Recent Automobile industry outperformance is largely from Tesla – highlighting the rise of the Electric Vehicles (EVs) trends.
While we recognize the large potential growth for EV, we initially saw some signs of euphoria. Despite many EV businesses remaining small and unprofitable, small start-up companies’ share prices skyrocketed.
We believe the market is currently in the later stages of a bull market because the March 2020 drawdown functionally behaved more like a large correction than a traditional bear market. Consequently, we currently prefer less exposure to automakers, preferring to focus exposure to industries with higher gross margins, less competition and higher-quality earnings growth.