March 2, 2023

Portfolio Changes: None
Earnings: Polestar (PSNY) Earnings Report Expected Today

Tesla Investor Day

Yesterday was Tesla’s annual investor day and it seems it came up a bit short regarding specifics.

Elon Musk started with a big number even by Washington standards, suggesting that realizing the vision for an energy transition could require some $7 trillion of investments in electric-vehicle manufacturing.

He confirmed that Tesla plans to build a manufacturing plant in Monterrey, Mexico but that it would not impact production at any other plant.

A key question for many is just when Tesla will launch a new, less expensive mass market passenger car. The cheapest Tesla currently available in the U.S. is priced at about $40,000. Tesla hopes to sell 20 million vehicles a year by 2030, up from around 1.3 million in 2022. Toyota was the top-selling auto maker in 2022, selling 10.5 million vehicles.

Tesla is also working on a futuristic humanoid robot called Optimus. Musk has suggested the robot could help Tesla make cars more efficiently (without robot unions).

Tesla shares have rebounded around 65% so far in 2023 after an abysmal performance in 2022.

America is behind Europe in EV adoption even though the price for electricity in Germany is more than double that in the United States. A lack of charging stations, especially in cities, is also a challenge across the country since there are 23 electric vehicles for every spot to recharge. In addition, Germany’s power grid is under pressure due to Russian sanctions.

In other EV news, BYD is considering offering complete packages to consumers, including solar panels for generating electricity and batteries that can be installed in a private garage for storing and charging – all taking advantage of BYD’s roots in battery production. That’s good news for our new BYD position.

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 were down yesterday after the company came out with a quarterly loss of $0.17 per share, about 20% better than consensus estimates of a loss of $0.21. Total 2022 revenue was $73.4 million, which represented 17.3% growth compared to 2021, and operating profit margins showed an improvement. Seems the market overreacted a bit. Buy a Half.

BYD (BYDDY) shares ended their first week as an Explorer recommendation unchanged. BYD’s preliminary results suggest net profit in the fourth quarter will rise sharply. BYD has ambitious plans to launch an array of EVs in different price ranges in the next few months, while expanding at home and abroad. Buy a Half.

Centrus Energy (LEU) shares were quiet this week after quarterly earnings of $1.42 per share were released last week. Centrus reported net income of $52.2 million for 2022 and the stock is up about 30% since the beginning of the year. Buy a Half.

Corteva (CTVA) shares were steady this week. The stock is a bit expensive but Corteva could significantly improve its earnings and free cash flow in the coming years. It was created out of the DowDuPont merger and subsequent breakup and is a leading seed and crop protection multinational. Hold a Half.

Kraken Robotics (KRKNF) was up marginally this week as well as so far in 2023, outperforming the broader market. This maritime and defense stock remains a buy for aggressive investors. Buy a Half.

MP Materials (MP) shares were up more than 10% this week after the company reported quarterly earnings of $0.42 per share compared to earnings of $0.31 per share a year ago. Despite analysts reducing earnings expectations, price targets were largely unchanged though the target price range is rather large, from 34 to 56. I would not be a buyer right now and my rating stays Hold a Half.

Novo Nordisk (NVO) shares were unchanged this week as this $300 billion-plus Nordic pharmaceutical giant develops and markets therapies for diabetes and obesity. Novo’s obesity drugs were the subject a “60 Minutes” segment and it plans to increase production of the weight loss drug Wegovy, which has been in high demand in the U.S. Hold a Half.

Novonix (NVX) shares were up this week and positive in 2023 but still underperforming relative to my expectations. As I mentioned last week, investors are becoming concerned with the company getting the Chattanooga factory in operation, a step that may now slip to 2024. Buy a Half.

Polestar (PSNY) shares treaded water this week as the market awaits its next earnings report today, March 2. This idea is intriguing but the cash-rich, Volvo-backed company needs to post strong growth numbers. 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 in the U.S., Europe, and Asia.

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, leaders of the EV revolution in terms of size, scale, and growth.

Centrus Energy (LEU) is a nuclear fuel supplier for utilities in the U.S. and abroad and has net income margins are above 50% so far this year with new nuclear fuel sales contracts and commitments worth an estimated value of $270 million. Nuclear power provides 20% of the power for our electricity grid and more than 50% of U.S. emission-free energy, according to the Department of Energy.

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 a French drug giant, Germany’s Bayer, and Japan’s Sumitomo Dainippon.

Kraken Robotics (KRKNF) is probably the most speculative of Explorer stocks, but it is a well-run company and a prime takeover candidate in the growth defense sector, coupled with a strong management team. Based in Newfoundland, Kraken Robotics is a marine technology company providing ultra-high resolution, software-centric sensors, and underwater robotic systems.

MP Materials (MP) is an effective way to play clean tech, defense, semiconductors, and other advanced and emerging technologies. It is America’s only active rare earth mining and processing site, producing approximately 15% of the rare earth content consumed in the global market in 2021.

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.

Novonix (NVX) is an Australian technology and advanced materials supplier to the electric vehicle and storage battery industry. Founded by members of a research team at Canada’s Dalhousie University, the company is a supplier of high-performance materials, equipment, and services for the global lithium-ion battery industry with a focus on North America.

Novonix is an unusual blend of both exploring and mining graphite and developing synthetic graphite, a key lithium-ion battery material. The focus is on electric vehicles, which are projected to go from global sales of 3.1 million in 2020 to 15 million in 2025 and then on to about 40 million in 2030.

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 expects its cars to 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.

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. BUY A HALF