Cabot Stock of the Month Issue: April 11, 2024

It was more of the same for the markets this past month—some momentum, but ultimately, we ended up in just about the same place.

Investors are a little gun-shy as most were expecting Fed rate cuts to begin in the latter half of the year. But as the inflation beast is proving harder to tame than expected, Fed Chair Powell has indicated it may take longer before we see a rate cut.

Naturally, the markets had an issue with that.

However, they seem to have absorbed that information and gone back to business.

Both Growth and Value stocks are doing well, with the exception of Small-Cap Value, which is down 0.34% so far this year.

Sector-wise, all sectors—except Real Estate—are positive in 2024, with Energy (up 16.98%), Communication (+13.57%), and Financial Services (+10.56%) leading the way.

The economy—despite a lot of trash talk—is actually doing pretty well. Factory orders came in higher than expected (+1.4% vs. 1.0%); job openings are steady at 8.8 million; U.S. Farm Payrolls exceeded expectations (+303,000 vs. 200,000); and the unemployment rate stayed steady at 3.8%.

The housing market is looking healthier, with inventory up 19.1% over last year. Prices are continuing to creep up, rising 6.4% from 2023. Here in East Tennessee, we are seeing similar—but better—movements, with inventory up 24.0% and prices up 10.3% over last year.

All in all, we are still bullish here at Cabot, but also maintaining our judicious stock-picking stance.

This month, I have an undervalued company that’s also in growth mode for you, recommended by an analyst new to these pages. I’m really excited for you to hear about both!

Feature Recommendation

Honda Motor Co., Ltd. (HMC): Growth at a Big Discount, and in a Booming Industry

Recommended by Chris Preston, Chief Analyst, Cabot Value Investor

It’s my pleasure to introduce Chris Preston’s new recommendation. I’ll give you more information about Chris in a minute, but I wanted to first share one of his new picks as the new Chief Analyst of Cabot Value Investor.

Chris chose a company that is gaining traction in the evolution of the automobile industry—electric and hybrid vehicles. Here’s his review of Honda Motor Co., Ltd. (HMC):

“I just added Honda (HMC). In seeking growth at value prices, Honda fits the mold: it’s coming off its best year in half a decade, as sales grew 33% in 2023, boosted largely by its expanding hybrid options, which nearly tripled their revenue and now make up a quarter of total sales. Hybrids are likely to become a much larger slice of the pie in the coming years, and that should only benefit Honda’s total sales. Meanwhile, the stock has momentum (up 18% year to date) and yet is still dirt-cheap, trading at less than 8 times forward earnings and 0.5 times sales.

“The first car I ever bought was a Sapphire Blue Honda Civic. It had two doors; you had to manually roll the windows down with a lever; there was no button on the keychain to lock and unlock the doors—you had to stick the key in the lock and turn. And I loved it. Of course, at the time I was single, living in Washington, D.C., and needed a car—any car—to commute to my job at a residential real estate firm in northern Virginia. Once I moved to snowy Vermont and had kids, getting around in a two-door sedan with front-wheel drive quickly became untenable. But the Civic had served me well for more than a decade.

“Soon, the Civic will be available as a hybrid. Technically, it already was—or a close facsimile of it, the ‘Honda Insight,’ was until 2015. Later this year, however, the new Honda Civic Hybrid will go on sale, piggybacking on the success of Toyota’s Corolla Hybrid. In fact, Honda has found new life thanks to hybrids, i.e., cars that use both the traditional internal combustion engine and an electric, battery-powered motor. After years of declining sales, Honda was rejuvenated in 2023 thanks to hybrids.

“The Japanese automaker sold 1.3 million cars last year, a quarter of the cars it sold were hybrids, led by its popular CR-V sport utility vehicle (SUV) and Accord mid-size sedan. The CR-V was the best-selling hybrid in the U.S. last year, with 197,317 units sold. The Accord wasn’t far behind, with 96,323 sold. All told, Honda’s hybrid sales nearly tripled in 2023, to 294,000 units.

