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Jump-Start Your Driverless Car Portfolio

Written by Jason Williams
Posted June 14, 2018 at 8:00PM

When it comes to new technology, nothing’s quite as cutting edge as driverless cars, or autonomous vehicles (AVs). And it’s no surprise that folks are making a lot of fuss over the future of this burgeoning industry.

I mean, first off, there’s the fact that the cars are driverless! That’s crazy. It’s science fiction. It’s unbelievable. But it’s happening.

That’s exciting enough.

Yeah, it’s a little scary, too. There are all sorts of safety issues to overcome. Case in point, a self-driving Uber killed a pedestrian not long ago. And what’s worse is that the car’s computer “saw” the person and didn’t alter course.

But it’s also exciting. I mean, we’re watching a completely new technology be built. And thanks to advances in other types of connected and autonomous devices, the progress is staggeringly fast.

That’s pretty cool and worth some buzz in itself. But the really exciting side of the AV industry is the potential profits out there...

Millions of Billions

I’m talking a massive market. According to a 2015 Boston Consulting Group report, the AV market could easily be worth as much as $42 BILLION by 2025. That’s just a few years away!

But that’s not all. That same report predicts that within 10 years of that, the driverless car market will hit $77 billion. That’s some serious cash. And it just keeps growing.

But it doesn’t take into account the entire market that will grow around this groundbreaking tech.

I’m talking about service, mapping, computing, new business-to-business services... everything that goes with vehicles.

Boston Consulting is just talking about cars — how much money will be generated from the sale of these AVs. That’s it.

When you factor in all the auxiliary industries that will spring up to feed this market, we’re talking about massive piles of cold, hard cash.

Just as an example, NVIDIA Corporation (NASDAQ: NVDA) expects its total addressable market will be worth $4 billion by 2025. Just one company. And a company that makes one component of the technology behind driverless cars: the chip sets. That’s pretty big.

And in a joint report it released with Canalys in 2017, Intel predicted that the AV market will eventually build into an entirely new $7 TRILLION “passenger economy.”

Now that’s what I call serious cash...

That’s more than the GDP of every country in the world except China and the U.S. Think about that. More money than Japan makes in a year. More than Germany. More than the U.K. More than France, India, Italy, Brazil, Canada, Russia, and Korea.

That’s a lot of money. And that cash is all up for grabs right now because the industry is still so small and there’s still so long before it reaches maturity.

That’s why I’ve been diligently researching the whole industry from top to bottom, factory to driveway, for months. I want to know what companies are going to be the shining stars of this new industry. I want the next Apple, Netflix, and Amazon. I want Intel before the PC boom. I want Qualcomm before smartphones.

And I’m convinced I’ve found just that.

Through my research, I’ve pinpointed a handful of companies that have everything it’s going to take to become the new leaders in this $7 trillion industry.

And I’m putting them all together in a special, completely free report for my loyal Wealth Daily readers. I’m still putting on the finishing touches, but I wanted to give you a little taste of the research to whet your appetites.

So, today, I’m going to give you one of my favorite driverless car stocks. And as soon as the report is available, you’ll get immediate access through our website.

Now, let’s get to the investing...

AV Industry Leader #1: Delphi Technologies PLC (NYSE: DLPH)

My first driverless cars stock is an old standard in the automotive industry. You may not know it, but most of the electronics in the car you’re driving likely came from this storied British company.

From car radios and speakers to driver-assistance software to the drivetrains themselves, Delphi’s got a part in just about every car out there.

The company recently split into two. Delphi Technologies handles the drivetrain tech and the aftermarket parts and tools.

And it’s making big strides in the AV market...

Delphi recently partnered with several other companies, major universities, and the U.S. government to help improve the efficiency of this new generation of vehicles.

Using Delphi’s patented technology, the cars can do what the company calls “intelligent driving.” What that means is the software makes the car proactive rather than reactive. It allows the car’s onboard computers to interface with other vehicles and connected devices to predict future road conditions.

