Electric vehicles have a long road ahead of them, even if Tesla sees a few twists and turns along the way.
Matt Bohlsen talks about where he's keeping his focus, including a mineral that is newly rising to his attention.
He also mentions the next big trend he's following, which is just down the road from electric vehicles.
The thing about trends is they change. Even a trend with a long runway ahead of it is bound to hit some bumps and curves in the road, and the early winners are often displaced by nimble (or well-funded) latecomers who catch up before the trend really gets going.
We interviewed Matt Bohlsen of Trend Investinglast September. The conversation focused on the electric vehicles (EV) trend, as well as the associated trend in EV metals such as cobalt and lithium. There has been a lot of news since then, and a lot of Elon Musk tweets to go through.
We emailed with Matt to get the latest on the electric vehicle trend, as well as what else he is looking at. Seeking Alpha: Tesla (TSLA) and its various trials and tribulations, as well as growth, continue to grab headlines in the electric vehicle space. Are you paying attention to Tesla? If so, what do you think? Matt Bohlsen: Yes, I do pay attention to Tesla.
I think Tesla has been, and continues to be, the EV industry leader. If it was not for Tesla and Elon Musk, then the EV boom would probably have not happened. Regarding the stock I have mixed views. I can see an excellent growth story due to Tesla’s popularity and innovative products. I think eventually they will sort out their problems with regard to production volumes, etc. Of course the CapEx required creating a global leading auto and energy storage company is a major challenge. Tesla’s revenues continue to grow very strongly each year showing their products are selling very well. The negatives relate to lack of positive earnings, cash burn, and rising debt. I think Tesla can succeed provided they become profitable sooner rather than later. As for when that might be? Elon says in H2 2018. Judging by his record I would add a year or two to that forecast. SA: What else are you focused on in electric vehicles? MB: I am following the whole EV sector. My Seeking Alpha electric vehicle [EV] monthly news article tracks the EV sector (including e-car sales) and the EV companies. This not only covers electric cars, but also e-buses, e-semis, e-ships and e-ferries, and e-planes. An example being that electric car sales increased a massive 93% in April 2018 year on year, and are up 68% year to date on last year. Within Trend Investing I expand on these themes and give specific ideas on how to best invest in each opportunity. I also track developments in autonomous vehicles as you can read here. I follow closely the battery side of the supply chain. That means I follow the battery technology, costs and manufacturers, and the EV metal miners – In particular lithium, cobalt, graphite, nickel, copper and the rare earths. For example, some recent news is that Benchmark Minerals stated that they are now tracking over 40 new battery gigafactories. This is about double the figure from a year ago. A good part of my time and focus is on the EV metal miners sector, as that is the area I see the greatest opportunity for investors to do well. Apart from the EV metal miners, I also follow and write a monthly news article here on SA on the vanadium sector and miners, as well as following the energy storage [ES] sector. SA: Last time out you said your favorite idea was the EV Metals boom and the shift towards nickel content in batteries. Is this still playing out, or what's your update on this area? MB: Yes, my favorite thematic is still the EV metals boom. This area did very well in H2 2017 with many of my stocks having gains well over 100%. H1 2018 has proven to be a lot tougher so far as I had expected. Despite brilliant fundamentals behind the EV boom there have been a lot of media bashing and negative reports on oversupply, etc. This has left the EV metal miner stocks at very attractive current valuations making it a very good time for investors to take an interest.
Regarding the nickel content increasing in batteries we have seen this theme gain in strength, and the nickel metal price has been responding very well the past few months. To be clear, this thematic is more a post 2018 theme, as it will take time to take hold for several reasons as discussed here. My views on this theme are still the same. Nickel will do well as battery chemistry moves towards NMC 6:2:2. The best opportunity is in the class 1 nickel sulphate, or the nickel sulphide miners. SA: A lot of your coverage is on miners of less well-known materials, vanadium, cobalt, and lithium, for example. Could you give us a quick summary of the trends among those industries and what you watch for? MB: The key trend for all three is demand versus supply. Right now I run models for lithium and cobalt. Sovereign risk has also been a key issue, particularly with the very onerous royalties and taxes introduced by the DRC government last week that impacts the DRC cobalt miners. Vanadium – I am currently quite bullish on vanadium. A large vanadium spot price rise has already occurred the past year, so investors need to be a little careful on timing. Partly for that reason I am focusing on some of the next wave vanadium juniors. The vanadium demand outlook is very positive due to increased vanadium used to harden and strengthen steel rebar as China is improving their standards in this area. More interesting to me is the vanadium energy storage theme. Vanadium redox flow batteries [VRBs] have several advantages over lithium, especially when it comes to large-scale commercial energy storage. Some are a longer life span with more charging cycles possible, and the ability to charge and discharge at the same time. Robert Friedland is an early supporter of the sector and China is really moving fast towards installing VRBs with their large-scale solar projects. Investors can read my recent article on the vanadium sector here, and my top 5 vanadium miners here. Cobalt – I am still bullish on cobalt, but also realistic. By that I mean cobalt prices are likely to fall back between USD30-40/lb as we are seeing now. This is due to new supply starting to come online from the DRC from miners such as Katanga Mining [TSXV:KAT] (OTCPK:KATFF) and ERG (private). I see the best opportunities in the better quality Australian and some Canadian cobalt juniors that should make it to production after 2020 to help respond to a surging cobalt demand. My model already factors in cobalt thrifting. Lithium – I am also still positive on lithium and again realistic. My model suggests that in 2019/2020 we will see lithium supply catch up to demand, and hence lithium prices should moderate slightly. In 2018, we will welcome 4 new lithium producers (Tawana Resources [ASX:TAW] (OTCPK:TWNAF), Advanced Metallurgical Group [NA:AMG] [GR:ADG] (OTCPK:AMVMF), Altura Mining [ASX:AJM] (OTC:ALTAF) and Pilbara Minerals [ASXLS] (OTCILBF). I think around USD 10-13,000/t LCE will be a new base for contract prices by 2020. This will mean the lithium miners that can have a lower cost of production, strong off-take partners, production increases, and low costs will do best. There is a place for new juniors to become producers, but I would not be surprised to see some projects be delayed a year or two. Within the lithium producers space, things are looking very solid with most reporting record profits. Galaxy Resources (OTCPK:GALXF) recently announced a great $US 280m deal to sell their northern tenements at Sal De Vida Argentina, as you can read my update here. SA: You talked about how you diversify in a given sector to avoid the pitfall of a given company going bust. Do you also diversify across trends, and how do you avoid getting too correlated between your industries if so? MB: Correct. Yes, I diversify across several trends for risk control reasons. Right now, my stock portfolio and my Trend Investing admittedly are still quite heavily focused on the EV and EV metals trend, particularly as the fundamentals are very good as my article The EV Boom Just Keeps Getting Bigger highlights. However, I am conscious of the risk/reward balance, and hence I also focus to save cash to lessen that risk, as well as have a set of investment rules to help assist investors. SA: Any other trends that have emerged or developed significantly this year that you are spending time on? MB: I have still been focusing on the EV and EV metals trend; however, two newer areas of focus have been the vanadium boom (discussed above) and the autonomous vehicles trend.