“So, Honda is making the full pivot to hybrids, with the Civic soon to become the latest addition to its hybrid fleet. It’s part of a larger industry trend, where hybrids are gaining in popularity while the once-stoppable growth in pure electric vehicles has slowed. While Americans bought a record 1.2 million electric vehicles last year—up 46% from 2022—hybrid sales surged 65%. When you include plug-ins, roughly 10% of all new cars purchased in the U.S. in 2023 were hybrids, vs. a 7.6% market share for pure electrics.

“Investors have started gravitating more to the companies that sell them. Invariably, those are well-established, big-name car companies made famous by many decades of selling internal combustion engine vehicles. Most aren’t ready to fully abandon their roots but want to tap into the surging national (and global) appetite for electric, so they instead are turning to hybrids as a compromise. As a result, these once-stodgy car companies are tapping into new revenue streams, and their share prices are surging accordingly.

“That includes the likes of Toyota (TM) and Hyundai (HYMTF). But Honda is the best value, trading at a mere 7.9x forward earnings estimates, 0.47 times sales, with an EV/EBITDA ratio of a microscopic 0.04. Trading in the mid-36s, shares have surged of late, up 18% in 2024 and 38% in the last year. And yet, they’re 18% below their peak above 44 in 2011.

“Honda aims to boost sales by another 10% this year—a likely conservative estimate, considering its hybrid sales tripled last year and will only become an even bigger slice of the pie in 2024. Meanwhile, earnings per share are expected to come in at $4.20 in the current fiscal year (results will be reported on May 9), which would mark the company’s most profitable year since 2018 and a 47.7% improvement from fiscal ’23. EPS is expected to swell to $4.56 in fiscal ’25 (which technically started this week), and $4.89 in fiscal ’26.

“Given Honda’s renewed, hybrid-assisted growth, HMC shares are cheap by every measure. And now they have momentum. Let’s add this stock to the Growth & Income (it also pays a 2.7% dividend yield!) Portfolio. I’m setting a price target of 45, which gives us 23% upside. BUY”

Buy with a 45 price target.

The vehicle news in the U.S. keeps “accelerating.” According to GlobalData, in March, sales rose 5.1% to 3.75 million units, and they are predicting that the seasonally adjusted annual rate will rise to 15.5 million units, compared with 15.02 million in March 2023. Light-vehicle retail inventory reached 1.7 million, up 4.2% from February 2024 and 39% from March 2023. And total inventory surpassed 2.5 million for the first time since 2021. J.D. Power reported that the average price declined 3.6% year over year to $44,186.

I could have used that good news in November when I had to replace my car (no inventory and high prices!).

However, that is great news for Honda! While Toyota still dominates hybrid land, Honda’s hybrid growth rate tripled in 2023, to 293,640 vehicles. And with the shares trading at a trailing P/E of less than 10—that sounds like a bargain to me!

About the Analyst: Chris Preston, Chief Analyst, Cabot Value Investor

Chris Preston is Cabot Wealth Network’s Editor-in-Chief and Chief Analyst of Cabot Stock of the Week and Cabot Value Investor.

Chris joined Cabot in 2015, where he previously served as staff analyst, web editor, and Chief Analyst of Cabot Wealth Daily, our free investment advisory, which in 2019 was named “Best Financial/Investing Newsletter or Ezine” at the SIPA (Specialized Information Publishers Association) Awards, with Chris at the helm.

Prior to joining Cabot, Chris was an analyst and assistant managing editor with Wyatt Investment Research. He has been an investment analyst for the last 12 years and a professional writer/editor for more than 20 years, picking up multiple writing awards along the way. His bylines have appeared in Forbes, The Money Show, Time Magazine, U.S. News and World Report and ESPN.com.

Chris lives in Vermont with his wife, two young kids and their golden retriever, Scout.

