With today's action we have officially entered the two market phase: the real market filled with actual companies doing their business trying to hit their numbers, and the dream market, with early stage companies trying to become, yes, a part of the alternate fuel chain.
It's an unnerving phase because the real market's been ravaged by Covid, buoyed by the vaccine, run ragged by unemployment, and boosted by the stimulus package. They struggle to see their stocks advance because the rally from the March bottom is pretty insane to begin with. We've seen incredible gains, with one sector after another shining, but the market, after a spurt of gains among the financials, seems to have run out of things to buy. Tech, aerospace, industrials, banks, retail, even oil and gas have all had their day in the sun.
But then there's another market, one that's become about as inflated and overheated as they come, the market for all alternatives to fossil fuels that can propel automobiles and trucks. Consider Plug Power (PLUG) , a hydrogen-based company with a stock that's gone up 1000% this year and is now worth $15 billion. Or its cousin, Ballard Power (BLDP) , another hydrogen-based power solutions company, which has rallied 200% and is worth $6 billion. Or one more, Bloom Energy (BE) , same deal, a little more speculative with a stock that's zoomed almost 300% to just shy of $5 billion.
Then there are the self-drivers and the electrics. Think Luminar Technologies (LAZR) , autonomous vehicle parts, with a stock that almost overnight rallied 258% to almost $12 billion. Or Velodyne Lidar (VLDR) , solid state sensors for autonomous driving among other uses, with a quick 163% jaunt to $4.5 billion. Or MP Materials (MP) , a rare earth mineral company with an American hammerlock on magnets that you need to have in an electric engine. It's up fourfold to almost $6 billion in less than two months' time. Hammerlock.
You might like Blink Charging Co. (BLNK) , a charging station business, that has seen its stock go 2300% this year. How's your index fund doing? And then there's the mac daddy of the group, QuantumScape (QS) , the lighter, faster, better electric battery that's better than Tesla's (TSLA) , so they say, which has moved from $9 to $120 in seven months, to an astronomical $45 billion.
I apologize in advance if I didn't mention yours, including many SPACs that are almost at the cusp of becoming QuantumScapes but you only have so much room to go into the myriad companies in this, the dream portion of the market.
What's driving these moves?
Three things.
First, many of these companies have novel methodologies that have been too expensive for a long time but because of engineering marvels, lower power costs, and the embracing by much bigger companies, to get economies of scale, they have been able to become real businesses.
Second, the country has a new president that embraces alternative energy - the solar stocks are hot too - and you have to believe that if there is any money left in this blown budget, it will go to alternatives to fossil fuels.
Third, Tesla. The wonderment that is Tesla, the ultimate dream come true company with a stock that has soared with it. I look at Tesla as a tech company that makes electric vehicles and solar energy and is now worth $600 billion. Others just look at it as an overvalued car company. It doesn't matter. The success of Tesla has allowed companies as diverse as Fisker (FSR) , the asset light auto with a stock that's up a mere 50% to $4.2 billion, or Lordstown (RIDE) , think EV, with a stock that's up 100% and a company worth $3.3 billion, or the controversial Nikola (NKLA) , only up 61% to $16 or $6 billion but did trade as high as $80, or the battery power vehicle maker Workhorse (WKHS) , which has seen its stock soar 656% to $2.7 billion. Oh, let's throw in that Chinese juggernaut, NIO (NIO) , with a stock that has gone up 1000% to $74 billion. Six in June, forty-seven now, sorry if you missed it. Maybe the $35 billion XPeng (XPEV), a Chinese electric vehicle stock, that's gone from $19 two months ago to $45 with a pitstop at $72.
All of these dream stocks have enough of a connection to Tesla that their valuations mean little to the buyers, even QuantumScape, which rallied 28% just today. Only Tesla makes any real money. But that's okay, it didn't make money for years before it just crushed the numbers as easily as Al Capone crushed the miscreant mobster with a baseball bat in that poignant seminal meeting captured so well in the aforementioned movie.
What happens, though, when the dream portion of the market collides with the real stock market, specifically with a company not with a fairy tale theme but a company with real earnings, and real revenues, and the best products in the world. What happens when the dreams collide with Apple (AAPL) , which is the subject of an article by Reuters speculating that Apple's going into the EV car business. You get a move like we saw today, a 3% run to the largest stock in the market, taking the tech company's valuation to $2.2 trillion.
Apple's as tight-lipped as ever, telling me specifically no comment. Apple doesn't show its hand until you want to own whatever it is they are working on. When you spend $18 billion in research and development, though, it's most likely on the drawing board along with a host of other ideas. It makes sense. Apple likes to disrupt big markets and there are none bigger than the worldwide auto market. I would have total faith that they would have an amazing engine, one that would have the best battery technology, or one that could give the current Tesla a run for its money.
So, do you buy it on this?
Unlike, literally, all of the companies I have mentioned you can actually buy this stock because it's products, including the iPhone 12, are in amazing demand. I have long believed that we need to view each iPhone buyer as a satisfied customer, so satisfied that you should be able to get a lifetime value of everyone who buys one. That way you would get the company to finally hit the value it deserves, which I think is well above here. Should it be valued like Tesla? I can't even comprehend what that would put the stock at. Suffice it to say though, that the lifetime value of a customer includes the incredible service revenue stream which is so sticky that you can't even compare it to any other consumer business.
There's only one problem with my analysis. I have been calling for that lifetime value number for ages, to the point where I am annoying to management so I will go away, for now. But what's clear just from today is that even with Apple's no comment, this stock flies on alternative auto lack of news. Who knows where it would go if there were some.
Now what would I do if I owned a dream stocks. I don't want to wake you up. Every sale of stock, with the exception of Nikola, has been pretty much wrong. I don't like to be wrong. I do like to be wealthy and if you are wealthy because of Tesla & company then remember you only need to get rich once.
I would point out that the managements of every single one of these companies should furiously be offering stock, billions and billions of dollars of it, so they can get to where they have to go. They would be nuts otherwise.
Apple?
Novel approach: you have still one more reason to own it, don't trade it. And if tomorrow people forget about the electric car and sell it off, you'll get your chance.
(Apple is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now.)
