As climate change becomes a major concern, governments across the globe are accelerating a shift in their economies toward carbon-neutral energy sources. Many countries have already set stringent carbon-emission norms, increasing the demand for electric vehicles (EVs). Incentives and subsidies offered by the governments for buying EVs are also adding to the demand. Moreover, people are gradually shifting to EVs for better efficiency and lower recurring costs.
While the pandemic-induced lockdown brought economic activities to a stand-still, it is expected that sale of plug-in electric light vehicles (PEV) will grow 6% to 2.3 million units in 2020. The electric vehicle battery market is expected to grow to almost 94 billion US dollars worldwide by 2026.
The electric vehicle momentum is likely to continue as Joe Biden enters the White House, as the President-elect has ambitious plans to achieve net-zero carbon emissions by 2050. Here are three ETFs well-positioned to significantly gain amid the EV revolution: Global X Lithium & Battery Tech ETF (LIT), Global X Autonomous & Electric Vehicles ETF (DRIV) and SPDR S&P Kensho Smart Mobility ETF (HAIL).
Global X Lithium & Battery Tech ETF (LIT)
Lithium is used in the battery cells that power EVs. LIT, managed by Global X Management Company LLC, focuses on stocks of companies operating across materials, metals and mining, diversified metals and mining, diversified metal ores sectors. The Fund tracks the performance of the Solactive Global Lithium Index, by using full replication technique. The index measures broad-based equity market performance of global companies involved in the lithium industry. LIT invests at least 80% of its total assets in the securities of the index. The top 3 holdings of the ETF are Albemarle Corp (ALB), BYD Co Ltd Class H, and Ganfeng Lithium Co Ltd with weights of 12.2%, 5.4% and 5.3%, respectively.
LIT has $1.77 billion in assets under management (AUM) and an expense ratio of 0.75% compared to the category average of 0.52%. The fund pays an annual dividend of $0.44, yielding 0.81% at its current price.
The ETF has gained 118.4% year-to-date and 87.4% over the past six months.
How does LIT stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Overall POWR Rating.
It is ranked #2 out of 110 ETFs in the Commodity ETFs group.
Global X Autonomous & Electric Vehicles ETF (DRIV)
DRIV invests in public equity markets of global developed regions. It seeks to provide exposure to companies that develop electric vehicles and autonomous vehicles, the required vehicle components and materials including companies that produce autonomous driving technology and network connected services for transportation. The fund is non-diversified and tracks the performance of the Solactive Autonomous & Electric Vehicles Index, by using full replication technique. It invests at least 80% of its total assets in the securities of the index. The top 3 holdings of the ETF are Tesla Inc. (TSLA), Qualcomm Inc. (QCOM) and NIO Inc. (NIO) with weights of 4.02%, 3.05%, and 2.95%, respectively.
DRIV has an AUM of $206.1 million and an expense ratio of 0.68% compared to the category average of 0.76%. The fund pays an annual dividend of $0.12, yielding 0.51% at its current price. The ETF has an MSCI ESG Fund Rating of BBB. The ETF has gained 59.7% year-to-date and 61.7% over the past six months.
DRIV is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade, and Industry Rank. It is ranked #47 of 98 ETFs in the Technology Equities ETFs group.
SPDR S&P Kensho Smart Mobility ETF (HAIL)
HAIL is managed by SSGA Funds Management, Inc. and seeks to provide exposure in stocks of companies operating across industrials, transportation sectors. The fund is non-diversified and investment results generally correspond to the total return performance of the S&P Kensho Smart Transportation Index, which it tracks using representative sampling technique. Under normal market conditions, the fund generally invests substantially all, but at least 80%, of its total assets in the securities whose products and services are the forefront of smart transportation innovation. The top 3 holdings of the ETF are NIO (NIO), Plug Power Inc. (PLUG), and Workhorse Group Inc. (WKHS) with weights of 12%, 7%, and 4.4%, respectively.
HAIL has an AUM of $99.2 million and an expense ratio of 0.45% compared to the category average of 0.76%. The fund pays $0.45 in dividends annually, yielding 0.96% at its current price. The ETF has an MSCI ESG Fund Rating of BBB. HAIL has gained 84% year-to-date and 79.8% over the past six months.
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LIT shares were trading at $59.24 per share on Thursday afternoon, down $0.48 (-0.80%). Year-to-date, LIT has gained 117.80%, versus a 16.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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