In this article, we present to you the 12 Best Autonomous Vehicle Stocks to Buy for 2021. If you’re in a hurry you can skip ahead to the 5 Best Autonomous Vehicle Stocks to Buy for 2021.
An autonomous car is defined as a vehicle that is capable of functioning without any human involvement. The vehicle is able to sense any environment at any given time with the help of sensors, actuators, complex algorithms, and software execution. Basically, AVs are driverless cars.
Autonomous electric vehicles are not good for the environment (please also see 12 Best Climate Change Stocks to Buy Now) but also prevent one of the leading causes of death. According to a study conducted by the Center for Disease Control and Prevention, crash injuries are estimated to be the eighth leading cause of death globally. If we were able to switch to autonomous driving over night, we would save more than 1 million lives per year globally. Yet, we are still too scared of harming people during the development process of the autonomous driving technologies.
With the continuous advancement of technology, consumer interest in autonomous vehicles has grown significantly. Please all see 15 Best Tech Companies: How Big Can They Get? In a study conducted by Statista, 85 percent of US adults would feel safe sitting behind the wheel of a driverless vehicle. By 2030, the autonomous vehicle will become a large market at $60 billion worldwide. ARK Invest's Cathie Wood thinks autonomous vehicles will capture a larger than estimated percent of the market. Wood’s biggest stock position in her portfolio is Tesla Inc. (NASDAQ:TSLA). She believes Tesla will beat GOOGL to self-driving car dominance.
As a result of recent activities relating to COVID-19 including the lockdown, there was a significant boost in interest for autonomous vehicles not only for transportation but for greater automation as well. Anjana Susarla, an accounting and information systems professor at Michigan State University mentioned,
“Part of the resurgence is coming from the fact that the pandemic has made companies realize the importance of investing in contactless technologies and greater automation. In China, for instance, driverless cars were used for disinfecting roads, driverless cleaning and disinfection vehicles for use within hospitals etc. Some airports have likewise installed autonomous disinfecting robotic vehicles. Some other applications are autonomous vehicles for contactless robot delivery systems for food delivery.”
The Biden Administration’s “Build Back Better” signals a strong digital infrastructure plan. The plan emphasizes clean energy in particular electrified vehicles. Garrett Nelson, a senior automotive analyst with CFRA Research mentioned,
"Traditional automakers with largely union workforces would likely be among the biggest winners from tax incentives that would further stimulate the production and consumption of EVs,”
Amazon (AMZN) has come up with its own self-driving vehicle company, Zoox. An electric, fully driverless vehicle that was built for ride-hailing. The company mentioned that this achievement marked a new key milestone for them,
“Zoox is the first in the industry to showcase a driving, purpose-built robotaxi capable of operating up to 75 miles per hour. While our vehicle is not ready for commercial use yet, this marks a key milestone towards our vision of building an autonomous robotaxi fleet and ride-hailing service.”
In order to identify the 12 best autonomous vehicle stocks to buy for 2021, we started with the 76 holdings in the Global Autonomous & Electric Vehicles ETF (DRIV) as of December 24, 2020, and we were able to narrow down our list to 12 stocks by using our hedge fund sentiment scores.
So why did we use the sentiment scores of hedge funds as the key criteria to assess the best stocks of autonomous vehicles to buy for 2021? Our in-house research shows that we can use the hedge fund sentiment data to identify in advance a small group of stocks that can outperform the S&P 500 index on an average by double digits annually. For example, the portfolio of stock picks for our monthly newsletter has beaten the market by over 78 percent since March 2017 (see the details here). We have also shared some of the portfolio holdings of our monthly newsletter online. We shared this real estate stock in October and it's been up more than 50 percent since then.
Based on our hedge fund sentiment data, we present to you, the 12 best autonomous and electric vehicle stocks to buy for 2021, among the 800+ hedge funds tracked by Insider Monkey:
12. Cisco Systems, Inc. (NASDAQ:CSCO)
No of HFs: 59
Total Value of HF Holdings: $3.93 Billion
In 2017, Cisco began working with Michigan DOT to build an autonomous driving infrastructure. In recent years, Cisco developed innovative data collection and analysis solutions in the smart car industry. Cisco aims to bring gigabit-speed Ethernet connectivity to smart cars allowing both the fastest air updates and laying the foundation for better self-driving technology. Cisco Systems Inc is in partnership with UK-startup Oxbotica in building a platform that runs a software built-in autonomous cars that would upload data to the cloud.