The car will know if the road is hilly or flat, if it’s curvy or straight, if there’s traffic around that bend or a clear road. And it’ll be able to give the driver (or would that be passenger?) the choice of the most efficient route.

Technology like this will help further reduce emissions from autonomous vehicles and will likely become a requirement like a muffler and a catalytic converter on an internal combustion engine.

And when it comes to aftermarket parts and service, Delphi has a stranglehold on the industry. Since it supplies most of the OEM parts in the cars, it also supplies much of the diagnostic equipment used to test and repair the vehicles.

That’s not going to change just because a computer is driving. If anything, it’s another segment that’ll just keep growing.

And with Delphi’s stock trading at around half its 52-week high and with super-low valuations, now is the time to get in on this future titan.

It’s got a market cap of $4.69 billion and annual sales of $4.85 billion. Yeah. You read that right. You can buy a dollar of revenue for about $0.97 right now. You pay about $52 a share and get about $54 a share in sales.

That’s unheard of. And it just won’t last.

Plus, the shares trade at about a 16% discount to enterprise value. That means if the company was dismantled and sold, your shares would be worth 16% more than what you paid for them.

Any way you slice it, this is an investment that’s too good to pass up. And that’s why it made my list of top driverless car stocks.

Patience, Daniel-san

As Pat Morita taught us in The Karate Kid, patience isn't only a virtue. It’s a necessity.

Especially when you’re investing in an industry that’s still in its infancy. So don’t expect any driverless car companies to explode in the next year or two.

You’re positioning yourself for the long run here. Just like the companies that made my list, you’re planning ahead. Very far ahead.

The most aggressive timetable in the industry belongs to Tesla. That company says it’ll have a vehicle that can drive itself from LA to NYC sometime this year.

That may happen. Or it may be another one of Elon Musk’s empty promises. Either way, don’t expect Tesla to start offering AVs to the masses anytime soon.

Then there’s Ford. It’s made big investments in driverless tech. And it’s hoping to have a Level 4 AV on the road by 2021 — just a couple years away. A Level 4 vehicle, in case you were wondering, has neither gas pedal nor steering wheel and can only operate in a predefined area.

But that again doesn’t mean you’ll be able to walk into a dealership and buy yourself one of those newfangled self-driving vehicles. First, the company will make them for ride-sharing fleets. We come way later.

And to really put the timeframe in perspective, let me give you some words spoken in June of 2017 by the CEO of the Alliance of Automobile Manufacturers (which represents General Motors, Toyota, Volkswagen, BMW, Ford, and Fiat Chrysler, along with other automakers) to a Senate committee:

Level 4 geo-fenced self-driving vehicles that can only be operated by an Automated Driving System will probably begin around 2021. But, retail sales to consumers of so-called Level 5 vehicles that can operate anywhere a person can drive a conventional vehicle today is unlikely to happen until around 2025 or after... Ubiquity is not projected to occur for at least four decades largely due to the fact that over 260 million light duty vehicles are registered in the U.S.

So, we’re talking maybe 2045 before you can go buy an AV and let it take you home. But getting in now ensures we’ll be around to catch all the growth this new industry has to offer.

But that doesn’t mean you won’t see any gains at all for decades. Quite the contrary. I expect we’ll start seeing some slow growth this year. And that should continue into the mid-term until it finally accelerates and goes parabolic as the rubber hits the road.

I’m predicting the following profit timetable:

  • Short-Term Profits: 10%–30%
  • Medium-Term Profits: 80%–150%
  • Long-Term Profits: 3,500%+

Just be patient. Keep buying on dips. And remember you’re in it for the long haul.

Keep your eyes out for my report with the rest of my driverless car top stock picks.

To your wealth,

jason-williams-signature-transparent

Jason Williams

follow basic@TheReal_JayDubs

After graduating Cum Laude in finance and economics, Jason analyzed complex projects and budgets for the U.S. Army. Then, at Morgan Stanley, he led the assistants' team for the North American repo sales desk, responsible for hundreds of multibillion-dollar trades every day. Jason is the assistant editor for The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.


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