The GARP acronym stands for growth at a reasonable price. 

It was made famous by investor Peter Lynch.

The strategy seeks to combine the best facets of growth and value investing approaches to select individual stock investments.

In the words of Global X, the fund provides access to global companies with:

• Strong earnings growth
• Solid financial strength
• Reasonable valuations

Inside GARP's December 2025 Rebalance

In a fresh report out of the ETF provider yesterday, it highlighted the changes made to the fund.

These changes went into effect in December.

Marc Jocum, Senior Product and Investment Strategist said the latest rebalance resulted in a measured refresh rather than a wholesale shift. 

While some individual holdings changed, the portfolio's core identity remains intact.

It is tilted toward high-quality global companies with improving earnings momentum, resilient fundamentals, and reasonable valuations.

Periods of market noise often tempt investors to chase momentum or retreat to defensives. However, the most durable outcomes tend to come from discipline – owning companies that can consistently grow earnings, maintain balance sheet strength, and trade at a fair price.

What's in?

According to the report, the December 2025 rebalance saw the addition of companies where earnings are improving, but valuations are yet to fully re-rate.

The first inclusion was Rolls-Royce Plc (LSE: RR.). 

Global X said this was due to expanding earnings margins, driven by higher engine flying hours, improved pricing, a greater mix of recurring services revenue, and disciplined cost control.

The company is also emerging as a beneficiary of the AI-driven power generation theme. 

Another inclusion to the fund was Walt Disney (NYSE: DIS) due to improved earnings momentum across its diversified entertainment ecosystem.

Additionally, SoftBank (OTC: SFBQ.F) – a global technology investment conglomerate was added. This was thanks to its unique leverage to the AI megatrend. 

What's out?

The GARP ETF also saw key stock removals from the fund. 

Global X said several high-quality franchises were removed not because their businesses are broken, but because growth has slowed, balance sheet risks have risen, or valuations are no longer warranted.

• Visa (NYSE: V) was exited as earnings growth moderated, balance sheet leverage increased, all amidst regulatory and competitive pressures intensified.
• Costco Wholesale (NASDAQ: COST), despite its exceptional business model, faced slowing revenue momentum and emerging margin headwinds, challenging to reconcile with a premium valuation.
• General Motors (NYSE: GM) screened as optically cheap, but weakening margins and falling returns on equity, perhaps due to uncertainty around EV strategy, meant GM no longer fit a GARP framework.

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To say the least.

ASX lithium stocks, large and small, have taken a beating amid a massive fall in global lithium prices.

While relatively stable over the past month, the lithium price is down more than 80% since the November 2022 highs, with prices down some 50% over the past six months alone.

With that headwind in mind, here's how these four ASX 200 lithium shares have performed over the past six months:

• Pilbara Minerals Ltd (ASX: PLS) shares are down 26%
• Core Lithium Ltd (ASX: CXO) shares are down 70%
• IGO Ltd (ASX: IGO) shares are down 43%
• Liontown Resources Ltd (ASX: LTR) shares are down 62%

For some context, the ASX 200 has gained 2.7% over this same period.

Those certainly aren't the kinds of results investors want to see.

But the pain for ASX 200 lithium shares may not be over quite yet.

More headwinds ahead for ASX 200 lithium shares?

Much of the pressure on global lithium prices over the past year has come as exploration and mining activity for the battery-critical metal have ramped up. This has seen supplies increase faster than demand growth.

To be clear there's still plenty of growth ahead for the EV industry, and for those ASX 200 lithium shares that can weather the current pullback.

However, in another potential headwind for lithium producers and explorers alike, the growth rate in global EV markets is slowing markedly.

China ends subsidies

China, the world's biggest consumer of lithium, recently ended EV subsidies and other incentives for the industry.

And that looks to already be having a marked impact on the growth outlook for EV sales, potentially impacting the demand for lithium from ASX 200 lithium shares.

According to the China Passenger Car Association (courtesy of Bloomberg), China's EV and plug-in hybrid vehicle deliveries to dealers is forecast in increase to 11 million in 2024. While that's still 25% higher than last year, it represents a slowdown from 36% in 2023 and a whopping 96% in 2022.

But it's not just China's slowing growth figures that could hit ASX 200 lithium shares in 2024.

Supply and demand

"Global EV momentum is stalling. The market is over-supplied versus demand," Morgan Stanley analyst Adam Jonas said (quoted by Reuters).

In the United States, the world's biggest economy, General Motors Co (NYSE:GM) is prepared to adjust its EV goals and potentially boost its planned manufacturing of internal combustion engine (ICE) vehicles.

"It's true, the pace of EV growth has slowed, which has created some uncertainty. We will build to demand," GM CEO Mary Barra said.

GM CFO Paul Jacobson added, "We know the EV market is not going to grow linearly. We are prepared to flex between ICE and EV production."

Tim Piechowski, portfolio manager at ACR Alpine Capital Research, said (quoted by Reuters):

There's no doubt that the limitations – EV charging and the lack of battery resiliency at low temperatures – are causing consumer anxiety.

The reality is that the adoption curve will be slower and there will be pushback to regulators about fuel economy. It'll just be a longer ramp than perhaps was initially anticipated.

It's with that longer ramp in mind that we've recently seen a number of ASX 200 lithium shares reduce their expansion plans. Or, in the case of Core Lithium, even temporarily halt mining operations to conserve cash.

Of course, it is still a growing industry. Just not quite as fast as many investors had been hoping.

The post Uh oh! Does this spell more bad news for ASX 200 lithium shares? appeared first on The Motley Fool Australia.

At one stage today, the ASX materials share was up as much as 23% to 74 cents.

In early afternoon trade, it has pulled back a touch but remains up 10% to 66 cents.

Why is this ASX materials share rocketing?

Investors have been fighting to get hold of this ASX materials share on Monday after it announced a deal with auto giant General Motors Co. (NYSE: GM).

According to the release, Element 25 will supply up to 32,500 metric tonnes of manganese sulphate to General Motors annually. This will support the automaker's annual production of more than 1 million electric vehicles (EVs) in North America.

