When you filter out the noise, one thing becomes clear about the electric vehicle (EV) market. That is, we’ve passed a point of no return. There is simply too much being invested into the technology to go backwards. Since batteries are to EVs as gasoline is to internal combustion engine vehicles, investors are paying close attention to high potential battery stocks.
Investing in battery stocks can be tricky. For starters, many of these companies went public via special purpose acquisition companies in 2020 and 2021. As many investors know, the success rate for many of these companies is poor. Add to that, this is a rapidly evolving sector with no shortage of competitors. Many of these companies are developing technology that may not make it to market in a meaningful way. The barriers to entry are significant and battery makers have to go beyond proof of concept.
However, this can also simplify your task of finding high potential battery stocks. This means looking at companies that are currently meeting demand for batteries today. These are companies that are generating revenue and, ideally, positive earnings. Those fundamentals matter, especially in an emerging sector like electric batteries. However, this is also an area where speculation may be rewarded.
Byd Co. (BYDDF)
First up is Byd Co. (OTCMKTS:BYDDF) which is not a pure play battery stock. Nevertheless, BYDDF stock makes this list of high potential battery stocks because the company is one of the leading EV manufacturers in China. This comes at a time when the Chinese government looks to stimulate the nation’s economy which is suffering from, among other things, a lack of inflation.
In the United States, the rate of inflation is slowing, but it’s not likely to be back at the Federal Reserve’s preferred target of 2% for quite some time. That’s not the case in China which, as of its latest report, has an inflation rate of just 0.1%.
That is causing China’s leadership to prime the pump with stimulus measures and Byd stands to benefit. Byd has approximately 11% of the overall car market in China. However, the company is more than just an automobile manufacturer and makes its own batteries for its EVs.
In the most recent quarter, Byd reported total vehicle deliveries of 552,000. This includes both full electric vehicles as well as hybrids.
Panasonic stands to benefit from the Inflation Reduction Act because it currently has an EV battery plant in the United States with plans in place to build more. Another catalyst for the company is its plans to increase the density of its battery designs.
Critics may cite that Panasonic is no longer the exclusive battery supplier for Tesla. However, the company also secured a joint venture with Toyota Motor (NYSE:TM) that includes the construction of a manufacturing facility in Japan. Panasonic also has many patents for solid-state batteries. While this technology is still not commercially available, it could be a catalyst for further stock price growth.
PCRFY stock is also objectively undervalued trading at around 13x earnings. Plus, the company is expected to report an increase in earnings in a year when many companies are posting declining earnings.
Microvast Holdings (MVST)
Microvast Holdings (NASDAQ:MVST) makes this list because it’s operating in an appealing niche. Specifically, the company is working to develop high-speed charging solutions for commercial vehicles.
If you plan to invest in MVST stock however, you’ll have to get past some noise. The company recently had a loan denied from the U.S. Department of Energy citing concerns over the company’s alleged links to the Chinese government. For its part, Microvast is denying the allegations citing that it is headquartered in Texas and the Chinese government has no ownership stake or operational control of the company.
Investors will also have to contend with the fact that Microvast is not yet profitable. But it’s expected to move closer to profitability in 2023. This may not be a smooth ride forward, but risk-tolerant investors may be able to scale into a position, particularly with MVST trading in penny stock territory at the time of this writing.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.