Chris and I came to Cabot at about the same time, but we actually had run into each other years before that, as I freelanced for a company in the investment business where he was working. I’m very excited about him taking the helm at Cabot Value Investor and have no doubt subscribers will continue to enjoy some healthy profits under his tutelage.

Here is our interview:

Nancy: Congratulations on being named the new Chief Analyst of Cabot Value Investor. Cabot subscribers, of course, will be familiar with your name as you’ve been at the helm of Cabot Stock of the Week for some time now.

As Chief Analyst of Cabot Stock of the Week, you highlight a specific recommendation from one of Cabot’s advisories. Would you please share your primary criteria for selecting each recommendation?

Chris: In Stock of the Week, I try and create a balanced portfolio, but I also go where the market winds are blowing. So, in bull markets like this one, I lean more growth-y, plucking stocks from Mike Cintolo’s Cabot Growth Investor and Cabot Top Ten Trader, Tyler Laundon’s Cabot Early Opportunities, and Carl Delfeld’s Cabot Explorer, a global, growth-oriented portfolio.

But it’s important to hedge your bets. You never know when the market is going to take an abrupt U-turn, so the Stock of the Week portfolio has many “safer” value and dividend picks as well. Fortunately, much like yourself, I’m picking stocks that have already been pre-selected by our outstanding team of investment analysts, so I’m plucking from the cream of the crop, which has led to good returns.

Nancy: How long do you generally keep a stock in your portfolio, and what criteria do you use for deciding when to sell?

Chris: It’s a tricky balance. Because I’m recommending a new stock every week (hence the name!), I have to sell somewhat frequently. Otherwise, we’d have 50-plus stocks in the portfolio just from one year of issues! That said, it’s not a trading advisory, so I don’t want to sell out of stocks too soon just to turn a quick profit.

After all, one of Cabot’s greatest success stories, Tesla (TSLA), is still in the Stock of the Week portfolio more than 12 years after my predecessor, the great Tim Lutts, hand-picked it from Mike Cintolo’s Cabot Top Ten Trader in December 2011. Since then, all it’s done is return more than 9,000%, and longtime Cabot readers who got in early (on Tim/Mike’s recommendations; I take zero credit!) have bought million-dollar houses and, yes, Teslas on their TSLA profits.

So, I’m very mindful of that. I’m always on the lookout for the next Tesla and don’t want to risk selling out of a stock with that kind of long-term potential too soon. Right now, in addition to Tesla, I have four other stocks that have been in the portfolio for longer than a year. I don’t envision selling those any time soon. With others, however, I tend to have a quick hook if they’re not producing.

Nancy: Moving on to Cabot Value Investor, the publication currently offers two portfolios: Growth & Income and Buy Low Opportunities. I realize that this is early days, but I’m wondering if you have plans to change the current format or add additional portfolios.

Chris: I don’t intend to do any sort of massive overhaul. Bruce Kaser is an excellent value analyst and did an outstanding job generating strong returns in what have been a very challenging few years for value investors. I will likely leave those two portfolios intact, at least for now.

However, I do plan to beef up the Growth & Income portfolio quite a bit, especially the “growth” part. In bull markets like this one, identifying pure value stocks that can beat the market is an uphill battle. But there are myriad growth stocks at value prices right now, given just how concentrated the rally has been in artificial intelligence stocks, the Magnificent Seven, and tech stocks in general. There’s still value in many other long-neglected sectors, and many of those sectors are growing at a healthy clip. So, in Cabot Value Investor, my job is to find the marriage between the two.

Nancy: Do you have a specific time period for how long you want to hold specific stocks?

Chris: Value stocks are like something you put in a crock-pot—they take time to cook. Unlike with Stock of the Week, Cabot Value Investor stocks should be in the portfolio for at least a year—sometimes several years—barring a major change in the company or its story. That means fewer recommendations. In general, I’ll likely add one new stock per month. But I’m hoping the quality-over-quantity approach can net us a strong overall return.