As part of the deal, General Motors will provide Element 25 with a US$85 million loan to partially fund the construction of a new manganese sulphate production facility in Louisiana, United States.

In total, the ASX materials share expects to invest approximately US$290 million to build the 230,000-square-foot facility. Site preparation is planned to begin in the third quarter of 2023, before opening in 2025.

The company highlights that the facility will produce manganese sulphate by processing manganese concentrate from the Butcherbird Manganese Project in Western Australia. It is expected to be the first facility of its kind in the United States.

Element 25's managing director, Justin Brown, said:

E25 aims to be a leading source of high quality, vertically integrated, traceable and ESG-compliant battery material to the global electric vehicle industry and GM's support does more than accelerate our strategy for HPMSM production in the United States. Together, we are creating a resilient and sustainable North American supply chain that will help introduce millions of customers to the performance and environmental benefits of EVs.

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The sensational rally resulted in shareholders of the electric vehicle company enjoying a 40% gain in the space of a fortnight, as shown below. However, the green streak came to an end overnight, with enthusiasm momentarily depleted, allowing shares to settle 0.7% lower at US$256.79 apiece.

The rapid ascension has no doubt left some onlookers wondering what could be behind such an energised reception. So, let's pause for thought and reflect on the recent driving force behind the Tesla share price and where to next.

Why has this EV maker been charging upwards?

Firstly, there could be a whole host of reasons — both at a macro and company level — that have propelled Tesla shares higher. However, the most pertinent developments of late likely relate to its EV charging network.

In the past two weeks, both Ford Motor Co (NYSE: F) and General Motors Co (NYSE: GM) have announced that they will adopt Tesla's North American Charging Standard (NACS) across Canada and the United States moving forward.

Essentially, the hope is it will remove a barrier for would-be Ford and GM buyers that might have been concerned over a limited number of charging stations. As part of the agreement, a network of more than 12,000 Tesla Superchargers will become available to GM and Ford EV owners.

At the time of writing, Stelanntis — another automotive company — is rumoured to be 'evaluating' the adoption of NACS as well.

What could be next for the Tesla share price?

Looking ahead, the question on everyone's mind is where to next for the Tesla share price. In the view of KGI Securities analyst Jennifer Liang, the next 12 months could see the EV company reach US$335 per share.

Updating her target price last week, Liang cited Tesla's investments in manufacturing and battery technology as positive forward drivers. Additionally, the analyst believes the Inflation Reduction Act will provide a boost to sales while also collecting billions in credits for battery production.

In contrast, recent research published by Morgan Stanley's Adam Jonas reads less bullish. Jonas wrote:

Tesla is in the midst of an industry-wide EV price competition with potentially falling margins and EV market deceleration (still growth — but at a slower rate). If the company wasn't benefitting from significant government incentives (IRA) and price cuts (30% on Model Y YTD), we question how much cash flow Tesla's would be generating.

Following on, Jonas still thinks Tesla is underappreciated by the market in some regards. As such, Mogan Stanley holds a $200 price target on the company but with an overweight rating.

The Tesla share price is up 137.5% so far this year — exceeding the 31.2% YTD return notched up by the Nasdaq Composite Index (NASDAQ: .IXIC).

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Analysts at ANZ Group Holdings Ltd (ASX: ANZ) are tipping the US Fed to raise rates at a meeting later this week.

The S&P 500 Index (SP: .INX) slid 1.3% overnight, the Dow Jones Industrial Average (DJX: .DJI)slipped 0.77% and the Nasdaq Composite Index (NASDAQ: .IXIC) slipped 1.96% on Monday, US time.

What's ahead?

ANZ highlighted it is a "big week for both central banks and US equities" in a research report released this morning.

Among the US stocks due to report earnings are Apple Inc (NASDAQ: AAPL), Meta Platforms Inc (NASDAQ: META), Caterpillar Inc (NYSE: CAT), McDonald's Corp (NYSE: MCD), General Motors Company (NYSE: GM), United Parcel Service Inc (NYSE: UPS) and Alphabet Inc Class A (NASDAQ: GOOGL).

ANZ senior economist Felicity Emmett said these earnings announcements will provide a "micro overview of the macro economy". She added:

Investors bought into the 'soft landing' view in early 2023, despite the prospect of what could still be a bumpy ride for activity as the lagged effects of last year's interest rates front-loading and still-high inflation bite. 

Meanwhile, the United States Federal Open Market Committee (FOMC) is due to announce an interest rate decision on Thursday morning, Sydney time. ANZ is forecasting a 0.25% rate rise.

Commenting on this outlook, ANZ's Emmett said:

We expect a 25bp rate rise and anticipate that the Fed will caution against an early pause in the tightening cycle and certainly give the notion of cuts no rein.

Risk appetite could be vulnerable to a correction.

US stock market snapshot

Meta shares fell 3% on Monday and have shed 53% in the last year.

Apple Inc (NASDAQ: AAPL) shares lost 2% on Monday and have slid 18% in the last year.

Alphabet shares slid 2.74% on Monday and have tumbled 28% in the past year.

McDonalds shares dropped 0.58% on Monday but have climbed 4.41% in the last 52 weeks.

General Motors shares shed 4.37% on Monday and have slumped 31% in the last year.

Caterpillar shares fell 1.11% on Monday but have soared 29.74% in the past year.

The United Parcel Service share price lost 2.81% on Monday and has slid 12.48% in the last year.

Meanwhile, the S&P 500 Index has shed 11% in the last year, while the Dow Jones has lost 4% in a year and the Nasdaq Composite has shed nearly 20% in the past 12 months.

The post What to watch on the US stock market this week: ANZ appeared first on The Motley Fool Australia.

What happened

Shares of Tesla (NASDAQ: TSLA) were up as high as 4.8% this morning before cooling off by the afternoon. By market close, the stock had still managed to hold a 0.38% gain on the day, slightly trailing the broader market. Year to date, the stock has fallen 37%.

