3 Ways to Capitalize on Self Driving Car Trend

Early this year, our list includes Tesla (NASDAQ:TSLA) and Google (GOOG). Both proved to be ‘headline grabbers’. GOOG for instance, have been developing and testing self-driving cars for almost a decade.

Company Ticker Recommend Date Price to Date Price at Recommend % Increase
Tesla Nasdaq: TSLA

01/01/2017

$337.86

$219.50

54%

Nvidia Nasdaq: NVDA

02/11/2017

$159.15

$116.00

37%

Delphi NYSE: DLPH

08/22/2017

$92.91

Cypress Semiconductor Nasdaq: CY

8/22/17

$12.94

 

GOOG’s self driving car subsidiary, Waymo goal is to make self-driving cars safe and easy for everyone to get around.

That leaves us with opportunities in these area of the markets

 

  • Software
  • Hardware
  • Entire Vehicles

 

Google will have its share of the self driving car technology as much as possible. Tesla, on the other hand, is also rolling out new self-driving technology.

 

As Waymo is putting up cars, testing and preparing to produce them on a large scale.

 

The big elephant in the room will be the Sensors market. Sensors will be the most important component of self-driving cars . Those sensors allow cars to stream loads of 3D data for the whole system to function properly.

What is LIDAR?

 

LIDAR stands for L Detection and Ranging. LIDAR detects whats around the vehicle acting as a Radar system. To date, the auto sensor market is worth over $7 billion. According Strategy Analytics, the sensor market is likely triple , growing into $21 billion in five years.

 

Source: NY Times , Nvidia

 

When it comes sensors, which well-known players are already in this segment? The big players, Intel (INTC), Qualcomm (QCOM) and Nvidia (NVDA).

Cars in the near future will be like a large moving computer. Every integrated system from the cameras, A.I modules to its braking system will be completely electronic. This explains why Intel’s aggressive purchase of Mobileye as the leader in vision sensors in self-driving cars is preparing the company for the next trend.

Right now, Nvidia stock is gaining significant traction. Nvidia is positioned well to capitalize on this trend after more than 20 years of making graphics card. Nvidia is able to supply processors that can handle the most data-intensive processes, even A.I.

Nvidia’s DRIVE PX 2 artificial intelligence unit is the C.P.U or ‘brain’ of self-driving cars. Nvidia have also partnered with Tesla, Audi, Volkswagen, BMW, Honda and Mercedes-Benz

the Race to make Self-Driving Cars a Reality

Levels of Self-Driving Cars
Level 1— Function-specific Automation: Automation of specified control functions, such as cruise control, lane guidance and automated parallel parking. Drivers are fully engaged and responsible for overall vehicle control (hands on the steering wheel and foot on the pedal at all times).
Level 2 – Combined Function Automation: Automation of multiple and integrated control functions, such as adaptive cruise control with lane centering. Drivers are responsible for monitoring the roadway and are expected to be available for control at all times, but under certain conditions can disengaged from vehicle operation (hands o the steering wheel and foot o pedal simultaneously).
Level 3 – Limited Self-Driving Automation: Drivers can cede all safety-critical functions under certain conditions and rely on the vehicle to monitor when conditions require transition back to driver control.
Level 4— Self-Driving Under specified Conditions: Vehicles can perform all driving functions under specified conditions.
Level 5 – Full Self-Driving Automation: Vehicles can System performs all driving functions on all normal road types, speed ranges and environmental conditions.


The Autonomous Megatrend Pure-Play?

 

Delphi (DLPH). We are looking for under-valued automotive suppliers like Deplhi (DLPH) and Magna (MGA). A few years ago, DLPH filed for bankruptcy and learnt the

hard way that profit margins

are virtually zero if you try to manufacture commoditized auto parts. However, DLPH turned around and is selling more than $16 billion in auto parts annually. DLPH have

two separate entities now: One focusing on traditional combustion-related technologies and another focusing on growth-oriented technologies like connectivity and autonomous driving.

While the traditional business will remain stable and profitable, the growth division should position the company to compete in the self-driving cars niche.

 

394385-INFO

Source: Delphi

 

 

At current prices, DLPH is trading at discount prices , 11 x forward earnings. The S&P is currently 17 times forward earnings.

Upside potential: aiming for a 100% returns as the company transitions from traditional auto parts play into fast-grower autonomous tech-play.

Conclusion: within a few years, there is no difference between an auto parts supplier and tech hardware supplier.

