Set Aside Self-Entitlement and Politics and Invest in EVs and the Auto Industry

by: SA Editor Rocco Pendola

Seeking Alpha contributor Dana Blankenhorn wrote an article, Higher Mileage Cars Can Send Message to the Market, that shows the type of forward-thinking many investors tend not to display. There's a sense of entitlement in the air, and many Americans, in particular, cling to it vis-a-vis the stock market and the open road.

Blankenhorn astutely notes that despite the expected reports of resistance, automakers will actually embrace the government's desire for a 56-mile per gallon (mpg) standard for cars and light trucks by 2025. The dealers have a beef, but, like Blankenhorn says, they always complain. A move toward better fuel efficiency - namely more hybrids and electric vehicles (EVs) - makes economic sense for the automakers. Blankenhorn writes:

While the Chinese run into one another in a mix of electric go-carts and EVs that would never meet U.S. standards for a cul-de-sac, let alone the highway, America can actually innovate again, outside of the mobile phone and social networking spaces. Imagine the U.S. emerging as the leader in EVs and fuel-efficient vehicles.

More than the automakers, many Americans - drivers, investors and driver-investors - resist the inevitable change. On two fronts, the aforementioned sense of entitlement comes into play.

First, no matter how frequently investors refer to themselves as "long-term," many view a bull market as a birthright. When a flash crash, all-out crash or fleeting bear market ensues, they tend to look for a villain - that one person (the President!) or group of people (hedge funds!) responsible for messing with the comfortable bliss of the expected status quo. When the market resumes its expected upward trend, norms get restored until the next "manipulative" event triggers a temporary takedown.

Second, the car culture that permeates the U.S. perpetuates the notion that Americans should be able to drive whenever, wherever, however and whatever they want, unabated. In fact, contrary to much of the rest of the west, Americans have come to expect government to facilitate their obsession with incessant driving and gas-guzzling SUVs. You'll be hard-pressed to hear a yelp about subsidies for highways (thanks to a relatively non-existent gas tax), but any discussion of favoring EVs over SUVs or complete streets over parking spaces sparks outrage.

Of course, you can argue until gasoline comes out of your ears that the government should not impose its will on the people. It should let the market dictate the types of cars automakers should produce. If the market votes in favor of something that gets 20 mpg, so be it. That's where the self-entitlement comes in. Just because you choose it does not mean it's the right choice for the rest of the world or even yourself, for that matter.

Every once in a while, government needs to step in to save "free-thinking" people from themselves. Two-thirds of the nation is fat and healthcare costs are out of control - force proper nutrition down the people's throats. The same type of logic applies to the nation's automobile fleet. Turning crude into gasoline isn't working out for us - structure the system where one day Americans will have no choice but to opt for a fuel-efficient vehicle. It could be worse, really. The government could ask you to walk or bike and leave the car at home, but, of course, the political will for such common sense lacks in Washington.

Agree or disagree with my or Blankenhorn's sentiment, I think you can profit from it, given a long-term time horizon. It's pretty clear that the get-rich-quick stocks and millionaire-making IPOs are fewer and farther between these days. We might even have to get used to living without a perpetual bull market. And while you may despise government intervention at the gas pedal and pump, a self-entitled attitude gets you nowhere in the stock market.

Simply put, read the writing on the wall. Don't pay attention to the political dog and pony shows. In five or 10 years, don't be the investor who wished he had seen the trend coming. Take the cue from Ford (NYSE:F) when it reports that it plans to triple EV production. Pay attention to supply and demand, not the initial slow and methodical roll out of EVs from Nissan (OTCPK:NSANY) and General Motors (NYSE:GM). Know the niche market that luxury automakers like Tesla Motors (NASDAQ:TSLA) will dominate. Realize that EV charging stations are sprouting like wildfires across the nation. Know the names of the major players - NRG Energy (NYSE:NRG), AeroVironment (NASDAQ:AVAV), American Electric Power (NYSE:AEP), EcoTality (ECTY), Coulomb Technologies and others. Stay on top of the surprising names, such as Best Buy (NYSE:BBY) that have entered the EV fray.

In the coming weeks I will update my basket of EV-related stocks. In the meantime, you can review the first two installments that detail my approach to investing in the EV space here and here. Often, you have to put aside the things you hold dear - what you feel you're entitled to and your political views - in favor of making money in the stock market. For a not-so-old "lefty" like me, that has meant considering investments in "evil" oil companies and the poster children of big-box retail. Those who fall a bit more to the "right" might need to reconsider their psychological and political inhibitions if they want to make the prescient play on the auto industry before the story gets told.

Disclosure: I am long F, TSLA.