Wolfe Research released its findings on the potential impact of the electric vehicle incentives included in the Inflation Reduction Act. Plus, Tesla is looking to add almost 7,000 jobs, despite weakening auto sales across the industry year to date.

So what

Wolfe Research analyst Rod Lache said that the Inflation Reduction Act (IRA) could benefit the larger EV makers such as Tesla. A week ago, Goldman Sachs labeled Tesla and General Motors as its favorite picks in the auto space due to the catalysts with the IRA.

It's also a positive indicator for Tesla's near-term demand that it is looking to hire thousands of employees. The job listings reportedly represent a 50% jump from June. Most of the job openings are spread across its factories in the U.S., with over 200 openings listed for its China factory in Shanghai.

Now what

Tesla said that it delivered over 343,000 vehicles in the third quarter, which missed estimates and sent the stock down at the start of October. Investors initially saw the delivery miss as a sign that Tesla's demand was plunging with the rest of the industry.  But it noted that there were cars still in transit at the end of September that skewed the delivery total downward.

Investors will get more clarity on demand when Tesla reports third-quarter results on Wednesday 19 October.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Tesla stock was surging at the market open today appeared first on The Motley Fool Australia.

General Motors will fork out up to $108 million for an equity stake in the battery metals-focused mineral developer.

The pair have also outlined a long-term offtake agreement. That will see the US-listed company snapping up all uncommitted nickel and cobalt sulphate produced at Queensland Pacific's TECH Project.

The Queensland Pacific Metals share price is surging on the news, gaining 18% to trade at 17.7 cents.

Let's take a closer look at the news driving the All Ordinaries Index (ASX: XAO) share higher today.

Queensland Pacific Metals rockets on General Motors deal

The Queensland Pacific Metals share price is surging on news the company has agreed to supply General Motors with battery-making materials.

General Motors expects to use the materials to produce Ultium battery cells for its electric vehicles.

The partnership will kick off with General Motors investing $31.4 million in the All Ords company.

That will see the car manufacturer buying 174.6 million shares for 18 cents apiece. It will also receive 46.8 million options with a 20-cent exercise price.

The cash will go towards the construction of the TECH Project, expected to kick off next year.

In return, the pair will commit to a 15-year offtake agreement for the first phase of the project. That will see General Motors snapping up around 6,000 tonnes of nickel and around 800 tonnes of cobalt per annum.

That will increase to around 16,000 tonnes and 1,800 tonnes respectively when Queensland Pacific Metals' other commitments are met.

General Motors has also agreed to participate in a capital raise conducted as part of the TECH Project's final investment decision (FID). That will see the automotive giant with offtake rights for the life of the project.

After that, the pair could commit to an additional yearly supply of around 16,000 tonnes of nickel and 1,800 tonnes of cobalt from the project's second phase expansion.

What did management say?

Queensland Pacific Metals managing director Dr Stephen Grocott said the company's "absolutely delighted" with the news driving its share price. He continued:

GM's strategic direction, company values and focus on sustainability in its pursuit of making electric vehicles for all is a perfect fit for Queensland Pacific Metals and our TECH Project.

GM's investment in our company and the associated offtake brings us one step closer towards construction of the TECH Project where we will one day aim to deliver the world's cleanest produced nickel and cobalt.

General Motors vice president of global purchasing and supply chain Jeff Morrison also commented:

The collaboration with Queensland Pacific Metals will provide GM with a secure, cost-competitive and long-term supply of nickel and cobalt from a free-trade agreement partner to help support our fast-growing EV production needs.

GM already has binding agreements securing all battery raw material supporting our goal of 1 million units of annual capacity in North America by the end of 2025.

This new collaboration builds on those commitments as we look to secure supply through the end of the decade, while also helping continue to expand the EV market.

Queensland Pacific Metals share price snapshot

Despite today's performance, the Queensland Pacific Metals share price has had a rough year so far.

Today's gains included, the stock has fallen nearly 3% so far this year. It has also dumped 30% since this time last year.

For comparison, the All Ordinaries has slumped around 14% year to date and 10% over the last 12 months.

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tIn the first quarter of the year, Warren Buffett and his company Berkshire Hathaway (NYSE: BRK-B) initiated a small stake in the digital consumer bank Ally Financial (NYSE: ALLY), which is also a big auto lender. In the second quarter of the year, Berkshire more than tripled its position in the stock, purchasing more than 21 million shares in the quarter. Now, Berkshire's position in Ally amounts to 30 million shares valued at more than $1 billion, representing nearly 9% of the company. With Buffett and Berkshire buying heavily now, is Ally a buy? Let's take a look.

Wall Street has grown bearish

Interestingly, Buffett is piling into Ally as the Street is growing more bearish. After a strong second-quarter earnings report, a number of analysts downgraded the stock on concerns regarding funding and credit quality.

Ally has been bolstered in recent years by a shortage of car inventory and elevated car pricing and interest rates, which have boosted financial results. Ally's retail auto loan portfolio at the end of the second quarter reached more than $82 billion, up 8.4% on a year-over-year basis. As the Federal Reserve has hiked interest rates, margins have also expanded significantly.

This has helped Ally generate a core return on tangible common equity (ROTCE) of more than 23% in the second quarter, which is superb. Furthermore, management said on Ally's second-quarter earnings call that they have been originating auto loans at an 8% yield in the third quarter while still maintaining their underwriting standards.

But analysts are worried about what will happen when car prices normalize, and how consumers will fare now that stimulus programs have winded down and economic conditions are more difficult. In the second quarter, Ally saw 30-day delinquencies in its retail auto portfolio jump by 0.50%. Also in the quarter, Ally started to see its deposit costs climb, which will keep climbing this year along with interest rates and could begin to cut into the bank's margins.

Why is Buffett buying?

Let's remember a few things when we talk about Buffett and Berkshire's investing philosophy: They both like to invest on a long-term basis and they both know the car business quite well.

