Electric Vehicles
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What was once (not too long ago) a niche sideshow in the automotive market is poised to take over the whole thing, with electric vehicles anticipated to dominate car sales by 2040, according to BloombergNEF’s Electric Vehicle Outlook 2020.
But is the mass adoption of electric vehicles really as far off as 2030, when some projections anticipate that battery-powered cars will start to outsell conventional combustion engines? Or, is the electric vehicle revolution already here?
Right now, the prices of electric vehicle stocks are jumping. Tesla, which is expected to announce new battery technology in September, jumped 13% in one morning in June to an all time high of $1,746.69. Now, it’s as high as $1,835.64 and looking at the next milestone of $1,900.
Workhorse, a maker of electric vans, also jumped after it cleared the next hurdle to participation in California’s zero-emission subsidy program. These, in addition to a jump for the Chinese electric vehicle maker NIO, the Chinese electric scooter maker Niu, show the enthusiasm for the EV market.
And there should be. Here’s why.
What Are Electric Vehicles?
All-electric vehicles (EVs) are cars and trucks equipped with an electric motor rather than a traditional internal combustion engine. The electric motor is powered by a large traction battery pack which requires a charging station or wall outlet to charge.
Because EVs are powered by electricity, they don’t have the tailpipe that emits exhaust as is typical of internal combustion engines. EVs also do not require liquid fuel components, including a fuel pump, fuel line, or fuel tank. Hybrid vehicles, however, still do have these components, as they typically switch over to an internal combustion engine when the electric battery becomes depleted.
Why Invest in Electric Vehicles?
Simply put, electricity is the future of transportation.
EVs have the potential to help slash carbon emissions and lower costs for drivers, which is why public utilities such as Xcel Energy are pushing to get 1.5 million electric cars on the road by 2030.
When investing in EVs, it’s more than a matter of purchasing pricey Tesla stock or not. Lots of companies stand to benefit from the adoption of electric vehicles, from battery manufacturers to companies thinking creatively about how to charge electric vehicles.
These companies are trying to solve the biggest challenges for electric vehicles that have been stumbling blocks to their mass adoption. Namely, the production of batteries that hold a greater charging capacity for a longer period and the accessibility of charging opportunities.
For example, a new type of battery—solid-state electrolyte— is scheduled to enter the commercial market in 2023. Solid-state batteries are generating major excitement for electric vehicle makers. The solid version of the battery can hold three times more energy than its traditionally liquid counterpart, not to mention it can hold that energy more efficiently and ultimately last longer. Battery prices are expected to fall as their energy density improves, making electric vehicles increasingly more affordable.
EVs continue to become more mainstream as they become more affordable and charging equipment becomes more widely available. Blink Charging, for example, designs, manufactures, and operates an electronic vehicle charging network that is managed by cloud software. According to the company, its EV charging equipment sales increased by more than 350% and its revenues for just the first six months of 2020 surpassed its total revenues for all of 2019.
But, there’s more to all-electric vehicles than batteries and charging stations.
Specifically, the list of key components in electric cars is long. In addition to the usual wheels and tires, you also need:
- A charging port
- A DC/DC converter
- An electric traction motor to drives the wheels
- An onboard charger that accepts energy from the charge port and converts it to charge the battery
- A power electronics controller to “manage the flow of electrical energy delivered by the traction battery”
- A thermal system to maintain an appropriate temperature range
- A traction battery pack to store electricity for the motor
- An electric transmission
- And more…
In other words, a shift from conventional combustion engines to all-electric means a shift to makers of these parts for suppliers.
For example, Aptiv develops safety systems for electric vehicles. Safety systems are crucial considering the high voltage that powers electric vehicles and the “more than 8,000 connection points in a typical electric vehicle.”
Delphi offers automakers powertrain, electrical and battery management solutions for components including inverters, high-power electrical centers, high-voltage connection systems, combined inverter DC/DC converters (CIDD), high-voltage shielded cables, on-board and plug-in chargers and charging inlets.
Magna offers complete vehicle manufacturing, producing vehicles for BMW, Daimler, Jaguar Land Rover and Toyota. Magna was selected by the Beijing Automotive Group Co., Ltd. (“BAIC Group”) in 2019 to “produce up to 180,000 electric vehicles per year in China…starting in late 2020.”
Amphenol develops and supplies advanced interconnect systems, sensors, and antennas for hybrid and electric vehicles.
These and other companies are poised for growth and are ripe for investment.
