Autonomous electric vehicles? The fight against COVID-19? Heightened volatility? We discuss these various topics in our second edition of Talking Shop.
Your phone buzzes. You look down and see an Uber Eats notification that your food has arrived. You walk outside and see a Hyundai IONIQ 5 in your driveway with no one inside, but your dinner carefully placed in the back. After you open the door and retrieve your meal, the car backs itself out of the driveway and takes off for its next delivery. This sounds like a scene from The Jetsons, but for the citizens of Santa Clara, CA this will be their reality in just a few months. Motional – a joint venture between Aptiv (CEA Holding: APTV) and Hyundai – last week announced an agreement with Uber to utilize Motional’s autonomous electric vehicles for deliveries starting in early 2022. This news follows Motional’s announcement of their formal launch of an autonomous taxi service which will debut in Las Vegas in 2023, in partnership with Lyft. These developments are very positive for Aptiv, as they are a key supplier to the autonomous driving market – a market that some estimate will be over $100B by the end of the decade.
Last week, confirmed COVID-19 cases in the United States surpassed a grim milestone: 50 million. While Pfizer, Moderna, and J&J have gotten much of the attention for their roles in administering 8.5B vaccine doses globally, the number of companies that have rapidly innovated and helped to lead the fight against COVID is much greater than you may know. Within our portfolio, Danaher (CEA Holding: DHR) sells equipment and biological materials used to create the vaccines and is also a leading provider of diagnostic COVID-19 tests. Entegris (CEA Holding: ENTG) sells highly purified storage devices for finished and unfinished vaccines, while Catalent (CEA Holding: CTLT) is a major outsourced manufacturer of the actual vaccine. While these companies are experiencing a COVID-related tailwind to their businesses, the efforts that produced these vaccines have served as a catalyst to propel investment towards new therapies and medicines. Because of their research and development, these companies will benefit from this trend long beyond the COVID pandemic.
If you follow your portfolio daily, you may have noticed that the markets have been rather choppy lately. Volatility is back. The market volatility index (VIX), otherwise known as “The Fear Index”, thus far in December is at its highest daily average since January of 2021 and well above its 5-year daily average. Markets are grappling with uncertainty around tax and spending legislation, historic levels of inflation, and heightened COVID-19 restrictions on businesses in many parts of the world. It may sound counterintuitive, but as active long-term investors, we welcome volatility. A well-rehearsed quote from a certain world-renowned investor in Omaha, Nebraska is to “be greedy when others are fearful.” While the largest companies in the index continue to prop up the markets, the average stock is now off 29% from its 52-week high. Moments like these often create opportunities to buy excellent businesses at attractive prices. Volatility is a patient, long-term investor’s best friend.
The Sandhill Research Team
Disclosure: This has been prepared for informational purposes only and does not constitute, either explicitly or implicitly, any provision of services or products by Sandhill Investment Management. Sandhill Investment Management (“Sandhill”) is a registered investment advisor with the Securities and Exchange Commission that is not affiliated with any parent company. Third-party information in this report has been obtained from sources believed to be accurate; however, Sandhill makes no guarantee as to the accuracy or completeness of the information. All statements made regarding companies, securities or other financial information contained in the content are strictly the beliefs and opinions of Sandhill and are not endorsements of any company or security or recommendations to buy or sell any security. Holdings discussed are part of our Concentrated Equity Alpha (“CEA”) investment strategy. For a full list of CEA strategy recommendations for the preceding year, please email your request to email@example.com.
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