Berkshire first invested in General Motors (NYSE: GM) in 2012, although it actually trimmed its position in the company in the second quarter. Ally was a financing division of GM called the General Motors Acceptance Corporation up until 2006, when GM sold a controlling interest in the company. Eventually, General Motors Acceptance Corporation would apply for a bank charter and rebrand into Ally. 

Ally's management team does seem prepared for the normalization of auto prices and said they have assumed that used car prices, which are up 60% since 2019, will come down by 30% from the end of 2021 and 2023. The bank is also reserving for future losses prudently when you consider it is still not seeing huge cracks in credit quality just yet.

In addition, Ally has also done a much better job of improving its funding base and relationship with customers. In 2018, only 64% of its funding base came from deposits. Now, more than 85% of its funding comes from deposits. Also, Ally now offers mortgages, credit cards, point-of-sale lending, and wealth management, all of which can help create better relationships with consumers and hopefully lead to more primary banking relationships and a higher-quality deposit base. Ally's deposit costs are still fairly high compared to other large banks, but it seems like the company has really improved this aspect of the business and can continue to do so.

Finally, Ally believes its returns are going to continue to be higher post-pandemic. Prior to the pandemic, the company would at best generate a 12% ROTCE. Now, management has guided for a 16% to 18% ROTCE in 2022 and on a medium-term time horizon.

A value play for Buffett

Buffett and Berkshire have long been value investors, and Ally gives them the opportunity to purchase an asset that they believe is trading for less than its fair value. Ally currently trades at about 105% to its tangible book value or net worth, and at about five times forward earnings.

Companies generating and guiding for the kind of returns that Ally is would normally trade at a much higher valuation, so the market is clearly skeptical of how sustainable the returns are. But Buffett and Berkshire clearly like the risk-reward setup here, which I think is favorable considering Ally's low valuation. Ally also pays an annual dividend yield in excess of 3% and buys back a lot of stock, two other things Berkshire and Buffett find attractive. Overall, I agree with Buffett and Berkshire and do think Ally is a buy at these levels.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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There's no question the $4 trillion energy sector has been home to the best-performing stocks on the market recently.

Over the past year, energy stocks have gained 72% on average while the next closest sector, utilities, rose less than 15%. In comparison, the broad market S&P 500 Index (SP: .INX) index lost 1%, and that started long before Russia invaded Ukraine.

It hasn't been much different in 2022 either, with the oil and gas stocks, in particular, leading the way. Energy is again on top with a 58% gain as utilities again ranked second with a less than 5% increase in value.

Yet over longer periods, the high cost of exploration and resource exploitation has made the energy sector a lagging sector for investors.

Technology stocks were the market darlings only until recently and over the past decade energy stocks ranked dead last with simple double-digit increases when virtually every other sector was sporting triple-digit gains. 

Oil and gas stocks are the stars these days, but is now the time to buy them?

Beating up on big oil

President Joe Biden recently said he hoped Americans could come out of the current energy crisis less dependent on fossil fuels. Alternative energy sources are already a rising component of the world's energy consumption, about 30% of the total, and that number is continuously growing.

Where the energy sector accounted for 29% of the stocks weighted in the S&P 500 in 1980, today they represent just 3.7%. Back then, seven of the top 10 stocks in the popular index were oil and gas stocks, led by ExxonMobil (NYSE: XOM); today there are none. 

And in a sign of how the world is further changing, Exxon was booted out of the Dow Jones Industrial Average in 2020 -- a spot it has held for nearly 100 years -- leaving only Chevron (NYSE: CVX) to represent the industry. Oil and gas stock investing isn't what it used to be.

Oil, oil everywhere

Yet that doesn't mean you shouldn't invest in the energy sector. It is simply too ingrained in the global economy to disappear.

For example, the U.S. Energy Information Association forecasts global "conventional" light-duty vehicles will nearly double from 1.31 billion in 2020 to 2.21 billion at their peak in 2038, but that will still far outstrip electric vehicle usage.

General Motors (NYSE: GM) has said it wants to produce only electric vehicles (EVs) by 2035 while Ford Motor Company (NYSE: F) is shooting for 40% of its fleet.

Tesla (NASDAQ: TSLA), in contrast, says it wants to sell 20 million EVs by 2027. However, the EIA predicts EV usage will grow from just 0.7% of the global LDV fleet to 31% in 2050, or just 672 million vehicles. Not an insignificant number, but still trailing gas-powered vehicles.

Petroleum products account for about 90% of all energy usage in the U.S. transportation sector, with gasoline accounting for 56% of the total.

Distillates, primarily diesel fuels, accounts for another 24%, and jet fuel, 9%. And jet fuel usage is growing rapidly with the EIA expecting consumption to increase at a faster rate than any other liquid transportation fuel through 2050.

And fossil fuels are in almost every product consumers use today, with petroleum appearing in everything from cosmetics and personal care products, to everyday items such as smartphones, computers, TVs, shoes, sporting goods, flooring, furniture, and medical supplies.

Grand View Research estimates the global petrochemicals market size was valued at $556.1 billion in 2021 will grow at a 6.2% compound annual rate through 2030, driven primarily by construction, pharmaceuticals, and automotive needs, as well as our industrial economy.

And though petroleum itself is not as important of a component for plastics manufacturing, natural gas and natural gas processing is. 

Still a gusher of an opportunity

The chances that alternative energy replaces fossil fuels for the foreseeable future are incredibly low. That's why I think the energy sector generally, and oil stocks in particular, are great buys, even today at their elevated levels.

Fossil fuels will be around for a long, long time meaning investors are to look very closely at some of the best energy stocks in the space as a long-term growth investment.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Tesla (NASDAQ: TSLA) has captured the spotlight once again with another showstopper of a quarter. Fans may flock to the company's top and bottom-line growth, the continued success of the Model Y crossover SUV, or its timely rollout of new factories in Germany and Texas. But critics may cringe at Tesla's lofty valuation and CEO Elon Musk's erratic behavior on social media and on other public platforms.

Tesla has been, and continues to be, a battleground stock with a riveting bull and bear case. Here's why the electric car stock may or may not be worth considering now. 

