“Brake!” scolds a big orange display in the middle of my dashboard a few times a week, making a routine bend in the road a moment of white-knuckle panic.
One time, the brakes engaged with no trouble in sight. The manufacturer calls this computerized incontinence facilitator a “collision mitigation system.” I’d like to sneak up on the CEO a few times a week and set off an air horn, then tell him I’m still working out the kinks on my management salutation system.
Stock investors should nonetheless look for exposure to semiconductors in cars. That includes people who are scared to chase soaring
(ticker: TSLA) and too impatient for
General Motors (GM)
and its Cruise division.
It turns out my car brand scored poorly in a recent Consumer Reports survey on robo-braking systems, but others did better, and 69% of respondents said they were “very satisfied.” Technically, my car can drive itself on highways, too, although it won’t let me recline the seat, put both hands on a pastrami sandwich, and blast Carrie Underwood’s “Jesus, Take the Wheel,” as I feel I deserve.
That’s because it is a 2018 model, with mere Level 1 autonomous driving features, as they’re called. Later this year, when I’m in the market again, the company will roll out the same model in a Level 3, which will allow for a modified pastrami-Underwood. It will drive itself in slow-moving traffic, but while drivers may let go of the wheel, they must remain alert and ready to take over.
On Tuesday, the Cruise division of General Motors introduced a robotaxi with no steering wheel, called Origin. Passengers sit facing each other, prom-limo-style. To my eye, the vehicle appears to have two rears and zero fronts.
Time to buy GM? I’ve honked about those stalled shares so many times I’m at risk of losing my automotive stock-picking license. Turn sweet on Tesla instead? Barron’s Roundtable member James Anderson said this month that the stock, which has multiplied more than tenfold in price over the past seven years, to a recent $543, could one day be worth $5,000. We’ll see.
I’ll shift gears to car chips instead. Nearly five years ago I recommended a spinoff of German conglomerate
(IFX. Germany), for its exposure to car electrification—both electric drive systems and automation. It has returned 117% since then, versus 85% for the S&P 500 index and 32% for Germany’s DAX index.
On Jan. 15, Bank of America published a report predicting car semiconductor companies will outperform the market over the next three years. Its reasoning: The gradual uptake of electric and sort-of autonomous vehicles will push semiconductor spending higher. Currently, spending on semiconductors for electric propulsion works out to $37 for every car sold, while chips for driver-assist systems comes to $66. Those figures are projected to hit $74 and $136, respectively, by 2022.
That means semiconductor companies can prosper in cars even if the world isn’t buying more of them. Just the same, J.P. Morgan on Tuesday predicted that after two years of declines, global car production would stabilize this year and recover in coming years.
BofA says to buy
(ON) in the U.S., which are cheaper than the broad market, and in Europe, Infineon and
(STM. France), which are more expensive than the market. J.P. Morgan on Tuesday upgraded shares of
(TEL), a U.S. maker of sensors and such, for its exposure to electric and autonomous vehicles. It goes for 19 times forward earnings, with double-digit earnings growth projected over the next few years.
I brake for valuations like that. Until I get a car with smarter sensors and chips, of course, I brake for just about everything.
Write to Jack Hough at firstname.lastname@example.org