When in December 2020 Apple (AAPL) announce that it’s moving forward with self-driving technology and aims to produce an electric vehicle featuring breakthrough innovations by 2024, its stock climbed as much as 4.7% on the day. Likewise, Tesla (TSLA) stock closed at a high of $695 on the day it joined Wall Street’s S&P 500 share index. With the push for more sustainable modes of transport surging and gaining traction in recent years, electric vehicles (EV) have stepped into the limelight with EV stocks in particular cruising in the fast lane.
And as demand for autonomous and electric cars is increasing, so is the opportunity for investing in the sector. Launched in 2018, the Global X Autonomous & Electric Vehicles ETF (DRIV) invests in companies that develop autonomous vehicle technology, electric cars and EV components and materials. Since crashing below $10 per share at the height of the pandemic selloff, DRIV has trended sharply higher ever since. The ETF was up 76% in 2020, while as of February 10, 2021, the DRIV has $802 million in net assets.
|Fund launch date||13/04/2018|
|Legal structure||Open-ended fund|
|Net Asset Value (NAV)||$27.87|
|Dividend frequency||Semi annual|
|Competing ETFs||EKAR, IDRV, KARS|
DRIV invests in companies involved in the development of autonomous vehicle technology, as well as EVs and EV components and materials, including those that develop autonomous vehicle software and hardware and those that produce components like lithium batteries or critical EV materials such as lithium and cobalt.
The ETF’s objective is to provide investment results that correspond to the price and yield performance, before fees and expenses, of the Solactive Autonomous & Eletric Vehicles Index, while it invests at least 80% of its total assets in the securities of the index.
So why DRIV? Without a doubt, the autonomous and electric vehicles sector has been making enormous strides, often touted as a potentially transformative economic innovation. By enabling investors to access companies critical to the development of this sector, DRIV is also offering high growth potential. At the same time, the ETF tracks an emerging technological theme, not to mention that in a single trade, DRIV offers access to several companies with high exposure to the sector.
What are DRIV’s top holdings?
DRIV has 75 stock holdings and zero bond holdings with 15 companies originating from the electric vehicles category, 30 from components and another 30 from technology. More specifically, the consumer discretionary accounts for 35.9% of net assets, whereas information technology 32.2% and materials 15.5%. Its top holdings include industry heavyweights such as Alphabet, Google’s parent company, Microsoft, Apple, Tesla and many others.
Below is a breakdown of the ETF‘s top 10 holdings.
|TICKER||COMPANY||MARKET VALUE ($)||NET ASSETS %|
|GOOGL||ALPHABET INC-CL A||27,990,129.20||3.42|
|7203||TOYOTA MOTOR CORP||20,976,650.22||2.68|
|MU||MICRON TECHNOLOGY INC ||16,285,206.60||1.99|
What has DRIV’s performance been like?
DRIV has had a good year, gaining 48.9% over the past 3 months and 76% over the past year, mainly attributed to the ETF’s investment strategy.
If we assume a hypothetical scenario whereby you would have made a $10,000 investment in the ETF on April 30, 2018 and assumed the reinvestment of dividends and capital gains, your initial investment would have increased to $18,348.41 as of January 31, 2021.
So is DRIV a buy?
EV stocks have been incredibly popular over 2020 and all thanks to an EV craze that doesn’t seem like it’s bound to fade any time soon. Tesla (TSLA) for one has gone up an astounding 695% in 2020, making it one of the most valuable companies in the world with investors fascinated by the company’s product lineup, manufacturing expansion plans, growth narrative, self-driving technology and Tesla’s very own CEO, Elon Musk. What’s more, between July and December of 2020, the company delivered just under 320,000 vehicles, roughly 140,000 units more than during the six months of 2020, lifting the year’s total to almost 500,000 units, while annual deliveries increased by around 36% year-over-year.
Likewise, NIO (NIO) rose 1,110% in 2020 according to data from S&P Global Market Intelligence, thanks to its incredible momentum and the industry’s long-term growth potential. In December of 2020, the company deliver over 7,000 vehicles, up 121% year-over-year. Meanwhile, General Motors (GM) announced that it plans to increase the amount it invests in electric vehicle development to $27 billion, while it aims to sell 1 million electric vehicles in 2025.
Total global EV sales rose 43% in 2020 to reach 3.24 million units for the first time, while Europe has managed to superseded China as the global driver of electric car sales in 2020 for the first time in five years, despite the COVID-19 pandemic. Sales of plug-in passenger cars in the continent rose 137% year-over-year to almost 1.4 million in 2020.
On the other hand, the global autonomous cars market reached a value of nearly $818.6 billion in 2019, having increased at a compound annual growth rate (CAGR) of 12.7% since 2015, while following a decline mainly due to lockdown and social distancing norms imposed by numerous countries, the market is expected to recover and grow in 2021, potentially reaching $1,191.8 billion in 2023.
A shift to autonomous and electric vehicles could not only reshape the entire transportation industry, but could also improve our way of life as attested by GM’s CEO Mary Barra who once was quoted as saying that such a future could spell ‘zero crashes, zero emissions and zero fatalities’. And as the autonomous and electric vehicle industry continues to disrupt the broader automobile industry, poised to trigger the transportation industry’s largest shakeup, DRIV should also increase and significantly too.
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