A sign of things to come

Howard Smith (Tesla): Tesla shares soared after it just reported results for its 2022 first quarter. While the stock move brings the electric vehicle (EV) leader's already lofty valuation even higher, there are reasons to think it is justified. That valuation is what has kept many investors from buying Tesla stock. At its recent market cap of about $1.1 trillion, the stock has a price-to-earnings (P/E) ratio of 200 based on 2021 earnings. But the most recent quarterly results show why that could still make sense. 

Tesla earned $5.5 billion in all of 2021, and it already has booked net income of $3.3 billion in the first quarter of 2022. The company grew revenue 81% in the first quarter compared to the prior-year period. But it's really the bottom line profitability that should catch investors' attention. 

Tesla reported an operating margin of 19.2%, which shows just how much it stands out compared to traditional automakers. For perspective, while it hasn't announced first-quarter results yet, General Motors (NYSE: GM) reported an adjusted operating margin of just 11.3% for 2021. 

That level of profitability comes in an environment of inflation driving rising raw material costs. Additionally, Tesla has had to overcome the suspension of production at its Shanghai plant due to restrictions implemented to fight the spread of a COVID-19 wave. 

Even with that headwind, CEO Elon Musk said the company could still achieve 60% growth in its year-over-year vehicle deliveries. With its new plants near Berlin, Germany and Austin, Texas just beginning production, there looks to be plenty of growth still ahead for Tesla.

The company has shown it can operate efficiently even as other manufacturers struggle with supply chain constraints and rising costs. The results from the first quarter may just be a sign of things to come for Tesla. Investors with a place in their portfolio for higher risk growth stocks could do well to include Tesla there. 

Tesla keeps demonstrating it is worth a premium price

Daniel Foelber (Tesla): As Howard mentioned, one of the primary reservations that investors have when deciding whether to buy Tesla stock or not is its valuation. And if we know anything about history, hesitating to buy an excellent company on valuation alone is usually a bad idea. Great companies have a habit of growing into their valuation. That hasn't happened yet with Tesla. But there are signs that Tesla could one day be affordable.

One of the common complaints you'll hear about Tesla is that it can never sell enough cars to be worth $1 trillion, let alone grow to a $2 trillion market cap. But the difference between Tesla and legacy automakers is that it's simply a much better business. As Howard said, Tesla continues to sport a high operating margin relative to the industry. Tesla just began delivering vehicles produced from its new factories in Germany and Texas. With those two capital-intensive mega projects now in the past, the full effect of Tesla's profitability is coming into frame.

Tesla's Q1 2022 operating margin of 19.2% resembles a low overhead tech company more so than an automaker. Tesla's profitability is due in part to doing a lot of things in-house and controlling its sales and distribution, which helps it keep costs down and rely less on external suppliers. And even as the company cited supply chain disruptions and higher raw material costs as challenges for the quarter, Tesla's high average selling price and ability to reduce costs largely offset these headwinds. 

Tesla is growing fast and is more profitable than ever, with Q1 2022 revenue up 87% year-over-year (YOY) to $16.86 billion and adjusted diluted non-GAAP earnings per share (EPS) up 246% YOY to $3.22. The run rate for those figures would give Tesla 2022 sales of $67.44 billion and $12.88 in adjusted diluted EPS -- giving it a forward price to sales ratio of 15.9 and a forward price to earnings ratio of 79.2 -- not cheap by any stretch of the imagination.

Tesla is undeniably the best company in the auto industry and could very well accelerate its growth and continue to look like it deserves to be worth a lot more than critiques say it should be. But in terms of being the best stock, I would simply argue that there are better ways to invest in the growth of EVs than solely buying Tesla. If this market has taught us anything, it's that valuation does matter. The risk/reward for Tesla just doesn't seem to be worth it quite yet, especially given some of the amazing growth stocks that are on sale right now.

A compelling success story in a struggling industry

Tesla has always had impressive technology. But over the past few years, it has evolved to become a very well-run and profitable business that continues to earn more revenue, profit, and free cash flow. The biggest advantage that Tesla has over the competition is that nearly 100% of its cash flow gets poured into its core business, while other legacy automakers still have a lot of costs associated with internal combustion engine divisions. Put another way, Tesla can sustain its momentum and outpace the growth of its competition. For that reason, Tesla may be worth considering now for risk-tolerant investors that can stomach volatility. But for everyone else, it's OK to wait too. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Of course, the stock market's spectacular recovery out of that trough has made decent money for many people — including first-time investors. 

But nothing probably represents that speculative fervour better than the enthusiasm for a particular US company.

Saxo Markets this week revealed that the 4th-most traded stock among Australians last month was Rivian Automotive Inc (NASDAQ: RIVN).

The electric truck maker made its debut on the NASDAQ on 12 November, Australian time, and quickly captured the imagination of investors.

The stock was listed at US$78 per share but within a week, it hit a high of US$179.47.

And it seems Australians were definitely part of the craziness.

The trouble is, Rivian has so far only made a handful of cars, mostly driven by employees and a select few outside the business. The company has not recorded any revenue yet.

Even at the current stock price of around US$90, the market capitalisation is US$76 billion. That's pretty much the same as Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM), which rake in annual revenues in the hundreds of billions.

What is going on?

Why investors are going mad for Rivian

Australians are going nuts for Rivian because they want to experience the same windfall that Tesla Inc (NASDAQ: TSLA) shareholders have.

Those lucky souls have seen their money multiply 10 times over the past 2 years as the world awoke to the realisation that electric vehicles would eventually dominate.

And who wouldn't want to emulate that?

"Traders are excited to back the next reportedly big electric vehicles startup, with Rivian Automotive Inc seemingly being that meteor to grab onto," stated Saxo in its Australia's 10 Most Popular Stocks in November report.

Rivian supporters point out that e-commerce giant Amazon.com Inc (NASDAQ: AMZN) owns a reported 20% of the business and has an order for 100,000 delivery vans to be fulfilled by 2030.

