Let's face it, you don't have to be a genius to know that there is going to be some incredible growth in the business of making, supplying, and operating chargers for electronic vehicles (EVs). The concept of all-electric cars has moved from being the domain of a few specialist companies to being embraced by just about every major vehicle manufacturer in the world in a short space of time. Now that the big boys' combined investment is measured in billions of dollars, they are committed, and that means they also have a vested interest in making sure that the required charging infrastructure is built out.
So, I have been thinking about EV charging stocks for a while. and it occurred to me that if I am to get involved in something like this, I have to go against both my nature and training. Both of those things make me a trader, and this is not really a trading opportunity. It is about a long-term investment, and that needs different parameters and a different strategy.
As a trader, when I have a base case about the economy, an industry or whatever, I start to narrow down the various ways of playing that belief until I come to one thing, then I look at the charts to find an entry point for that stock or whatever, then where I might reasonably set a stop-loss, and then I buy as much as I am prepared to commit to it. With something like EV charging stocks, though, that is not a smart approach. The industry is too young to pick a clear winner yet and volatility in the stocks…
Let's face it, you don't have to be a genius to know that there is going to be some incredible growth in the business of making, supplying, and operating chargers for electronic vehicles (EVs). The concept of all-electric cars has moved from being the domain of a few specialist companies to being embraced by just about every major vehicle manufacturer in the world in a short space of time. Now that the big boys' combined investment is measured in billions of dollars, they are committed, and that means they also have a vested interest in making sure that the required charging infrastructure is built out.
So, I have been thinking about EV charging stocks for a while. and it occurred to me that if I am to get involved in something like this, I have to go against both my nature and training. Both of those things make me a trader, and this is not really a trading opportunity. It is about a long-term investment, and that needs different parameters and a different strategy.
As a trader, when I have a base case about the economy, an industry or whatever, I start to narrow down the various ways of playing that belief until I come to one thing, then I look at the charts to find an entry point for that stock or whatever, then where I might reasonably set a stop-loss, and then I buy as much as I am prepared to commit to it. With something like EV charging stocks, though, that is not a smart approach. The industry is too young to pick a clear winner yet and volatility in the stocks that are out there makes setting levels a matter of guess work, not study.
In this case, I want to diversify my investment and spread it out over time. That means buying multiple stocks and dollar cost averaging into each of them. If I am doing that, I would usually want to try and include one small long shot that has the potential to offer massive returns. But try as I might, I couldn't do it here. I looked at Volta (VLTA) and a few others, but the same problem kept coming up. This is an infrastructure play which means it requires capital, and the small companies in the space just don't have strong enough balance sheets to make me believe they can thrive.
So, I ended up with the big boys in the industry. The biggest of all is Tesla (TSLA), but they build chargers only for their own vehicles and the play here is on overall proliferation, not one specific EV maker. So, it seems that the best opportunities are in ChargePoint (CHPT), Blink (BLNK), and EVGO (EVGO). All three stocks soared at the end of last year when this kind of long-term potential play was all the rage but have dropped considerably this year. So far, the lows they all hit earlier in the year have held, though, indicating some support.
Even so, with this week's CPI data reinforcing that inflation is still a problem and that therefore any slowing in the pace of rate hikes is unlikely, they could well drop back to rechallenge those lows. That is why averaging in makes sense. That way, I don't have to worry about picking a bottom. I just have to get started and buy all three on a regular basis for a few months, based on the calendar, not the price. If the price goes down after my first purchase, great, I am getting to buy some even cheaper, if it goes up, great, I bought some at the bottom. Psychologically at least, it's a win, win!
Whether we like it or not, EVS are here to stay, at least for a while. I wouldn't personally buy one right now but that doesn't mean I can't make money off those that do, and the best way to do that right now seems to be to average into a long-term investment in CHPT, BLNK, and EVGO.
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