Nancy: Would you share some of your favorite criteria for finding Value stocks?

Chris: As I mentioned, I like growth at value prices. So, stocks that are trading at low multiples—price-to-earnings ratios below 15, price-to-sales of less than 1, EV/EBITDA ratios below 10, etc.—but whose companies are still growing revenues, preferably by double-digit percentages. That can be a difficult sweet spot to find. But those opportunities are out there if you look hard enough.

Nancy: Value stocks are beginning to show some strength so far this year. Do you have any particular sectors that look undervalued, or is it more a case of picking discounted stocks, using bottom-up criteria?

Chris: I’m intrigued by some of the traditional automakers, many of which have been neglected in recent years due to the rise of electric vehicles. Now, EV sales have slowed a bit, while sales of hybrids—most of which are sold by the biggest, longest-running brands in the auto industry—have accelerated. Shares of those companies were already underpriced after years of neglect, and are now even more undervalued since the new revenue streams created by their pivot to hybrids have rejuvenated automakers’ top and bottom lines.

I’m also keeping a close eye on China. Investing in China comes with all sorts of baggage given its slow-to-recover economy and strained U.S.-China relations, but there are some good companies in China, many of which have a global footprint. Given how beaten down that market has been the last three years, there’s value there.

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Portfolio Updates

Qualcomm Inc. (QCOM) was updated by Tom Hutchinson, Chief Analyst of Cabot Dividend Investor, who reported, “Qualcomm is secretly one of the best semiconductor and AI stocks to own. It had been held back by cyclicality, both in semiconductors and smartphones. But the negative cycle is ending, and AI is coming to mobile devices. QCOM cooled off over the past month after a huge rally in which it had risen 22% YTD and 65% since late October. It could bounce around for a while here. But the rest of the year looks strong as Qualcomm is also introducing new AI chips for PCs and smartphones and is well positioned for the next phase of the AI craze. BUY”

An overweight rating on the shares was just reiterated at KeyBanc, raising their price target from $180 to $205. Continue to buy.

Chris also updated his views on Citigroup (C), saying, “The bank announced plans to cut 430 jobs in its U.S. investment bank unit. The layoffs, which are expected to happen in June, are part of a larger cost-cutting effort, as Citigroup pledged last September to slash its global workforce by 20,000 employees over the ensuing two years; it has already eliminated 5,000 of those jobs.

“Wall Street seemed to like the news, as Citigroup shares are up 2% since we last wrote. They still have 37% upside to our 85 price target. The stock remains attractive as it trades at about 64% of book value of $98.71. The dividend offers investors a 3.4% yield. Earnings are due out April 12. BUY”

Still in turnaround mode, adjusted profit for Citi is expected to decline 23% to $1.43 a share, with revenue down 5% to $20.29 billion. Continue to buy.

Michael Brush, Chief Analyst of Cabot Cannabis Investor gave his subscribers an update on the cannabis industry (concerning his recommendation of Curaleaf (CURLF), reporting, “Cannabis stocks rallied hard Monday, particularly after the close when we learned that the Florida Supreme Court approved a referendum on legalizing the sale of cannabis for recreational use. Florida already permits medical use, but the change would expand the size of the Florida cannabis market significantly, especially considering Florida’s large tourist industry.

“Note that four of the nine cannabis companies in our portfolio have large exposure to Florida. So, the news provides a significant boost to our portfolio.

“Curaleaf has 61 medical-use stores in Florida, which can be readily converted into recreational-use stores. Recreational-use sales may launch in mid-2025 if Florida voters approve the cannabis referendum this November.

“Unless you have zero exposure to cannabis, I would not buy this rally. Cannabis is a notoriously volatile sector, and the Florida-induced rally may easily fade over the next few days. If you own no cannabis stocks, consider buying a little exposure to get a foothold, and then consider adding incrementally on weakness of 2%-4% or more.