Why investors should be wary of Rivian

But the trouble is, backing a zero-revenue business — let alone one that's not making a profit — carries a big risk.

The Saxo report pointed out that even if Rivian reached its estimated revenue of US$9.4 billion, the money left over after expenses would not amount to much.

"Based on Rivian reaching Tesla's operating margin of 9.6% and a 25% cash tax rate, this would equate to a net operating income of US$677 million after taxes."

For Saxo Bank head of equity strategy Peter Garnry, the possible financials just do not justify the current valuation.

"Assuming the cost of capital of 10% — primarily equity financed with a high beta and early-start risk premium — and we play with the thought that this revenue/orders were a perpetuity and it could pass on inflation of 3% in the future, then this cash flow is worth [a market cap of] US$10 billion today."

The Motley Fool US' Jason Hall, in a video recorded just before Rivian's listing, could not quite reconcile the numbers either.

"I just can't wrap my head around buying what's essentially still a start-up," he said.

"This is still a start-up, they're still basically pre-revenue. Start manufacturing 100,000 cars a quarter, and then we can have a conversation about whether I think it's an investable company."

The post Why are Aussies going mad for this $0 revenue company? appeared first on The Motley Fool Australia.

Self-driving technology has been advancing quickly over the last decade, and there are now a handful of companies operating fully autonomous commercial vehicles in the market. And it may surprise you to find out that Tesla (NASDAQ: TSLA) is not yet one of those launching fully autonomous vehicles, despite the attention it has received about its driver-assist technology. 

Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Waymo and General Motors' (NYSE: GM) Cruise are now operating fully autonomous ride-hailing services in the San Francisco area, and Waymo is also operating in the Phoenix area, both without a safety driver. If all goes according to plan, within the next few years, fully autonomous ridesharing will likely be available in some cities in the U.S., and the companies leading the way include some surprising names. 

Where self-driving stands today

There are eight companies with permits to operate driverless tests in California, where most of the country's self-driving testing is taking place. Four have deep ties to China, and we'll set them aside for now given the uncertainty facing Chinese technology companies both in China and in the U.S. Those companies are Auto X, Baidu, Pony AI, and Weride.

The other four companies have received approval to bring self-driving technology to market and in some cases are already offering rides to the public. 

• Cruise: This is GM's self-driving unit, which currently has a permit to give autonomous rides to the public. The company has also already built about 100 Cruise Origin vehicles and is testing those vehicles right now. It doesn't have a commercial launch date, but given the state of its testing, we can likely expect something sooner than most, at least on a limited basis.
• Waymo: This is Alphabet's self-driving unit, operating in both Phoenix and San Francisco. The company is currently operating Jaguar vehicles and has ambitions in commercial trucking as well. 
• Nuro: This is the only company with a permit for commercial operation in California. Nuro isn't a ride-hailing company, but rather a delivery company. It's partnered with Domino's, Chipotle, CVS, and others to bring goods to people's doors. It's an autonomous driving service and it's here! 
• Zoox: Owned by Amazon (NASDAQ: AMZN), the company announced a ridesharing vehicle late in 2020 but has been very quiet ever since. We don't know if its ambitions are for commercial ridesharing operations or something within Amazon's operations. 

All four of these companies should be taken very seriously because of the technology they've developed. But they're taking their technologies to market in very different ways. 

Building a company to last

Developing self-driving technology is one thing. Building a business will be another. Companies are going to have to build the physical vehicle infrastructure, attract a network of users, and continue to build and advance technology. This will take an incredible amount of cash. 

Nuro's path to the market is clear. It's delivering goods to people's doors, and, with a custom vehicle design and pods that keep items safe and secure while in transport, this could be a future vision of delivery if it can scale fast enough to beat the competition. 

Waymo, being owned by Alphabet, has enormous resources and capital behind, so access to capital isn't a problem compared to other independent ventures. The company has a product called Via that aims to bring autonomous driving to commercial vehicles. It's also testing an autonomous ride-hailing service, which it could launch more broadly. But it's not clear if there's a custom vehicle in development, as Cruise and Zoox have developed, to make ridesharing a reality. 

Cruise has been much more upfront with its plans, the Cruise Origin, which is under development. The company also has a war chest of $10 billion to deploy vehicles, $5 billion of which came from GM Financial. Cruise is majority-owned by GM, and that gives the company the ability to tap into GM's manufacturing expertise and its financing muscle to grow. It's already doing that, and that may give it a leg up in building an autonomous driving business.

Why isn't Tesla on the list? In its home state of California, the company reported only 12.2 miles of autonomous testing on California's public roads during 2019 and zero miles in 2020. The company is clearly trying to sell autonomous driving features to customers, but they aren't fully autonomous and are not meant to replace the driver. In fact, it's not even testing a fully autonomous driving system -- at least, it's not doing any tests on public roads in California that it's reporting to regulators. 

Where should your autonomous dollars be going? 

As a public stock investor, if I were to bet on any two companies in autonomous driving it would be Waymo and Cruise. Zoox seems to have great technology but it's unknown what Amazon will do with it and Nuro is still privately held, so isn't eligible for investment by retail investors. 

Waymo and Cruise are clearly industry leaders in self-driving vehicles, and they're already transporting people around cities in the U.S. The difference between them is the upside they could generate for their respective owners. 

Alphabet is a nearly $2 trillion company, and Waymo's impact on a company that size will be limited just because of the company's current size.  GM, on the other hand, is a $72 billion company, and if Cruise becomes a valuable business it would be transformational. Cruise is already valued at about $30 billion, so the upside for GM from that level is simply much higher than it is for Alphabet. 

GM Market Cap data by YCharts

Despite being somewhat under the radar, GM has arguably built the most impressive autonomous driving business in Cruise. The company has a custom vehicle in testing, a manufacturing partner, billions in financing, and it could launch to the public in the next year or two based on plans to launch in Dubai late in 2023 and in San Francisco sometime ahead of Dubai. If self-driving cars are indeed going to be a revolution in transportation stocks, GM may have the most to gain. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Self-driving cars are here and the leaders may surprise you appeared first on The Motley Fool Australia.

