This has been a crazy ride, sold some yesterday, they have doubled since August.  May sell more on Monday but plan to buy them back when they bottom

NIO came to my attention a week or 2 back. It is tough for me as I tend to be more of a value investor and Tesla (I know it is not Chinese!), Nio, Li Auto, etc. should all be about 1/10 of what they are currently priuced at, but are being priced as if they will replace GM, Ford and Toyota in  the next 3-5 years. I struggle with their valuations. On the other hand, it is clear that some folks value them off of some crazy growth model that I cannot necessarily comprehend. My fear is to be stuck as the bag holder. I do believe that electric cars are the future, so at most I might take a small position in the market, but would probably hedge amongst 2-4 different companies.

My issue with Tesla: They are selling cars at a loss while growing market share, but there is no indication they will be able to get costs down so how will they turn a profit from selling more? Their profit now is due to credits they sell other car manufacturers, and that cannot last. Seems to be a house of cards. Not sure if Chinese companies are similar or not. Can they get costs down and turn a profit?

Please keep posting as you do DD. I am interested in following more closely.

When I started investing in EVs, I did it because I had missed TSLA.  I first bought XPEV when it went public back in August. Days later I started buying NIO shares.

My investment thesis for the EV market is as follows:

China has the biggest car market on the planet – 24M car sales every year – EV sales will be 25% of that market in the mid-term, I think by 2025 (from memory)

China is heavily subsidizing the EV market

China wants to become carbon neutral by 2060

EVs are all the rage worldwide

Battery technology is now beginning to advance, and the economies of scale will continue to push manufacturing costs down.  It is believed that within five years the price of battery packs will be on par with gas combustion engine and its related parts.  Time will tell.  However, if this is true, I figure governments around the globe will move to ban manufacturing of combustion cars.  This assumption does not mean gas combustion engine cars already in use will be banned, they will age and break down within a couple of decades.

The valuations are indeed pricing in 10 years of growth.  It is crazy, but having seen the trajectory of TSLA, I decided and figured that the market would treat Chinese EVs in a similar fashion.  My timing was lucky, no question.

I decided to sell my entire positions in NIO and XPEV as the charts have gone vertical.  I made something like 90%+ since August.  I do plan to buy them back, assuming they drop to levels in the $28 to $30 level.

One thing I love about EV investing is deliveries are announced every month, this allows you to see if the EV stock you have picked is actually producing a product people like and are purchasing

 

Just one more thing:  I followed the same line of thinking when I invested in BABA about 4 years ago, i.e. I missed AMZN, so how could I make up for that.  I recently got flushed out of BABA at $285.  Jack Ma was made an example for speaking out and being critical of government fintech policies or lack thereof or something like that.

I did well with BABA but nothing as good as with EVs.

 

And speaking of Value Stocks:  I started building positions in Banks, retail and restaurants recently.  Banks I have held for several months, the rest when Pfizer announced its Third Face Trial results some weeks ago. My positions in banks are BAC and WFC, in retail its M and WMT,  in restaurants are DRI and BLMN. The positions in banks are bigger than retail and restaurants.

Forgot to add F as a value stock I recently bought.  I am also looking to again buy BABA, I think it is now finally bottoming.  The company is a compelling buy at these levels, the regulations that China has imposed on them will not have a significant impact on its growth, time will tell.  It is selling for a fraction of the valuation of AMZN. So at these levels I think the downside is limited.

Thanks for sharing. I am interested in looking into some other areas and I like your logic. Might have to do some reading over Thanksgiving.

I bought back BABA (not as a big a position as I had when I got flushed out about 9 to 10 days ago) at $260, will keep it for a while, hope Xi Jinping is done Chinese Water torturing Jack Ma.

 

I also bout CAKE on Monday.

Why CAKE? I do not follow them, but prior to pandemic they were ~40ish/share, close to that now. Even as we get vaccines, won't it be close to a year before they can return to where they were at before - in terms of business, revenues and profits, etc. What are your expectations that make you think it is a buy now?  TIA.

 

The restaurant stocks (and old economy stocks in general) are a play on an economic recovery. I am not expecting to keep the restaurant stocks for more than 15 months or so. As to CAKE, I think it is a very popular restaurant.  Before the pandemic it was always full. The chart too looks bullish, so tecgnically it has a decent chance to keep rising. 

My thesis is that restaurants in particular will see incredible pent up demand not just because people will do a lot more dinning out once the vaccines are deployed en mass, but in particular because the choices are going to be far fewer given that so many small restaurants will never recover.  So, they should enjoy increased demand for both reasons.

To be sure, I am not a restaurant stock guru, far from it and I may certainly have it all wrong.  Because of it I have not parked that much money in this sector. I also needed to diversify a bit more given that my portfolio was very Tech heavy.

In financials, I do have more money, I own both WFC and BAC, and even though they are still lagging the market, I view them as being very undervalued, I hope this provides a bit of stability for my portfolio. So far even banks have been very volatile, but I would expect that to decrease as the economy stabilizes and have less risk at these levels than other sectors.  I too believe that rates will increase moderately, my reading and due diligence tell me that the 10 year note could over the midterm (2 years) rise to the 1.25%, while modest, it is some 40 basis points from current levels or a 47% increase. With all the money being thrown from the proverbial helicopter, I believe that inflation will make a modest comeback.

 

awesome, thanks for the thoughts!

I have done more DD since your original post.  I like NIO the best of the 3  FWIW and even did an earnings trade (bought at 44- sold at 49 and it is 55 now. It just keeps going, crazy!).

Especially since it is expanding into Europe and seems to be the leader. I always seem to miss when I go for the 2nd or 3rd best  thinking they have more growth potential. Sometimes they do, but more times than not it is the leader I should have bought.

I too am sorry I sold NIO, it and XPEV have gone vertical.  Left a ton of money on the Table, I should have sold half and kept the rest, oh well.  They seem to be having a pull back.

I too wonder how far they will pull back on the next correction, whenever that happens.  NIO has a market cap about twice that of Ford. They are trading at Tech Valuations.