Heartland Opportunistic Value Fund mentioned in an article that they believe positive strides from CSCO made in previous quarters will resume post-pandemic
“A handful of Information Technology (IT) names have been grabbing most of the investment headlines lately, however, as a whole, the sector has been a mixed bag from a performance standpoint. The Russel 3000® Value Index highlights the dynamic where the group ended the period mostly flat. Our holdings in the space outperformed marginally but also contained a key detractor, Cisco Systems, Inc. (CSCO).
Cisco, the world’s leading computer networking provider, was down for the period after revenues from its Products and Applications business lines weakened as IT departments postponed network spending in response to COVID-19. Sales from its security line were up roughly 14% but strength in the segment wasn’t large enough to offset weakness elsewhere. Impressively, they held operating margin on a 9% revenue decline.
Wall Street’s reaction to the weak results were mixed. Some credited the company for executing well in the face of an unprecedented macro pressure on its clients, while others cited results as an indicator that Cisco is struggling in its transformation from a predominantly hardware-oriented business to one that generates recurring-revenue through software and services.
The challenges faced by Cisco strike us as a temporary setback to what has been ongoing progress in its transition to a model that generates recurring revenue and is less tied to the IT spending cycle.
We believe the positive strides made in previous quarters will resume. With the recent setback, shares are trading at an attractive 12x earnings, while generating a nearly 4% dividend yield and a free cash flow/enterprise yield of nearly 10%.”
11. General Motors Company (NYSE:GM)
No of HFs: 60
Total Value of HF Holdings: $4.78 Billion
GM ranks 11th in our list of the best autonomous vehicle stocks to buy for 2021. If you own a Chevy, GMC, or a Cadillac, your car is definitely from General Motors Co. General Motors Co. is one of the biggest automotive companies not only in the US but also globally that specializes in designing, manufacturing, and selling cars, trucks, and automobile parts. Recently, General Motors and Honda announced to team up on new models for North America, foreseeably sharing platforms for electric and internal combustion vehicles with a variety of body styles. Earlier this year, GM unveiled the design of the ultimate ride-sharing driverless car in San Francisco. GM and Honda unveil “Origin”, an all-electric, driverless shuttle, that can seat up to 6 people in the car of tomorrow. Could Origin wipe up the ride-sharing giant, Uber? One thing is for sure, now we’ll keep an eye on you, GM.
In an article, Greenlight Capital’s highlighted a few stocks and GM was one of them,
“We have owned GM for a number of years and our investment has underperformed the market (our return to date has been 10.6%, annualized). Every year the shares seemed cheap on an earnings basis, but cash flow ultimately came up short for one reason or another. An unprofitable region or two was sold or restructured, investments were made in new technologies, plants and product lines required capital investment, GM Financial required capital to grow, and pension plans were funded. All of these steps have led to a stronger company that can better face future economic and business challenges. However, the net result of so many cash needs is that while earnings have been good, cash flow has lagged.
Management recognizes this disconnect, and in early 2019, the company emphasized that cash flow must better match earnings. As we looked at the company’s forecast, we saw no more regions requiring expensive restructuring, and the above-normal capital and strategic investments appeared to be paid for. As such, we believed that by late 2019 the cash flow would again be significant enough to allow GM to recommence its share repurchase program. We half-asked and half-joked, what would cause cash to come up short in 2019? We couldn’t think of anything. And then a six-week-long strike hit that caused GM to miss its earnings forecast and come up woefully short on free cash flow – again.
10. Intel Corporation (NASDAQ:INTC)
No of HFs: 66
Total Value of HF Holdings: $4.34 Billion
INTC ranks 10th in our list of the best autonomous vehicle stocks to buy for 2021. Intel-based technologies are being promoted by Intel Corp in autonomous vehicles for sensor processing, general computation, and connectivity. In 2017, Intel Corp acquired Mobileye, a leader in computer vision for autonomous driving technology, for $15.3 billion. The company was mentioned as one of the 10 Best Dividend Stocks to Buy Under $50 and one of the 10 Most Profitable Companies in America in 2020.
The top hedge fund holder of this stock is Ken Fisher’s Fisher Asset Management which had over $1.46 billion invested in the stock at the end of September.
9. Tesla, Inc. (NASDAQ:TSLA)
No of HFs: 67
Total Value of HF Holdings: $8.17 Billion
TSLA ranks 9th in our list of the best autonomous vehicle stocks to buy for 2021. The California-based autonomous vehicle producer swept our feet off the ground with its electric-fueled, sexy-looking, driverless cars. Tesla, Inc. is the crowd’s favorite because it’s the opposite of the boring; its products are innovative with a touch of luxury and fit with the right market. During the third quarter of 2020, the company reported a net income of $331 million on revenue of $8.77 billion. Tesla was mentioned as one of the 5 Best Auto Stocks to Buy Now and ranked as one of the Top 10 Stocks Americans Searched the Most in 2020.
