Invest in The Internet of Things and Electric Cars
(This post was written: March 16th, 2017 and updated: July 15th, 2019.)
Why should you invest in the internet of things and electric cars? Because these 2 separate worlds are going to combine to create an incredible revolution that starts with three little words: self driving cars.
On Monday, March 13th 2017, members of my Profits Unlimited, an exclusive investment stock newsletter a welcome breakfast surprise. Mobileye (NYSE: MBLY), a stock that I had recommended in the March 2017 issue, was up 30%.
Intel, the mega chip company, decided to buy Mobileye, a car sensor developer, in a $15 billion deal, causing big gains quickly.
I’m incredibly happy for our readers, who have made Profits Unlimited one of the fastest-growing newsletters in the financial industry.
The thing is, if you look behind Intel’s decision to buy Mobileye, you’ll see a theme that I’ve been telling you about for some time — self-driving, or autonomous, cars — which is a critical component of the Internet of Things mega trend that is unfolding right now. And as you can see, it’s making people huge amounts of money quickly.
Now, there are two developments related to the self-driving car theme that have equal potential and are also happening right now.
Rise of the Machines
You see, the car is morphing from a mechanical machine, meaning that it’s driven by things like pistons and gears, to one that is electronic. Second, the car is developing into a machine that is connected to the Internet all the time, and because of that, connectivity is something that can be used as a shared resource.
Related to these things is the fact that because of laws that have been passed around the world, virtually all carmakers are preparing for most cars to be electric.
So, in other words, the entire way of making a car is going to be uprooted and changed.
This means it’s a time of incredible opportunity and, equally, of tremendous risk.
For sure, companies that make the components that are going to go into this electronic, connected, shareable and eventually electric car are going to benefit. This is where the internet of things and electric cars have a chance to revolutionize the way we travel on a very fundamental level.
And the companies that hang back, betting on mechanical, unconnected, unshareable and fuel-driven cars, are going to go bust.
The Model of the Future
The key moment, has already happened in 2017 when Tesla released its Model 3 car.
The reason why I believe that Tesla’s Model 3 is the key is because it’s going to be the first car that has virtually all the things that I mentioned. It’s electric, filled with electronic components instead of mechanical ones, and has the latest in self-driving capabilities. Model 3, like all of Tesla’s cars, is connected to the Internet nonstop.
According to news reports, over 400,000 people reserved a Model 3 before production and over almost 146,000 units have sold globally as of August 2019. Now, remember that these reservations are high-commitment: You had to put down $1,000 to do it. And the list price is $35,000.
When you do the math, it means Model 3 is setting up to be a $14 billion product right off the bat.
Now, $14 billion seems like a lot, but it’s nothing compared to the $147 billion that General Motors is expected to generate in sales in 2017.
So, in terms of overall car sales, Model 3 sales are a drop in the ocean. But the Model 3 is uniquely positioned to be the first car to combine both the internet of things and electric cars. It’s affordable and it delivers the functionality needed. It could spread like wildfire.
The Race Is On
The real thing that investors are going to be blown away by is how profitable Model 3 will be compared to the mechanical, fuel-driven cars. That’s because, other than the battery, components like the ones in your computer are much cheaper than the mechanical ones that go into your car.
And when investors see this, all hell will break loose. You’ll see the stocks of some electronic-component makers soar and the stocks of mechanical car manufacturers and their suppliers plummet.
I believe that deals such as Intel buying Mobileye, GM buying self-driving car startup Cruise Automation for over $1 billion in March 2016 and Ford buying a similar startup, Argo AI, for $1 billion, as well as other events with Google and Uber, are all due to the fact that the starting gun for the race to dominate the electronic, electric, connected, shareable and self-driving car is about to go off. And people are expecting the race to be hotly contested between tech companies such as Google and Intel, and car companies such as GM, Ford, Tesla and others.
However, I believe the smart bet on this new kind of car is an investment in the electronic guts of the car. And I still believe that. You can get exposure to many of the companies that make these electronic guts by buying the VanEck Vectors Semiconductor ETF (NYSE Arca: SMH). This is the same exchange-traded fund I’ve been recommending since June 2016, and you’d be up by over 38% if you had followed my suggestion then.
Editor, Profits Unlimited
I’ve been investing for more than 25 years. I started my career on Wall Street in 1991 as an assistant portfolio manager at Bankers Trust. I quickly advanced to prominent positions at Deutsche Bank and ING, managing multimillion-dollar accounts. In 2006, the owners of a $6 billion firm named Kinetics Asset Management recruited me to manage their hedge fund.