“However, I would not sell this rally either. That’s because we could get rescheduling news near term. This would come in the form of a proposed rescheduling rule published by the Drug Enforcement Agency (DEA). The Department of Health and Human Services (HHS) has recommended moving cannabis to Schedule III from Schedule I. The DEA and the Department of Justice will make the final decision. DEA publication of the proposed rule, the next step in that process, would spark another big rally in cannabis stocks, and it could happen soon.

“There are also rumors that the Senate may soon take up the SAFER Banking Act, which would allow banks to serve cannabis companies. Significant action here, like full Senate approval of the bill, would be another major catalyst for cannabis stocks. It is not easy to forecast a timeline on this. BUY”

Currently, 14 analysts cover the stock of Curaleaf, with 11 rating it a Buy and a target price of $5.91.

Curaleaf will report its first quarter financial and operating results on May 9, 2024. Wall Street is estimating a loss of $0.05 on revenues of $341.07 million. Continue to Hold.

Updating his recommendation of TransMedics Group (TMDX), Tyler Laundon, Chief Analyst for Cabot Early Opportunities and Cabot Small-Cap Confidential, noted, “TransMedics Group pulled back to its 200-day line around 72.5 last week and has improved a little early this week. Management held a meeting with analysts at J.P. Morgan last week.

“The notes from that reinforce TMDX management’s confidence in meeting 2024 guidance (consensus is for 52% revenue growth this year), getting to (and maybe beyond) 10,000 annual organs supported by OCS & NOP, building out the Aviation business and expanding margins. I think the dust-up with Arizona Congressman Paul Gosar may be driving some of the subdued enthusiasm here.

“That said, TMDX has still roughly doubled since early November so it may also just be that investors want to see another quarter of good results on the books given just how much the aviation business has changed the company. Piper Sandler analyst Matt O’Brien just picked up coverage of TMDX with a buy rating and 95 price target. HOLD A QUARTER”

TMDX is also ranked high on Zacks list, based on this year’s expected revenue and earnings growth rate of 52% and 77.9%, respectively. Continue to Hold.

Tom Hutchinson also reported on Brookfield Infrastructure Partners (BIP), saying, “This historically stellar performer might be finally turning things around after a lousy couple of years. Apparently, the stock doesn’t like inflation and rising rates. Hopefully, those things are behind us. BIP is right around where it started this year despite a rougher start for many dividend-paying peers. Brookfield has some of the most defensive revenues possible. It’s also been expanding into cell towers, data centers and foundries. Meanwhile, Brookfield continues to deliver strong operational results and can well endure a slowing economy. BUY”

Brookfield has increased its payout by 10% every single year, and its funds from operations (FFO) has grown 15% annually.

The shares of Brookfield are still selling at a discount, about half of the average S&P P/E. Continue to Buy.

Chris also reviewed NOV, Inc (NOV), commenting. “We see the consensus view as overly pessimistic, given the company’s strong position in an industry with improving conditions, backed by capable company leadership and a conservative balance sheet. Buy.”

NOV paid a dividend of $0.05 on March 28 and will report earnings on April 25. Analysts are forecasting EPS of $0.27 on revenues of $2.12 billion. Continue to Buy.

International Business Machines (IBM) was updated by Carl Delfeld, Chief Analyst of Cabot Explorer reporting, “Shares were steady this week as tech stocks as a group are off to a slower start in April. IBM is the world’s sixth-largest cloud infrastructure provider, and the cloud computing industry is expected to grow at a compound annual growth rate of 14% through 2030. The stock remains a long-term buy. Buy a Half”

Wall Street is expecting IBM to grow its revenue and earnings by 3.1% and 4.7%, respectively, for this year. And earnings forecasts for the company have been increasing in the past couple of months. New shareholders, continue to Buy; existing shareholders, please Hold.