The market wrap-up

Data source: Yahoo! Finance.

Another strong year in 2021?

Which stocks are leading the way?

• A growing awareness that legacy automaker stocks should be able to participate and thrive in the trend toward electric vehicles. Shares of Ford Motor (NYSE: F) are up nearly 70% year to date, while General Motors (NYSE: GM) is crushing the market with gains of more than 40%.
• Energy stocks have continued to rebound. Marathon Oil (NYSE: MRO) has led the way with a near doubling in its stock price so far in 2021, but many other exploration and production companies are faring nearly as well.
• Hard-hit retailers are demonstrating their ability to bounce back as the economy reopens. L Brands (NYSE: LB) has seen gains of more than 90% so far in 2021, and Gap (NYSE: GPS) isn't too far behind with its 60% rise.
• Even tech giants are playing their part in driving gains. NVIDIA (NASDAQ: NVDA) has risen more than 50% on hopes that its stock split signals even better times ahead, while Applied Materials (NASDAQ: AMAT) and its almost 65% rise is symptomatic of the strength throughout much of the semiconductor space.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Stock markets post a strong first half of 2021 appeared first on The Motley Fool Australia.

And that brings us to today. Yesterday, Berkshire filed its 10F report for the quarter ending 31 March 2021. Although that's a while ago now (and an eternity in the investing world), it's still a great opportunity to get a look inside Buffett's head and see what he's been up to.

So let's dig in.

Buffett's buys

So according to reporting in the Australian Financial Review (AFR), Berkshire did make some substantial moves over the March quarter. These were mostly selling though. His largest sells were in bank shares, particularly Wells Fargo & Co (NYSE: WFC), which the AFR notes Buffett has held for more than three decades now. At the height of Berkshire's Wells Fargo investment, the company owned more than 10% of the US$198 billion bank. But as of 31 march, Berkshire only owned ~675,000 shares, worth roughly US$32.34 million on the most recent pricing.

Berkshire also offloaded shares of another US bank in U.S. Bancorp (NYSE: USB), as well as a smaller, but total, stake in Synchrony Financial (NYSE: SYF).

Another sector that Berkshire and Buffett seem less enamoured with than in the past is oil. In the quarter ending 31 December 2020, Berkshire has a US$4.1 billion position in the oil giant Chevron Corporation (NYSE: CVX). But Berkshire has been selling off this position as well. As of 31 March, Berkshire had just US$2.5 billion worth of Chevron stock left. Perhaps the recent bull run in oil prices has served its purpose for Buffett.

Other shares that Buffett and Berkshire trimmed over the quarter include AbbVie Inc (NYSE: ABBV), Bristol-Myers Squibb Co (NYSE: BMY), Merck & Co., Inc. (NYSE: MRK) and General Motors Company (NYSE: GM).

In their place, Berkshire has added to its stake in supermarket chain Kroger Co (NYSE: KR), almost doubling its investment over the quarter to 51 million shares (worth US$1.91 billion on today's prices). It has also topped up on communications giant Verizon Communications Inc. (NYSE: VZ), and services company Marsh & McLennan Companies, Inc. (NYSE: MMC). It also initiated a position in insurance broker Aon PLC (NYSE: AON).

Berkshire's stakes in its largest holdings in Apple Inc (NASDAQ: AAPL) and Bank of America Corp (NYSE: BAC) remain unchanged for the quarter.

The post Here are the shares that Warren Buffett has been buying (and selling) lately appeared first on The Motley Fool Australia.

Then there are specific, or thematic ETFs, that might focus on an individual sector, such as robotics or health care.

There are even funds that don't cover shares at all — ETFs can track all manner of assets, from property, to government bonds, to gold and silver.

A US tech-focused ETF

The BetaShares Nasdaq 100 ETF (ASX: NDQ) lies somewhere in the middle of this wide range. This ETF tracks an index – the NASDAQ-100 (INDEXNASDAQ: NDX) to be precise. But this index doesn't cover an entire market, as an ASX 200 ETF might. Over in the United States, there are 2 primary stock exchanges – the Nasdaq and the New York Stock Exchange.

The Nasdaq, for a variety of reasons, tends to be the exchange that tech companies like to list on. So you won't find 'old-style' companies like General Motors Inc (NYSE: GM) or 3M Co (NYSE: MMM). Instead, it's top constituents are tech giants like Apple Inc (NASDAQ: AAPL), Microsoft Inc (NASDAQ: MSFT) and Tesla Inc (NASDAQ: TSLA). These are the companies that the BetaShares Nasdaq 100 ETF tracks. Thus, it's not really an index fund in the same vein as a fund tracking the S&P 500 Index (INDEXSP: .INX) is, but it's more index-like than a pure tech-focused ETF.

So what does NDQ give you as an investor? Well, As we discussed earlier, Apple, Microsoft and Tesla make up 3 of the fund's 4 largest current holdings. Amazon.com Inc (NASDAQ: AMZN) is the other. But you'll also get moderate exposure to other tech giants like Facebook Inc (NASDAQ: FB), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), Paypal Holdings Inc (NASDAQ: PYPL). Netflix Inc (NASDAQ: NFLX), and Adobe Inc (NASDAQ: ADBE).

So why consider this ETF today?

NDQ suffers rare pullback

Well, it hasn't had a very pleasant few weeks.

NDQ units are down around 9% since 5 February, which happens to be the date NDQ made its last all-time high. Indeed, on the current unit price, NDQ is now down 2.5% year to date as well. Today alone, it's lost 2.7% at the time of writing. The weakness is of course underpinned by a shaky start to the year for the underlying Nasdaq 100 Index.

There's another factor in play as well. Since Nasdsaq companies are listed on a US exchange, a rising Aussie dollar also means that the value of NDQ's holdings in Aussie dollar terms has also been falling.

Now, the Nasdaq is renowned for being an index that has delivered stellar performance almost non-stop over the past decade. The BetaShares Nasdaq ETF has only been around since 2015. But since its launch, it has returned roughly 163% in capital gains alone.