How to Invest in Electric Vehicles
Electric vehicles will outnumber traditional fuel-powered cars before we know it. Now is the time to get ahead of the curve, before affordable, little known stocks rise to the heights of Tesla. A search on Magnifi indicates that there are a number of ways for investors to access this fast-growing segment via ETFs and mutual funds, rather than focusing only on individual companies.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the August 25, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Cloud Computing (SaaS)
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Software-as-a-Service is now standard, from mobile phones and laptops to business solutions for the largest of entities. It seems that there’s an app for everything, and it’s all personalized to each user’s credentials.
Is your gym closed during Covid-19? Subscribe to Truecoach to build an online training platform for customers. Need to set up an online store, especially with COVID-19 closures? Build one on Shopify. Too busy to make a baby book? Text Queepsake your baby milestones and they’ll make one for you. (Not kidding.)
The solutions are big, small, and endless.
But, it wasn’t always that way.
Cloud computing has transformed how users interact with software. Before the software-as-a-service model, users had to purchase their software, either on physical media or via direct download, and had to pay for updates or replacements as technology improved. These days, that’s not how it works.
Rather than purchase software annually or biannually, users pay for access to the software that they need on a subscription basis. They have credentials and they pay a small fee to accomplish their needs.
This model has transformed how we operate as a society, and it offers a frontier of investment opportunities as software companies strive to create solutions for the next big thing.
What Is SaaS?
Salesforce, which pioneered the software-as-a-service model in 1998 defines software-as-a-service as “a way of delivering centrally hosted applications over the internet as a service. SaaS applications are sometimes known by other names: Web-based software, On-demand software, and Hosted software”
How is this different from previous models?
Consider that hardware is the physical computer or user device. Now consider that software is the programs and apps that help users do things on the computer.
Before software-as-a-service, customers would buy software housed on a physical source, such as a compact disc. After purchasing, they would take it home, download it to their computer, and then use it. While this utilization of software was helpful, it was also exceptionally hard for companies to update.
It also wasn’t the most user friendly. For example, if someone was using a tax software before SaaS, they would purchase the software, download it, and input their information. However, every year, they would need to repeat the process in full. Knowing the autofills and recalls of today’s applications, starting from scratch seems tedious and time consuming.
Not to mention that because traditional software is so difficult to update with information, such as the annually revised tax code, for example, users would need to repurchase the software every year.
Software-as-a-service is different in that it doesn’t require customers to purchase software. Instead, users purchase access to software that’s available on the cloud.
What exactly is the cloud? It’s a “a vast network of remote servers around the globe which are hooked together and meant to operate as a single ecosystem,” according to Microsoft.
This type of infrastructure has changed the way software companies administer software, users access and use software, and multiplied the uses and ease of use of software products. For one, SaaS companies can focus on improving their product rather than dedicate energy to producing and marketing new versions. It limits distribution costs like packaging. It also does away with the hassle of administering licenses because the software can only be accessed by paying customers.
It has also changed payments from one-time to subscription-based. While subscription fees are much smaller from month-to-month than the one-time purchase fees previously were, the fees often add up to more than the cost of the software over the course of the year.
For companies, pivoting to SaaS has more perks. Because the functions of SaaS have become so familiar and house a user’s data, switching services is often a hassle despite the minimum software cost. This user data can also be leveraged by companies to test new features.
Why Invest in SaaS?
There have been many success stories in SaaS, from Salesforce to Shopify.
In 2015 at its IPO, Shopify was valued at $1.27 billion. As of spring 2020, it’s valued at $127 billion. Founded by Tobias Lütke and Scott Lake, Shopify started as an online store in 2004 to sell snowboards when they couldn’t find a platform that worked well for them. Now, its e-commerce platform is used by individual sellers and big companies like Google.
And, the industry is poised to keep growing, especially in the wake of COVID-19.
Consider the workforce shift to remote and the Zoom solution, connecting coworkers, families, and even loved ones in nursing homes. Another SaaS platform on the rise is Dynatrace, which provides software intelligence that streamlines user experience and improves business outcomes.
SaaS companies are solving problems from providing e-commerce solutions for businesses, business solutions that are making remote work scenarios work, to giving users access to platforms that help them do everything from monitoring their finances to staying fit to doing their taxes.
As the world adopts new post COVID-19 norms, these new solutions are likely to stay in one form or another.
How to Invest in SaaS
Naturally, in an industry as large and diverse as software, picking winners and losers can be challenging. However, for those investors interested in accessing the segment more broadly, there are a number of ETFs and mutual funds available to help streamline the process. A search on Magnifi suggests that there are many SaaS funds available to choose from.