Depending on which research is quoted, autonomous vehicles are forecast to grow at a CAGR of between 19% and 41.61% over the next 5 years. The chart below from Variant Market Research is a bit outdated, but shows a CAGR forecast of 25.7%, which is closer to a median average. Global self-driving car market forecast to grow at CAGR 25.7% Source
The current leaders in autonomous vehicles are Alphabet Google (GOOGL) (GOOG) via their Waymo subsidiary, along with Tesla, Ford (F), Daimler (OTCPKDAIF, OTCPKDAIY)/ Bosch (OTC:BSWQY) , BMW (OTCPK:BMWYY), Renault (OTC:RNSDF) / Nissan (OTCPK:NSANY) and Volkswagen (OTCPK:VLKAY).
In 2016, General Motors (GM) bought Cruise Automation for ~US$1 billion, and then in May this year GM's self-driving unit received a $2.25 billion investment from SoftBank's (OTCPK:SFTBY) venture fund. This is a very strong sign that the autonomous vehicle boom is gaining traction. GM (and Lyft) recently announced that they plan a large-scale launch of self-driving cars in U.S. cities in 2019. GM will soon release "fully autonomous robo-taxis." They will be a modified fully electric Chevy Bolt with no steering wheel or pedals. A fully autonomous all-electric Chevy Bolt - Planned for 2019 Source
Investors can read more on my articleHow To Benefit From The Autonomous Vehicles Trend Starting As Soon As 2019. SA: What's one of your current favorite investment ideas, and what's the story? MB: I would say I still have many favorite ideas and trend I am currently following. The e-commerce boom, data boom, memory storage boom and smart connected car boom are areas that get less hype but I think are very strong investment ideas. Micron Technology (MU), Samsung Electronics (XLON:SMSN) (OTC:SSNLF), and Alibaba (BABA) are three stocks I like in those areas.
But perhaps the area where I see the highest reward and highest risk would be the junior cobalt and lithium miners. Within that area perhaps my favorite right now is the Broken Hill district cobalt miners. This area has a very strong mining history and is an emerging cobalt region of Australia. Cobalt Blue [ASX:COB] (OTCPK:CBBHF) has led the field with spectacular returns for Trend Investing subscribers over the past 7 months. I think there are several neighbors to Cobalt Blue that can do the same. No doubt risk is high, but so is the reward. Some names are Havilah Resources [ASX:HAV] [GR:FWL],Castillo Copper [ASX:CCZ] [GR:7OR], and Alloy Resources Limited [ASX:AYR]. My Broken Hill cobalt miner’s article is linked above. Of the three cobalt juniors listed above Havilah Resources would be my top pick as you can read here.
Finally, another interesting story is Plateau Energy Metals [TSXVLU] [GR:QG1A] (OTCQBLUUF) – a lithium/uranium junior with a good size and grade resource, and a fast and cost-effective way to produce lithium, with uranium as a bonus. You can read my article on them here.
As one final comment, I would remind investors that the EV and ES themes are growing stronger and stronger every month. My Trend Investing service focuses to best capture those booms. Whilst 2017 saw my portfolio double, 2018 has thus far been a struggle. The struggle is in part due to the fact that lithium and cobalt supply should catch up to demand in H2 2018 or 2019. The main thing many are missing is the strength in the demand side.
The key takehome here is that the EV metal miners have been sold off quite heavily in 2018, while fundamentals are amazing. This has meant late comers to the EV boom have an opportunity to buy in at very attractive valuations into areas that are achieving tremendous growth. If Bloomberg’s latest forecast of electric car sales reaching 30m by 2030 (28% market share) and 60m by 2040 (55% share) come true, then we will see a ~27 fold increase in e-cars by 2030, and 54 fold by 2040, from 2017 levels. That is the type of trend and investing tailwind that gets me very excited."
It seems clear that AML mgmt still haven't bothered to properly update Matt Boulsen on their cobalt resource relative to other Australian peers, so he keeps banging on in his well followed international email updates about other players (and you'll remember the chart he normally uses to list the top 20 Australian cobalt deposits still doesn't even include Walford Creek!).
AML Price at posting:
32.0¢ Sentiment: Buy Disclosure: Held
LS] (OTC
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