April 27, 2023

Portfolio Changes: Polestar (PSNY) - Buy a Half to Hold a Half.

EV Price War in China, BYD Launches Seagull, GM Unplugs Bolt

This week tech stocks looked better while First Republic Bank continues to struggle to gain its footing. It was a relatively quiet week for Explorer stocks as movement up or down was minimal. However, the news on the global electric vehicle (EV) race is coming fast and furious.

General Motors (GM) is killing both versions of the Chevrolet Bolt and will revamp the factory where it’s made to assemble electric trucks. GM also announced a deal with Samsung to build the automaker’s fourth U.S. battery plant. America seems hooked on SUVs which make up about two-thirds of U.S. vehicle sales, while pickups account for about one-fourth. Volkswagen is slated to receive $9.7 billion from Canada over a decade to build an EV battery plant.

Meanwhile, China’s BYD is showcasing an $11,300 electric car called the Seagull. It was the star of this year’s Shanghai auto show. The Seagull is good for either 190 or 252 miles of range, depending on options, and has fast-charging battery technology.

This year’s Shanghai Auto Show highlighted the end of the petrol engine era in China. Government support for EVs and Chinese companies’ dominance of their home market with over 300 companies competing for market share underline their confidence as they begin to target overseas markets.

The average price for an electric car in China is already quite a bit lower than in the rest of the world- about $35,000 compared with $60,000 in Europe and $70,000 in the United States. Then there is EV infrastructure. Guangdong province alone has around three times as many public chargers as the whole of the United States, according to Bloomberg data.

Foreign automakers, including EVs, are losing market share in China as the country doubles down on the EV supply chain.

China makes almost all of EV electric motors and refines most of the chemicals used for lithium batteries. More than 80% of the electric cars sold in China last year were made by domestic automakers.

The BYD Seagull ($11,300)

Weekly Explorer Stock News

Below is a brief update on each Explorer stock. Any changes in ratings will be highlighted. This section is all you need to read each week and will be followed by a new recommendation every other week.

Butterfly Network (BFLY) shares weakened this week to close just above 2 as the company finally announced the appointment of Joseph DeVivo as its new CEO. Prior to joining Butterfly, DeVivo served as President of Hospitals and Health Systems at Teladoc Health, a telemedicine and virtual healthcare company, and as CEO and Director at InTouch Health. Hold a Half

BYD (BYDDY) shares were up slightly this week after it made a favorable impression at the Shanghai auto show by showcasing an $11,300 electric car called the Seagull. BYD continues to gain market share in China and is launching an overseas expansion in Southeast Asia and Europe. Buy a Half

Chargepoint (CHPT) shares went from 8.8 to 8.5 this week and need a shot of momentum. The price of the stock is about a quarter of where the stock peaked about two years ago despite that it has a network of electric vehicle charging stations stretching across 14 countries. Its last quarterly results showed a year-over-year, top-line revenue gain of 93% but profitability will take some time, so I rate this an aggressive stock. Buy a Half

Corteva (CTVA) shares pulled back two points to finish at 59 this week as we wait for its next quarterly report on May 3. This is a solid agri-business company with a steady dividend. Hold a Half

Kimberly-Clark de México (KCDMY) shares edged up this week this week as the company, the Mexican subsidiary of Kimberly Clark (KMB), produces and sells in Mexico and overseas a wide range of consumer paper products. This stock will have little week-to-week information. Buy a Half

Novo Nordisk (NVO) shares were unchanged at 165 this week. Last week, the company announced a share repurchase program and increased guidance for 2023. Its popular drug Ozempic is approved for Type 2 diabetes, but people have been taking the drug for losing weight because of its effectiveness. Ozempic sales soared 77% last year to $8.8 billion. Hold a Half

Polestar (PSNY) shares lost a little ground again this week, and surveying the EV competitive marketplace, I believe there are other EV automakers that offer a better risk/reward situation so I’m moving this to a hold. Buy a Half to Hold a Half

Solid Power (SLDP) shares were steady in their first week as an Explorer recommendation. Solid Power is a Colorado-based developer of solid-state batteries and sulfide-based electrolyte technology. Solid Power stated that it remains on track to open its electrolyte production facility, a key milestone in achieving full production, during the first half of 2023. This is an aggressive idea that comes with both risk and high upside potential. Buy a Half

Explorer ETF/Fund Positions

WisdomTree Emerging Markets High Dividend Fund (DEM) offers a high dividend yield and some of the highest-quality emerging market stocks. Buy a Half

WisdomTree China ex-State-Owned Enterprises Fund (CXSE) is a smart ETF play and a way to gain China exposure without any state-owned enterprises (SOEs). Buy a Half

Explorer Stocks Summary

Brief company overviews that will not change week to week.

