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Colossal Failure

Written by Briton Ryle
Posted July 14, 2021

If you’ve been thinking about investing in the electric vehicle (EV) revolution, well, you’re probably aware of the massive growth that’s coming. In 2020, 3 million electric cars were sold around the world. In less than two decades, EV sales are expected to hit 430 million units. 

With growth like that, it’s a no-brainer that some investors will make their fortunes. 

Some investors have probably already made a ton of money. Just about a year ago, EV company Workhorse (NASDAQ: WKHS) was trading around $2 a share. It caught fire and ran up to $40. 

Around the same time, Nikola (NASDAQ: NKLA), a company that planned to make electric trucks, was trading at a little over $10 a share. It would run as high as $90…

Catch a move like that and you’re sitting pretty. And hopefully, if you did get in on these EV stocks last year, you took your profits while the stocks were still trading close to those highs. 

You had to be quick, too, because the frenzy didn’t last. Two months after hitting $90, Nikola had fallen all the way down to the mid-$20s. Workhorse fared a little better — its drop from $40 stopped around $15 a share. 

Now, I don’t mean to rub anybody’s nose in this, but I do have two things I want to say about the EV revolution. The first is that, as I indicated earlier, the EV revolution is alive and well. There are still plenty of opportunities to make some fantastic investments in the EV sector

The second thing I have to tell you is a little more serious.

The Problem With Being First 

You see, any time there is an emerging technology, the first movers almost always fail. Railroads, radio, the internet — each was a game-changing technology. And all three were littered with bankrupt companies that, even though they may have a nice early advantage, didn’t have the staying power needed to remain in business. 

One of my favorite examples of this comes from the late 1990s, as the internet was emerging as a viable technology. A guy named Gary Winnick got the idea to run an undersea cable from the U.S. to Asia to carry internet traffic. Winnick figured he could charge enough for access to his high-speed cable network to make his company, Global Crossing, a success.

Winnick’s company went public in 1998 at $19 a share. By February 2000, shares were over $60. Global Crossing was worth $47 billion.

Of course, you know the story doesn’t end well. Two years later, Global Crossing filed for bankruptcy and was valued at $70 million. 

It wasn’t the technology itself. Global Crossing would eventually connect four continents, 27 countries, and 200 cities. It was the fact that the internet was brand-new and nobody really knew how much you could charge for access to a high-speed network. Winnick's numbers were all wrong and the company never made a profit. 

I can’t tell you that Nikola and Workhorse and the others are destined to fail and declare bankruptcy like Global Crossing. But I will tell you that there are plenty of challenges ahead for most EV companies, and the odds say that there will be some colossal failures.

That’s why Nikola, Workhorse, and even the big dog in the EV space, Tesla (NASDAQ: TSLA), are currently trading so far off their highs from just a few months ago.

The Next Wave

The internet sure seemed like a slam dunk for online companies. And it was — for the second wave of companies that came along. Nobody really talks about eToys or FogDog anymore...

When it’s all said and done, the EV space won’t be any different than the internet space. Ten years from now, nobody will talk much about the failed companies. Instead, it will be the second wave of EV companies that will be household names.

And in fact, this second wave of EV companies is emerging onto the scene right now. 

Investors that bought into the first wave and got burned are still licking their wounds. And that means there’s a window of opportunity for you to get positioned. 

I just finished presenting my findings and recommendations about this second wave of electric vehicle companies. You can check out what I have to say right HERE.

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.

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