Juice Your Returns with Lithium Battery Innovation …

Hey There Income Hunters,

I was down in St. Petersburg for dinner on Saturday and hailed an Uber to head back to Tampa …

To my great surprise, I was picked up in a sweet Tesla Model 3 …

All-in, the car cost $75,000 because, my driver said, he paid up for the engine on steroids.

It was extremely comfortable and the pick-up was powerful …

My driver also said the only issue he’s had with hi sride are the current limitations in lithium-ion batteries — it’s all about the JUICE.

So, to maximize investment gains in this critical sector, it’s smart to put money on the technology that will be a game changer for lithium-ions …


QuantumScape (Ticker: QS)

A solid-state battery would solve the bottleneck preventing wider electric vehicle (EV) adoption …

You see, the current issue is the physical limitations of the technology that preclude denser packing of the energy cells, which caps an EV’s overall range between charges.

There is a notable jump in energy density, which is key to achieving the dream of ending the world’s dependence on fossil fuels to power automobiles …

QS has further demonstrated its system can recharge at 80% capacity under 15 minutes versus roughly half the rate a conventional system can obtain …

The 15-minute mark is critical as it is the industry benchmark most drivers spend at a station pouring gas in the car …


Solid Support for QS

QS has Volkswagen (Ticker: VWAGY), as a prominent backer of the technology…

VWAGY is targeting an all-electric fleet by 2027, a very ambitious goal. Additional technological breakthroughs in battery technology will be necessary to get there.

Volkswagen doesn’t have in-house production of batteries for its EVs, so today it works closely through joint ventures with Chinese businesses and they may want to gain greater control over that supply chain …


Valuation

With companies that are pre-revenue I like to check Morningstar’s valuation (see below). They have QS trading at a slight discount to fair value …

QS is projecting $230 to $290 million in operating expenses in building out its product suite…. The company currently believes the 900 million in liquidity on its balance sheet will be sufficient to allow it to build out its products.

How to Play QS

With expectations for a strong second quarter — thanks in large part to the stimulus — plus heading toward massive infrastructure spending bill, QS should easily rally 25% from here…

This is a good set-up for a Call spread expiring in August with September forecast to be the signing of the spending bill…

I purchased an aug-20 60/70 call spread for a $2.90 debit…

 

Like most green energy plays they rallied hard at the end of last year and have corrected … so, now is a good time to be building a portfolio…

Bring it Home

Always look to diversify across a couple of names when you are investing in a macro idea like green energy that will benefit greatly from government support.

A couple of other companies I like in the space are the Amplify Lithium & Battery Technology ETF (Ticker: BATT) and the Global X Lithium & Battery Tech ETF (Ticker: LIT), which I’ve mentioned before, so keep an eye on them

And as always …

Live and Trade With Passion My Friends,

Griff

 

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