Butterfly Network (BFLY) Butterfly’s breakthrough software can be tied into a medical network to provide instantaneous images and improve both the speed and quality of healthcare. This is so much better than scheduling a test in a week and then having the patient come back and must pay for another appointment.

However, if your doctor has the Butterfly iQ+ in their pocket, he (or she) just connects it to an iPhone, it scans your body and has a digital image right in front of him. Plus, while an MRI machine can cost more than a million bucks, the Butterfly iQ+ costs a little over $2,000. Since it also requires a subscription service, it’s a steady source of recurring revenue for the company. The top 100 hospitals in the country already use Butterfly iQ devices.

BYD (BYDDY) In 2022, China auto giant BYD (for Build Your Dreams) switched to producing only all-electric battery vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). BYD sold more than 1.85 million electric cars in 2022, including hybrids. In both 2021 and 2022, BYD more than tripled sales from the previous year. Most of BYD’s sales are still in China but it has a big international expansion underway, including the U.S., Europe, and Asia markets.

The company also manufactures and supplies EV batteries, including to Tesla, and makes its own chips. This is vertical integration that would make Henry Ford proud. BYD is in a strong position to be one of, if not the leader of the EV revolution in terms of size, scale, and growth.

ChargePoint (CHPT)

ChargePoint is an industry leader in electric vehicle (EV) charging. ChargePoint operates in both North America and Europe, with more than 225,000 charging points on its networks. ChargePoint has more than 5000 fleet and commercial customers worldwide. The company has a 70% market share in the level 2 charging market in North America, giving it a powerful advantage over even its closest competitor.

ChargePoint has posted seven quarters in a row of increasing revenue with full-year revenue for fiscal ’23 with a year-over-year gain of 94%. We need to accept the company’s heavy investments in growth; profits will appear as the company monetizes and leverages its charging network.

Corteva (CTVA) uses emerging technology to help farmers improve crop yields and boost output. Stocks like Corteva are recession-resistant and outperforming the market on a relative basis. In terms of partnerships, a year ago it signed a $5.2 billion collaboration with French drug giant Sanofi (SNY). It has expanded a Bristol Myers Squibb (BMY) collaboration to include drug targets in both immunology and oncology. This is on top of a design partnership with the French drug giant, Germany’s Bayer, and Japan’s Sumitomo Dainippon.

Kimberly-Clark de México (KCDMY) was founded in 1925 and is based in Mexico City, Mexico. Its parent, Kimberly Clark (KMB) was founded as a paper company in Neenah, Wisconsin in 1872. According to consultant Alix Partners, Mexico has surpassed China as the lowest-cost country in the world for companies looking to manufacture products for North American markets. Mexico’s wages are now about 25% lower than in China and coupled with lower taxes and tariffs, this all adds up to a competitive edge.

Novo Nordisk (NVO) specializes in treatments for diabetes, hemophilia, and obesity. The company supplies half of the world’s insulin, and its diabetes care products are used by over 34 million people today. Novo highlights that more than 750 million people are currently living with obesity and that this is up a multiple of 3X since 1975. In summary, based on sizable and growing demand for this weight-loss drug, this well-managed, highly profitable company with an excellent growth profile and potential to develop new products has limited risk.

Polestar (PSNY) is a Swedish premium electric vehicle manufacturer. Founded by Volvo and Zhejiang Geely Holding Group in 2017, Polestar enjoys technological and engineering synergies with Volvo. By the end of this year, the company plans that its cars will be available in 30 markets. Polestar cars are currently manufactured in China, with 2024 manufacturing planned in America. Polestar has an edge on much of the competition for two reasons. It has an “asset light” strategy through access to world-class owner/partner Volvo’s factories. For 2023, Polestar anticipates global volumes to increase by nearly 60% to approximately 80,000 cars.

Solid Power (SLDP) is a Colorado-based developer of all-solid-state battery and sulfide-based electrolyte technology. Solid Power replaces the flammable liquid electrolyte in a conventional lithium-ion battery with a proprietary sulfide-based solid electrolyte.

Solid Power’s all-solid-state battery cells are expected to be safer and more across a broad temperature range, offer an increase in energy density compared to the best available rechargeable battery cells, and enable less expensive, more energy-dense battery pack designs. In addition, the technology is compatible with traditional lithium-ion manufacturing processes.

The company has a partnership with BMW and Ford and received a $5.6MM U.S. Department of Energy (DOE) award to continue its development of nickel- and cobalt-free solid-state battery cells.

Explorer ETF/Fund Positions

WisdomTree Emerging Markets High Dividend Fund (DEM) offers a high dividend yield and some of the highest-quality emerging market stocks. This ETF gives broad exposure with an emphasis on income and value.

WisdomTree China ex-State-Owned Enterprises Fund (CXSE) is a smart ETF play and a way to gain China exposure without any state-owned enterprises (SOEs).