In an article, Baron Opportunity Fund mentioned their comments on TSLA,
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, and energy storage solutions. The company reported robust second quarter results, solidly ahead of market expectations, despite the impact of the COVID-19 pandemic and associated macro-economic challenges. Indeed, in the second quarter, Tesla delivered almost 91,000 total vehicles – with strong unit level economics of 25.4% GAAP automotive gross profit margins – and another quarter of GAAP profitability and solid free cash flow (above $400 million). Moreover, Tesla recently announced a record of nearly 140,000 total vehicle deliveries for the third quarter. Despite global COVID-19 disruptions, our long-term expectations remain high due to Tesla’s differentiated products and healthy unit economics. Tesla has announced capacity expansions in Shanghai, China; Berlin, Germany; and Austin, Texas to support its short-term path to 1 million vehicles and its long-term goal of 20 million. Just a couple of weeks ago, Tesla held its Battery Day event, and presented a grand vision around its battery innovation and expanding its competitive advantages, including massively increasing internal battery production capacity (100 gigawatt-hours by 2022 and 3,000 by 2030), improving battery range (about 50%), and significantly lowering battery costs (cost per kilowatt-hour to decline by over 50%). We remain confident that Tesla will leverage its brand, technology leadership, and the electric vehicle secular trend to achieve sustainable long-term growth.”
8. NXP Semiconductor NV (NASDAQ:NXPI)
No of HFs: 68
Total Value of HF Holdings: $1.63
NXPI ranks 8th in our list of the best autonomous vehicle stocks to buy for 2021. The Company offers high-performance mixed-signal and regular product solutions for the automotive, personal security and identification, wireless and wireline infrastructure, mobile communications, multi-market industrial, consumer, and computing industries. NXP’s innovations include functional safety and automotive security, powertrain and vehicle dynamics, versatile body interior, and highly automated driving systems.
The top hedge fund holder of this stock is Alex Sacerdote’s Whale Rock Capital Management which had over $1.46 billion invested in the stock at the end of September.
7. Advanced Micro Devices, Inc. (NASDAQ:AMD)
No of HFs: 71
Total Value of HF Holdings: $5.08 Billion
AMD ranks 7th in our list of the best autonomous vehicle stocks to buy for 2021. Advanced Micro Devices, Inc. based in Santa Clara, California was founded in 1969. The company focuses on high-performance computing and visualization products used in computer processing. During the third quarter, the company reported a revenue of $2.80 billion.
The company was mentioned as one of the Top 10 Stocks New Mets Owner Steve Cohen was Buying in Q3.
6. Micron Technology, Inc. (NASDAQ:MU)
No of HFs: 79
Total Value of HF Holdings: $4.57 Billion
The Embedded Business Unit sector of Micron Technology Inc focuses on developing memory and storage products sold into automotive, industrial, and consumer markets. Micron’s automotive memory is the key to the intense memory needs of today's and tomorrow’s self-driving cars.
Is MU a compelling investment case? Check out our article where Bonsai Partners mentioned MU,
If there’s one investment mistake I’ve made multiple times in my career it’s accepting lower quality businesses available at attractive prices. I hope I’m not repeating this mistake again with Micron.
Acquiring a low-quality business at a great price usually does not lead to great investment returns, but neither does a great business at a low-quality price. You have to have both to earn superior returns.
I view Micron’s share price is quite attractive, but I also believe the business is transitioning from being mediocre to rather good. If that happens, attractive returns should follow.
Historically, Micron has not been kind to shareholders, and its shares are currently priced to reflect this. However, I believe that the nature of the DRAM industry has structurally changed for the better.
From a high-level, what makes Micron attractive is how essential it is to human progress. Without getting too professorial, humanity has had multiple waves of productivity gains over the past 12,000 years.
The first big improvement in productivity came from the agricultural revolution, which allowed humans to shift from hunting and gathering into high productivity farming and the division of labor.
The second wave of human productivity came from the industrial revolution, which harnessed machines to perform repetitive tasks on our behalf.
We are now in the third wave of human productivity: the information age. Like the machines of the industrial revolution, silicon chips are now automating and simplifying information-driven tasks.
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Disclosure: None. 12 Best Autonomous Vehicle Stocks To Buy For 2021 is originally published at Insider Monkey.