“We have increased conviction that its data center business is accelerating, and that it is continuing to build out its software offerings, consistent with our thesis that NVDA is morphing into a Parallel Processing Ecosystem play,” said Mark Lipacis of Jefferies in a note.
Furthermore, Jim Cramer stated that Nvidia is in a “bull market mode” and is led by “fabulous leadership.” Nvidia is bidding for the U.K.-based chip designer Arm from Japan’s SoftBank for $40 billion, but there are some stumbling blocks.
“If Nvidia can close on this acquisition of Arm Holdings, it will become the most important semiconductor company of our time,” Cramer said.
BioLife Solutions has increased by 6,313.8 percent since 2011. The company provides gene and cell therapy products and services.
Trex, a company that manufactures non-wood decks, had a share price of $2 in 2011. After ten years, the stock has returned nearly 5000 percent, trading at around $110 per share.
Other names on Bespoke’s list include Mirati Therapeutics, a biotech company focused on cancer therapeutics. In the last decade, the stock has increased by 4,485.9 percent.