Chris also reviewed Gates Industrial Corp, plc (GTES), noting, “Few buyers would balk at a reasonable price premium on a small-priced part from Gates if it means their million-dollar equipment keeps running. Even in automobiles, which comprise roughly 43% of its revenues, Gates’ belts are nearly industry-standard for their reliability and value. Helping provide revenue stability, over 60% of its sales are for replacements. Gates is well-positioned to prosper in an electric vehicle world, as its average content per EV, which require water pumps and other thermal management components for the battery and inverters, is likely to be considerably higher than its average content per gas-powered vehicle.

“The company produces wide EBITDA margins, has a reasonable debt balance and generates considerable free cash flow. Shares have 14% upside to our new 20 price target. BUY”

Gates Industrial’s seven analysts currently expect revenues in 2024 to be $3.57 billion, approximately in line with the last 12 months. EPS are predicted to come in at $0.86 for the same period. Hold.

Tom reviewed UnitedHealth Group Inc. (UNH), commenting, “While the hacking issue is in the process of being resolved, another problem is reeling the stock on Tuesday. The Biden administration announced that Medicare Advantage rates will increase far below what insurance companies were demanding to keep pace with costs. The administration announced rates will increase by 3.7% in 2025. It will put a dent in earnings as companies struggle to make up the cost increases. But this is a risk of healthcare insurance. The government has enormous sway and can make decisions companies don’t like. It’s another hit to the stock whose longer-term trajectory should be solid. HOLD”

Let’s hang onto our shares for now. Hold.

Carl also updated Exscientia (EXAI), saying, “Shares dipped from 5.7 to 5 this past week. I’m moving this stock to a hold until we see a renewed uptrend develop. AI models should shorten the development of successful pre-clinical drug candidates from as much as five years down to as little as 18 months. The company has sufficient cash to fund its operations and capital expenditure requirements well into 2026. Move from Buy a Half to Hold”

The company will report earnings on March 21, with analysts expecting a loss of $0.37 on $7.55 in revenues.

I agree with Carl; let’s put EXAI on Hold.

Mike Cintolo, Chief Analyst of Cabot Growth Stocks and Cabot Top Ten Trader, says, “Novo Nordisk (NVO) expects revenue to rise 18% to 24% in 2024, on a constant currency basis, though it should be noted that the firm has a history of lowballing and exceeding their outlook. Analysts see earnings rising at the high end of that range as well, but the main attraction here is the long-term potential. Many see Wegovy and Lilly’s competing Zepbound as possibly being the biggest-selling drugs in history, and which could affect many other areas of society (like health issues that come from obesity). Meanwhile, the top brass is forging ahead with another possible treatment, for peripheral arterial disease, which afflicts about a quarter of all cardiac disease patients. Novo Nordisk believes that combined with a hormone amylin, semaglutide can be a significant treatment. All in all, this remains a humongous story. Buy”

Novo recently reported that its next-generation weight-loss pill, amycretin, outperformed blockbuster Wegovy in an early-stage study. With patients losing more than 13% of their body weight compared to Wegovy’s patients who lost 6%. Buy on pullbacks.

Our newest recommendation, Baxter International Inc. (BAX) just received the FDA’s 510(k) clearance for its Novum IQ large volume infusion pump (LVP) with Dose IQ Safety Software. Continue to buy.

Portfolio

*Aggressive (A), Moderate (M), Conservative (C)

ETF Strategies

I’m happy to report that with the exception of the Global X Lithium & Battery Tech ETF (LIT), our ETF portfolio is on fire! And as I mentioned last month, I still see long-term value in LIT, so am holding on to it for now.

I’d like to take some more profits off the table this month by selling one-half of iShares U.S. Energy ETF (IYE), which is up more than 40% from our recommendation price. Sell one-half.

