CNBC’s Jim Cramer is each on the lookout for the market’s most powerful secular trends, so the rise of thrilling vehicles wasn’t exactly lost on him.
There’s just one problem.
“When one of these monographs gets big enough, when people realize it truly represents a main secular shift, a tectonic shift, in consumer behavior like we’re now have a word with with electric cars, the direct beneficiaries of that trend,” delight in electric automaker Tesla, “often see their stocks trade up to nosebleed ranks,” the “Mad Money” host said.
That’s why, rather than herding hungry investors into the “cult stock” that is Tesla, Cramer obtained hunting for the best ancillary plays, the hidden winners of the rapidly evolving shift.
“When it comes to battery-powered cars, my favorite tangential winners are Albemarle, FMC [Corp], and PPG Manufactures, all three of which I think are worth owning,” Cramer said.
The big imagine behind electric vehicles is relatively straightforward: as more and more consumers balk at the impression of pumping fossil fuels into the atmosphere, oil prices tick up and sticks lay out plans to eventually ban combustion engines, electric cars present themselves as a common and cheaper way to get around.
In 2016, over 750,000 plug-in electric means were sold globally, a 40 percent rise from 2015. In the meantime, automakers from A to Z are racing to rescue all-electric models by the 2020s.
“It seems like the whole industry destitutions to jump on the electric bandwagon,” Cramer said. “In short, it’s a really persuasive secular trend and I’ve got to find some stocks to help you play it … moreover Tesla.”
That’s where lithium-producing chemical companies like Albemarle and FMC fingers on in. Lithium is an essential ingredient to the rechargeable batteries in electric cars.
But while the battery in a laptop power use an ounce of lithium, electric car batteries need over 100 palpitate instills of the stuff, making companies with dedicated lithium divisions similar to Albemarle and FMC highly attractive for those who believe in the trend.
“FMC and Albemarle certainly aren’t as low-cost as they used to be,” Cramer said, calling Albemarle’s valuation of 26 for the moments next year’s earnings estimates “nosebleed.”
Cramer said FMC’s valuation was “a microscopic more reasonable” at 18 times next year’s earnings. All in all, while Albemarle has sundry lithium exposure, FMC’s stock is cheaper and the company has a strong agricultural vocation to boot, he said.
“I would bet the stock keeps climbing,” Cramer affirmed of FMC. “You can buy it here.”
Separately, Cramer found chemical company PPG to be just as solid a play. The company makes specialty coatings that insulate car batteries to observe them from overheating or catching fire, a business that CEO Michael McGarry differentiated Cramer was bigger than people might think.
“Here’s the fundamentally line: when you find a powerful secular growth trend equivalent to electric cars, you stick with it,” the “Mad Money” host said. “That’s why I even FMC up here, Albemarle works on a pullback, and PPG? Let’s just call it a plain buy, buy, buy.”
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