Three ways to build a core and satellite portfolio today
There are a lot of considerations that go into building an investment portfolio but ultimately, l...
When we think about electric vehicles (EV) it’s a car that usually comes to mind– and a Tesla at that. The company is synonymous with the rise of EVs and, while its share price has risen exponentially in the past two years, the team behind the Artemis Positive Future fund believe it’s still a good investment.
“Change would have been slower without Tesla,” commented co-manager Neil Goddin. “It’s a disrupter in a world of disruption and an innovation cycle ahead of everyone. Will anyone out-innovate Tesla? At the moment, no.” The company is also the top holding* in Capital Group New Perspective and Baillie Gifford Global Discovery.
But a quick look outside my window this morning reminded me that there are other forms of transport that are joining the green revolution.
While global sales of electric cars grew a huge 43% last year**, electric bus adoption has also been booming, for example. The European battery-electric bus market increased 22% in 2020*** and Aleksandra O’Donovan, head of electrified transport at BloombergNEF, believes that municipal buses “will go electric faster than any other segments of road transport”.
Electric trains are also not a new phenomenon and there are moves afoot to ditch the diesel locomotive in their favour, while electric boats also enjoyed a golden era in the early 1900s, before gasoline-powered outboard motors came to the fore. The limited power of batteries means the sea change here (pardon the pun) is currently slow, but a handful of builders are manufacturing larger, multihull cruising designs that are recharged by solar panels.
But when it comes to heavier road vehicles, the answers are not so easily found. While new diesel and petrol lorries will also be banned in Britain by 2040, road freight is one of the hardest parts of the economy to decarbonise, not least because of the size and weight of a battery that might be required to power a fully-laden truck over long distances.
Trucking companies are therefore looking for alternatives. One of several options being considered is an e-highway study. Backed with £2m in funding from the UK government, the project will design a scheme to install overhead electric cables to power electric lorries on a 20 km stretch of motorway near Scunthorpe. A study of hydrogen fuel cell trucks and battery electric lorries are also on the table.
At the other end of scale, electric motorbikes are another option for travellers. TB Amati UK Smaller Companies fund invests in Saietta, for example. It’s a UK-based motor design and manufacturing organisation specialising in the conceptualisation and production of electric drive solutions for electric vehicles.
“We first met Saietta in mid-January this year,” the managers said in a recent update. “The company had a compelling story to tell about having developed a new design of electric motor suitable to replace 110 -125cc combustion engines in motorbikes and light vehicles.
“We expect that motorbikes and light vehicles will go electric at scale some years before cars do. A big stumbling block for cars is not yet having a sufficiently scaled network of charging points. For motorbikes, this issue can be solved by having instantly inter-changeable batteries.
“From the point of view of a motor designer, this is also the biggest market by volume in the world, given the numbers of vehicles involved in Asia. 20m new motorbikes are sold each year in India alone. Whilst billions have been invested in new battery technology, a tiny amount by comparison has gone on motors.
“There are three key performance metrics in electric motors: torque density (how much power can you get from a given size of motor); power efficiency (how far can you go with a given amount of battery energy); cost and scalability of manufacture (can it become low enough cost for the mass market). Saietta’s design breaks new ground on each of these.”
Graeme Baker, co-manager of Ninety One Global Environment fund, commented: “Excitingly for investors, the transition to electrified transport is only just beginning – suggesting the big profits to be made from the e-transport revolution lie in the future.”
But instead of buying into auto makers, Graeme says an alternative route to getting exposure to the future of transport is to turn towards the supply chains and related industries – a view shared by FTF Martin Currie European Unconstrained manager, Zed Osmani.
“EVs require different technologies and even, to some extent, raw materials,” said Graeme. “The projected development of the EV market implies very significant growth potential for the companies that produce and supply them. Areas to consider here include semiconductors, lasers and sensor technology, mobility software, battery production and heating/cooling systems.
“Another possible benefit of investing in EVs via supply chains is that companies within these areas typically get less attention than carmakers. Consequently, their growth potential is more likely to be underappreciated, and hence not properly reflected in their share prices.
“Investors may therefore want to consider taking the road less travelled, by investing in companies in related sectors. That may give them a better chance of capitalising on perhaps one of the biggest economic revolutions of the 21st century, while making a positive contribution to driving forward global decarbonisation.”
**Source: www.sustainable-bus.com, 19 May 2020
***Source: fund factsheet, 31 July 2021