I’m still waiting on a pullback for these two ETFs on our Watch List:

• GX U.S. Infrastructure Development ETF (PAVE)
• Vanguard Small Cap Growth Index Fund (VBK)

But I’m also adding two more names to our Watch List:

• Midcap Growth ETF Vanguard (VOT)
• Total Intl Stock ETF Vanguard (VXUS)

Portfolio

*Aggressive (A), Moderate (M), Conservative (C)

**Purchase price reflects a 3-for-1 stock split

Hybrid Cars Are Making a Huge Comeback

As Chris mentioned, hybrid cars are having a moment! And more car companies are joining in, as you can see from the following graphic.

The hybrid vehicle market is exploding and is expected to grow more than four times its size in the next eight years.

Hybrids have been around in the U.S. since the early 2000s when Toyota introduced them. And they’ve proliferated due to environmental concerns and the “go-green” movement.

But Elon Musk and Tesla disrupted the process when he gave us the beautiful, sleek all-electric machine that captured the hearts—and pocketbooks—of (at first) very well-heeled consumers. Of course, the other automobile manufacturers jumped on board, and today, there are more than 2.5 million EVs on our country’s roads.

However, the mood is changing, from the “charge” towards all-electric vehicles, back to hybrids. A recent Gallup poll reported that just 44% of American adults say they are either “seriously considering or might consider” buying an EV, which is down from 55% in 2023. And the number with no interest in buying an EV has risen from 41% to 48%. Automakers have heard these messages and are now promoting “consumer choice,” with Ford, BMW, Mercedes, Hyundai and General Motors all either reducing EV manufacturing or increasing hybrid production.

Here’s why:

• Upfront costs. The average price of a new EV—as of last September—was $50,683, while a hybrid averaged $39,040.
• Range anxiety and charging availability. The average range of an EV is 250-500 miles. According to the Department of Energy, the number of public and private electric vehicle (EV) charging ports nearly doubled in the past three years, from 87,352 to 161,562. And they are mostly clustered around the coasts. California has more than 14,000, but here in Tennessee, there are only 600 or so. I have to tell you, that would make me really nervous, as I love to take road trips!
• Driving habits. My vehicle goes 525-560 miles to a tank, and I drive about 1,500-1,800 miles a month. Notwithstanding the EV I would probably buy would be on the shorter end of mileage and with few charging stations near me, having an EV would be stressful for me. Also, climate matters. Consumer Reports says, “Old weather saps about 25% of range when cruising at 70 mph compared with driving in the same conditions during mild weather in the mid-60s, and 31% during warm weather in the mid-80s. In the past, we found that short trips in the cold with frequent stops and the need to reheat the cabin after a parking pause saps 50/5 of the range.”
• How long you plan on keeping the car. Both EV and hybrid batteries are designed to last 100,000-200,000 miles. The average car is expected to last 14 years, with an EV lasting 21.
• The country in which you live. While the U.S. is catching up, many other countries have made EVs a priority, including Norway, which leads EV deployment, with the share of electric car sales reaching 88% in 2022, and China, which accounted for nearly 60% of all new electric car registrations globally in 2022.
• Manufacturing costs. According to Kelley Blue Book, manufacturers can construct 17 hybrid batteries with the materials necessary to make one electric vehicle battery.
• Costs over time. The cost to replace an EV battery can run $5,000-$20,000 and a hybrid battery, $2,000-$8,000. Here’s a cost comparison of just one model Hybrid vs. EV over a five-year period.

Kelley Blue Book’s 5-Year Cost-to-Own Projections

It, of course, comes down to your personal preference. I have owned two hybrids—a Toyota Highlander and a Lexus 450H. I didn’t really like the handling of the Toyota, but I loved the Lexus! But as my battery was approaching 100,000 miles (after four years), and I wasn’t really seeing that much of a savings in gas prices, I went back to the good old combustion engine. However, I’m still a believer, and the cars have become much more gas-efficient, so I’m not discounting being a future hybrid owner.

And with companies like Honda beginning to ramp up hybrid manufacturing, it may just be a good time to jump on board at the shares’ discounted value.

The next Cabot Money Club Stock of the Month issue will be

published on May 9, 2024.

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