Automation and the Stock Market


Absolutely any science fiction visualization of "the future" involves cars, airplanes, and space ships capable of driving themselves while humans relax on easy street.  While the meals in pill form seem to be taking much longer than anticipated, the automation of the transportation industry presents a fantastic game-changer for not just the United States, where 3 million drivers will need to find a new career, but the human race writ large.  Google cars haven't hit the market yet (though they've hit the roads, racking up over a million self-driven miles) and likely won't do so for the next 2 to 3 years.  It doesn't take much in-depth analysis to conclude that Google and its sister companies will benefit the most from this automation, in addition to all of us who won't have to fight rush-hour traffic, but what other companies will see their value shoot through the roof once we can direct a driverless car where we need to be?

Time To Buy Today

Without a doubt the best value stock for automated cars today is MobilEye (MBLY on the NYSE, trading for $56.31 a share), one of the world's leading manufacturers of motion cameras.  Since a robot, just like a human, can only drive a car when there's a clear picture of the road about it, the progress of automated cars depends on the progress of image capturing and real-time data feeds.  MobilEye has two feet out of the starting gate thanks to its lucrative contracts with existing auto manufacturers, including GM, Ford, Volvo, BMW, and Hyundai, which makes them the camera equivalent of a Bridgestone or Goodyear.  The imperative to buy today, furthermore, is the fact that the company's stock has tumbled within just the past week, losing about 10% value in the dying days of August, after shooting up almost unchecked in the six months prior.  MobilEye stock leaped by no less than 80% between March and July, indicating a fantastic growth rate for a young company with all the cards up its sleeve that it needs to survive and thrive.  The temporary downturn is just that; temporary.  Snatch up this stock for both good value and good growth, counting yourself lucky to get in on the equivalent of Apple stock in 1998.  There's a few other contenders for this crown, but none have such a sweet asking price: General Dynamics (GD on the NYSE, trading for $143.59 a share) has a far higher price and is riding a momentum wave as high as it can go.

Time To Buy Soon

A standard car purchased from a standard show lot contains a bevy of safety features to protect driver and passengers.  What safety features, however, need to be implemented in a self-driving car?  It's a question without any real answers since the technology remains very much in the drawing-board state.  Delphi Automotive (DLPH on the NYSE, trading for $75.27 a share) has been working to come up with a solution for each such issue by manufacturing high-tech safety systems that allow vehicles to communicate with one another to maintain safe distances and speeds on a robot-populated highway.  Delphi doesn't have as many contracts with major auto manufacturers as MobilEye, but the ones they do are plenty green.  Audi uses their safety protocols for their in-design fleet of automated vehicles, for instance, while GM decided to buy Delphi's component and steering divisions part and parcel in 2009 for a price tag of three and a half billion dollars.  Delphi isn't a buy-today stock, however, because the company's reorganization has sent their value down in the past two months: odds are good it'll drop further within the next 12 weeks.  Keep it on the short-term horizon and buy aggressively if Delphi stock drops below $60 a share to hit a 52-week low.  With a 5-year projected growth rate of over 15%, Delphi is a slow and steady stock for a portfolio that could grow much faster than anticipated if lightning strikes.

Time To Buy...Eventually

When a company offers nothing but car rides, they can rake in a lot of money by cutting out the middleman and replacing them with unpaid middle-robots.  Uber has yet to go public with their company, preferring (for the moment) to ride out a wave of rapid expansion and look for the possibility of a fantastically lucrative buy-out package for its development executives.  There's no doubt that Uber would be worth more on the open market today than almost any other independent company (look no further than Snapchat, an app worth much less, that rejected a $4 billion offer from Google) and the instant that they decide to go public, their stock represents a fantastic buy.  Since they may not go public for years, however, it's something of an academic point.  The same is true by and large of Lyft, a competitor to Uber that hasn't gotten as much press as their big sibling rival.  Keep a close eye on the horizon for both lucrative buyouts or IPOs of transportation apps.

  • The Takeaway: anyone who doesn't keep Google stock in their portfolio doesn't deserve a nest egg, but Google won't be the sole breadwinner when automated vehicles leave the test pavement and hit the roads.  In fact, given the small stature of some companies like MobilEye, they won't even be the fastest growers in the new market.  Buy stock in Mobileye as soon as humanly possible to get the best possible value on the investment, since their stock price will gain incredible traction, and consider investing in similar robotics companies that have made developed contracts with automakers.
  • Some stocks will perform slower but have ample room to grow.  Delphi won't shoot up overnight but provides an excellent revenue stream for a portfolio in search of stability or low volatility.  Consider Delphi stock in a mutual fund like the American Beacon Mid Cap, currently enjoying a solid 1.65% growth on a very poor mutual fund market.

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