 

 

 

 



DLPH autonomous tech play by wallstreetsharks on TradingView.com

Why Dividends is the ‘Most Powerful Force’ in the Investment Universe

We all heard that ‘compounding’ is one of the most powerful investment concepts known to investors. However, that is only one small part of the story. The main body of of the story will be finding the right stocks to invest in. Compounding doesn’t work if the companies you invest in companies that have bad business models, substandard technology or not paying any dividends at all for a long period of time.

 

As Einstein puts it ‘ The Most Powerful Force in the Universe’ only works when you reinvest the money you make from an initial investment to grow even more money. Assuming your initial investment of $10,000 makes 10% for the first year. Instead of taking out the $1,000 , you reinvest the $1,000 and in the second year, the returns you make is $1,100 or 10% on your new balance of $11,000.

 

A simple Google search will give you a compound return calculator. All you have to do is key in your own starting capital, years and expected interest.

‘Do you know the only thing that gives me pleasure? It’s seeing my dividends coming in.’ John D Rockefeller

 

But again, the S&P 500 returned and average of only 9.7% annually since inception in 1928. We found out that High-dividend-paying stocks returned even more for investors who compounded their returns in the medium to long term.

 

The below table shows how compounding returns work in your favor at 10% annually into 40 years. Note: this is assuming you are not adding any new capital into your initial investment.

 

Year Year’s Returns Total returns Ending Balance Total % Returns based on initial capital

1

$1,000.00

$1,000.00

$11,000.00

10%

2

$1,100.00

$2,100.00

$12,000.00

20%

5

$1,464.00

$6,105.00

$16,105.00

61.5%

10

$2,358.00

$15,937.00

$25,937.00

159%

20

$6,116.00

$57,275.00

$67,275.00

572.8%

40

$41,145.00

$442,592.00

$452,592.00

4425.9%

 

The above shows in 10 years your total money grows into $25,937 or 159% from your initial investment. After 40 years, this adds up to $452,592 or a 4426% returns on your initial investment of $10,000!

 

The fact is, most Mutual Funds or the S&P 500 index do not generate a return of 10% annually. Although compounding can make almost anyone into a millionaire, it is not easy.

 

Most people picked the wrong stocks or panic out of the position at the wrong time like during the Subprime Mortgage crisis in 2008/09 , dot com crash year 2000.

 

The main reason why most people are not seeing this kind of returns is picking the wrong stocks when it comes to compounding.

 

The main key is to pick companies with great businesses, management team and a track record of increasing dividends over the past few years.

 

The Dividend Aristrocates and How to Beat the S&P500

 

Here’s a list of stocks in the S&P 500 that have a good average returns of 10% returns with dividend track records. Please note we are only using 10% as an average for long-term holding. (15 years and above)

 

Company Ticker Company Ticker
Abbott Labs ABT General Dynamics GD
AT&T T W.W Grainger GWW
Automatic Data Processing ADP Kimberly-Clark KMB
Cardinal Health CAH Lowe’s LOW
Chevron CVX Medtronic MDT
Cincinnati Financial CINF Nucor NUE
Cintas CTAS S&P Global SPGI
Emerson Electric EMR T.Rowe Price TROW
Federal Realty Inv. Trust FRT VF Corp VFC
Franklin Resources BEN Wal-Mart WMT

 

 

The Dividend Rock Stars for the past 61 years 

 

You will notice the companies that have long consistent track record of giving dividends have one thing in common. They are neither exciting nor in the high growth industry like tech. In other words, those companies sound boring, but boring is good. Warren Buffett’s portfolio is full of stocks that pay dividends .

Warren Buffett says ” If the company will be here in 20 years then it is probably a good business’.

 

Company Ticker
American States Water Company AWR
Dover Corp DOV
Northwest Natural Gas NWN
Parker-Hannifin PH
Genuine Parts GPC
Proctor & Gamble PG

 

What is the easiest way to invest in Dividend Aristocrats?

 

ETFs. Here’s the top three ETFs that focuses on buying companies with dividend growth potential.

 

(VIG ) Vanguard Dividend Appreciation ETF VIG offers a diversified portfolio of highly profitable U.S. dividend-paying companies.This fund has the widest range of dividend paying companies, about 188 of them.

 

SDPR S&P Dividend ETF (SDY) holds about 110 stocks that have been consistently increasing dividends for the past 20 years.

 

(NOBL) ProShares S&P500 Dividend Aristocrats ETF holds about 50 plus stocks only that have raised their dividends for the past 25 years in a row. All those stocks are listed in the S&P 500.

 

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