Unlock a World of Investing with a Magnifi Account
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the June 17, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Immunotherapy
Immunotherapy isn’t entirely new, but it’s quickly becoming a major player in the world of cancer care and treatment.
For instance, the global market for immunotherapy drugs is estimated to register a 8.9% CAGR from 2018 to 2023, and Grand View Research is predicting that it will reach nearly $127 billion annually by 2026.
While that might sound enormous, it’s just numbers compared to the impact it has in a doctor’s office when immunotherapy treatment gives a newly diagnosed cancer patient hope.
From fighting cancer to developing a COVID-19 vaccine, immunotherapy is changing the face of medicine. They are also presenting a frontier of innovative solutions that are driving growth in pharmaceutical and biotech industries.
What Is Immunotherapy?
Our immune systems are smart. A “collection of organs, special cells, and substances” that keep tabs on what’s supposed to be happening in our bodies, and what’s not.
So, for example, if it notices a germ that contains unusual proteins that is out of place, it attacks.
But what happens when normal cells start to change in a subtle way, but nothing is really out of place… until the healthy cells start to become more unusual and grow in an uncontrolled way? This is cancer, defined as “a group of diseases characterized by the uncontrolled growth and spread of abnormal cells.” And, because it starts in healthy cells, it can be so tricky for the immune system to stop it before it’s too late.
Immunotherapy is changing that.
According to the American Cancer Society, “immunotherapy is treatment that uses certain parts of a person’s immune system to fight diseases.”
It does so in one of two ways: Either by “stimulating, or boosting, the natural defenses of your immune system so it works harder or smarter to find and attack cancer cells,” or by “making substances in a lab that are just like immune system components and using them to help restore or improve how your immune system works to find and attack cancer cells.”
In other words, it helps a patient’s immune system recognize cancer and attack.
Why Invest in immunotherapy?
In 2020, there will be an estimated 1.8 million new cancer cases diagnosed, according to the American Cancer Society. Immunotherapy is changing the course of treatment for many of those diagnoses, which treatments were traditionally limited to surgery, chemotherapy, and radiation.
New immunotherapy drugs are most commonly being used to fight cancers of the lung, breast, and prostate.
And, even more exciting, they are getting in the cancer game sooner than ever. Coined immuno-oncology (IO) drugs, this subset of immunotherapy drugs give a patient’s immune system the ability to fight cancer cells at an early stage. This can make other more traditional treatments, like surgery, more effective, or potentially unnecessary all together.
Immunotherapies are becoming increasingly more complex. For example, immunotherapies are increasingly being combined in creative ways to treat GI cancers. Even more, simple blood tests have shown to identify which patients may have the most success with immunotherapies.
But, immunotherapy isn’t limited to cancer alone. It’s also being used to fight allergies.
A preventative treatment, immunotherapy for allergies can train the body to slowly become less allergic to a specific substance. Typically, an allergen is given via an allergy shot in incrementally larger doses which causes the immune system to “become less sensitive” to the allergen. Over time, small incremental doses train and change the immune system, building up a tolerance for allergens. Treatments typically happen over the course of three to five years, according to the Mayo Clinic.
It could even give us answers for COVID-19.
The Infectious Disease Research Institute has reported positive results after a clinical trial focuses on the treatment of moderate to severe COVID-19 cases. And, because “cancer behaves like a virus,” the same immunotherapy tools being used to fight cancer are also being employed in the development of COVID-19 vaccines.
If personalized medicine is the care model of the future, immunotherapy, or using a patient’s immune system to battle disease, is as personal as it gets. It’s already delivering cures, and in the race for a COVID-19 vaccine, immunotherapy tools are giving a pandemic-stricken world hope.
How to Invest in Immunotherapy
Key players in the development of new immunotherapies include companies such as: Amgen, AstraZeneca, La Roche, Bayer AG, Bristol-Myers Squibb and many more from the pharmaceuticals space. But given the wide-ranging interest in immunotherapy drug development, it can be difficult for investors to access the whole world of these treatments by investing in individual companies.
However, a search on Magnifi suggests that there are a number of ETFs and mutual funds dedicated to immunotherapy.
Unlock a World of Investing with a Magnifi Account
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the August 12, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Direct Listing
Once uncharted territory, pursuing a direct listing is becoming less and less an anomaly. “An IPO is no longer a one-size-fits-all path to public,” according to the New York Stock Exchange.
