The US Election Supercharges EV Stocks, Green Metals are the Play

The U.S. Election has been Good to EV Stocks

In this edition of Green Metals in Focus, Capital 10X examines the boom in electric vehicle stocks post the U.S. election.

Heading into the election the setup was very clear, Trump represented a continuation of the Republican anti-climate change and pro-fossil fuel policies, while Biden was pro-climate change legislation and a supporter of electric vehicles.

Biden’s November 3rd election victory became the biggest catalyst for electric vehicle stocks in 2020.  The EV stock universe ripped significantly higher in the days and weeks following the election.

Capital 10X created an index of 15 electric vehicle stocks (listed below), this group is up over 70% since election day, handily outperforming the S&P 500 by nearly 10X.

This is a group of stocks that sports very high Price/Sales multiples, and most of the names don’t have consensus forward estimates at all.  Of the top 5 names on the list by market capitalization, 3 of them are domiciled in China.

What about the Green Metals that underpin the Green Technology?

One of the most bullish EV proponents, Chamath Palihapitiya – CEO of Social Capital, stated in a tweet last week that production of EVs will create even more demand for rare earths – and that’s why he co-owns the largest rare earths producer outside of China – MP Materials.

Whether or not GM’s strategy will work is secondary to what I care about which is further demand for EVs. The byproduct will create even more demand for rare earth metals.

I co-own the largest rare earth supply outside of China. $MPhttps://t.co/IcOx68R5Qh

— Chamath Palihapitiya (@chamath) November 20, 2020

We examined how the ‘green metals’ have done during the same period, metals such as copper, lithium, cobalt, vanadium and rare earths. These elements underpin the environmental technology that will reduce carbon emissions.

These electric metals have done well compared to the S&P 500, however still meaningfully lag the group of electric vehicle stocks.

Copper miners (Global X Copper Miners ETF) and lithium miners (Global X Lithium ETF) are both up +17%, while rare earth stocks are up 28% (VanEck Rare Earths ETF).

Largo Resources (TSX:LGO), a pure play vanadium stock (resource effiecy & batteries), is up 19%.

Sierra Metals (TSX:SMT, NYSE:SMTS) the best performing copper stock is up 42% since the election.

Bottom Line: There’s a Big Catch-Up Trade in Green Metals

It’s clear the electric vehicle industry is competitive and still very early stage in terms of sales or profitability.

We believe green metals are the strategic play on the green economy, it is where the bottlenecks are in the supply chain and where pricing power exists – that is why Chamath owns green metals.

Additionally, green metals are generating revenue and cash flow today. For example on  a forward price-to-sales basis, Sierra Metals and Largo trade on 2x and 4x respectively – a big discount relative to their green electric vehicle peers.

Largo Inc. is a market awareness client of Capital 10X.

Sierra Metals is a market awareness client of Capital 10X.