A series of recent high-profile IPO failures of companies valued sky-high in the public eye have proven that a successful IPO isn’t guaranteed. Companies like Uber, Lyft, Endeavor, and Peloton all had highly anticipated IPOs that ended in failure. For example, on its first day of trading, Peloton’s stock plunged 11%. Uber’s shares dropped more than 7% on opening day in May 2019, continuing to slide. (Since then, it has recovered to nearly its introductory value.) At the eleventh hour (the day before it was scheduled), Endeavor decided not to go forward with its IPO. What was once the “only way” to go public is proving more and more not to be a foolproof step forward.
This series of public, lackluster performance seems to be a cautionary tale. And, while a direct public offering sounds fret with opportunities for things to go wrong, high-profile companies like Spotify and Slack are proving otherwise.
Here’s what you should know.
What Is a Direct Listing?
A direct listing or DPO (direct public offering) is a less conventional way to go public. What makes a direct listing so unusual? First, it allows companies to go public without raising capital, making it much different than an initial public offering (IPO).
In an initial public offering (IPO), companies establish an initial public stock price. By offering public ownership, IPOs are able to raise capital from public investors. To do so, a company will offer a certain amount of new and/or existing shares to investors.
Typically, stocks are sold by one or more banks that act as underwriters. These banks also help to market the company, including to institutional investors on a “roadshow” to the tune of millions of dollars. Institutional investors then filter the shares to the larger market, such as the NYSE, for example. In this somewhat exclusive process, only then do the shares become truly available to the public.
Following the IPO big debut, early investors are typically barred from selling their shares for 90 to 180 days, also known as a “lock-up period.” This has the potential to limit how much money those investors can make on the sale of their stock, which is determined by how the price of the stock fares in the public market.
A DPO skips the step of working with an investment bank to underwrite the issue of stock. Rather, “existing stakeholders basically sell their shares to new investors.” In other words, the company doesn’t have to go through the hoops of marketing the company or selling stock to raise cash before the stock goes public. This makes it faster and less expensive than a traditional IPO. It also equalizes the playing field because the stock is openly listed on the market, therefore accessible to everyone.
It should be stated that once a company is listed, even by way of DPO, the company then becomes subject to the “reporting and governance requirements applicable to publicly traded companies” as mandated by the Security Exchange Commission.
Why Are More and More Companies Choosing DPOs?
By using the less conventional DPO, companies can save a lot of cash— by skipping the IPO process, there is no need to pay banks huge underwriting fees.
But, even though there are major cost savings, DPOs are not ideal for every company. What happens if the stock for your little-known company arrives on public markets and no one knows what your company is?
The likelihood is, no one will buy it.
And, without the IPO process, there’s no initial price established by underwriters. For this reason, companies that pursue a DPO generally have better luck if they have “a lot of money and brand recognition.
Another major perk of a DPO is that there is no lock-up period. For early investors, including employees who may have accepted shares in the early days of a company to offset for a lower startup salary, the opportunity to sell shares right away when the stock might hold the most value is a huge perk.
To this point, because no new shares are created in advance of trading, the dilution of existing stock value is prevented.
DPOs are not without risk, however. For one, price volatility, even in the best of circumstances, can be enough to scare companies off. In a DPO, a reference price is typically established by “buy and sell orders collected by the applicable exchange from various broker-dealers.” However, without the support of underwriters who set an initial price, the stock becomes dependent on market conditions and demand.
Moreover, because the number of shares available on the market in a DPO is determined by the number of shares that employees and investors choose to list, there can be less control overall.
Consider Spotify, which successfully pursued a DPO. The stock hit the market at $165.90 in April 2018. On its introductory day, Spotify was ready with a reference price of $132. Even though it had plenty of brand recognition, there was worry that shares flooding the market without a price established by underwriters could lead to a steep fall.
On its first day on the market, it closed at $149. A little more than two years later, the stock is currently trading at $260.44.
Spotify is not alone in its DPO success, though. Slack had similar success after its direct listing in June 2019.
If an IPO seemed like the bar for startup success before, that’s no longer the case. Earlier this spring, Asana filed to go public via direct listing. Other companies that have been rumored to pursue a direct listing include DoorDash, Airbnb and GitLab. Needless to say, looking forward, it is quite possible (if not probable) that the DPO approach becomes a well-traveled path for companies aspiring to go public.
Investing in Direct Listings
For investors, there is functionally little difference between buying shares in an IPO vs. a direct listing. The difference comes in the source of those shares and the way they are priced at the start.
By converting insider ownership shares into publicly-listed stock, pricing on a direct listing can be volatile and a difficult way to access new companies. For investors looking to get into the IPO and DPO market without taking this risk, a search on Magnifi suggests that there are a number of different options in ETFs and mutual funds.
Unlock a World of Investing with a Magnifi Account
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the August 4, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.