Including dividend distributions that equates to an average of around 21.25% per annum. Speaking of dividends, this ETF currently offers a trailing distribution yield of 2.4%. That's not bad for a US-based ETF coming from a market not known for its love of a dividend.

All of this adds up to make the BetaShares Nasdaq 100 ETF worthy of consideration today.

The post Why this ASX tech ETF is in the buy zone appeared first on The Motley Fool Australia.

General Motors (NYSE: GM) reported a fourth-quarter profit that beat Wall Street's estimates, but said that an ongoing shortage of semiconductors could shave up to $2 billion from its profits in 2021. 

GM's guidance for 2021 calls for an adjusted operating profit between $10 billion and $11 billion, taking into account the net impact of between $1.5 billion and $2 billion resulting from the worldwide chip shortage. 

About the chip shortage

GM said on Tuesday that it will extend shutdowns at three of its North American assembly plants until at least mid-March, amid a shortage of chips that has hit auto production in factories around the world. The chip manufacturers have struggled to keep pace with a sharp rise in sales of personal computers amid the COVID-19 pandemic. 

CEO Mary Barra said on Wednesday that GM is prioritizing production of its pickup trucks and big SUVs, profitable products that are in high demand. The company expects manufacturing of those products to remain on plan through the year, Barra said, and the supply disruptions won't have any impact on its future-product efforts.

GM's fourth-quarter results were good

On an adjusted basis, excluding one-time items, GM earned $1.93 per share in the fourth quarter on revenue of $37.5 billion. Both numbers exceeded the average estimates of Wall Street analysts polled by Thomson Reuters, which called for adjusted EPS of $1.63 on revenue of $26.12 billion. 

GM's results were a significant improvement on the fourth quarter of 2019, which began amid a United Auto Workers strike that idled the company's U.S. factories. The improvement was driven by good results in North America, as sales of its newest products remained strong despite the pandemic.

• GM North America earned $2.6 billion in adjusted earnings before interest and tax ("EBIT-adjusted," in GM-speak) on good sales of pickup trucks and its new full-size SUVs. Margin of 8.7% was an improvement from the strike-battered year-ago result, but was dented a bit by pandemic-related production cuts. 
• In China, GM's joint ventures generated $248 million of equity income, up slightly from $239 million a year ago. Sales were up, but competitive pressures hurt pricing, and compliance-related costs dented overall results. 
• GM Financial, the company's financial-services subsidiary, earned $1.04 billion in pre-tax profit in the fourth quarter, up from $498 million a year ago. Leverage declined a bit from a year ago (to an 8.0 multiple from 8.3) as liquidity rose to $26.6 billion. 

Debt, cash, and one-time items

GM's automotive business ended 2020 with $22.3 billion in cash and an additional $18.2 billion in available credit lines, for total liquidity of $40.5 billion. Against that, it had $17.5 billion in debt, and another $12.4 billion in underfunded pension liabilities. 

The company said that it expects "no significant mandatory contributions" to its U.S. pension plans over the next five years. The plans were underfunded by $5.4 billion as of Dec. 31. 

GM has repaid the full balance of the revolving account it drew down in the spring of 2020, when it idled most of its factories amid the first wave of the pandemic. In addition, it paid off about $800 million of unsecured debt in South America, it said. 

The automaker had several small one-time items in the fourth quarter, including some small credits and charges related to overseas restructuring and buyouts of some Cadillac dealers that chose not to participate in the brand's transition to electric vehicles. The net impact was a credit of $5 million. 

GM's full guidance for 2021

For 2021, the company said that auto investors should expect:

• EBIT-adjusted between $10 billion and $11 billion. (2020: $9.7 billion. 2019: $8.4 billion.) 
• Adjusted EPS between $4.50 and $5.25. (2020: $4.90. 2019: $4.82.)
• Adjusted automotive free cash flow between $1 billion and $2 billion. (2020: $2.6 billion. 2019: $1.1 billion. "Automotive" figures exclude results from GM Financial.)
• Capital expenditures between $9 billion and $10 billion, on accelerated electric-vehicle investments and deferred spending from 2020. (2020: $5.25 billion. 2019: $7.49 billion.)

Those figures include GM's current estimates of the impact of the chip shortage, which it expects will reduce EBIT-adjusted by $1.5 billion to $2 billion, and trim adjusted automotive free cash flow by $1.5 billion to $2.5 billion.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post General Motors (NYSE:GM) profit beats estimates, but chip shortage could cost $2 Billion in 2021 appeared first on The Motley Fool Australia.

The electric car maker's stocks shot up a stunning 7.94% Friday morning Australian time. This allowed the South African-born Musk to overtake Amazon.com Inc (NASDAQ: AMZN) founder Jeff Bezos into the top spot.

Tesla shares were on an absolute tear in 2020, appreciating 743% during 2020. 

Musk, whose wealth is largely tied to his ownership of Tesla shares, saw his personal worth skyrocket more than US$150 billion in the past year, according to Bloomberg.

Bezos became the world's richest in 2017 after more than 20 years running Amazon. Since then he has undergone a divorce from his wife MacKenzie Scott, which deducted about a quarter of his Amazon ownership.

Scott herself instantly became one of the wealthiest people on earth, and currently sits at 23rd spot.

Early on Friday morning Australian time, Musk tweeted "How strange" in response to the news that he is now the earth's richest person.

He then swiftly posted "Well, back to work…"

Well, back to work …

— Elon Musk (@elonmusk) January 7, 2021

Is Tesla's incredible rise too good to be true?

Tesla, by market capitalisation, is now worth as much as the 8 biggest petrol car makers on the globe.

Despite COVID-19, the company ascended to this confounding valuation on the back of investors' enthusiasm that electric vehicles are the way of the future.

Then late in the year Tesla made it onto the S&P 500 Index (INDEXSP: .INX). This accelerated its growth even further as index funds were forced to buy up its stocks.

Legendary investor and GMO co-founder Jeremy Grantham this week used Tesla as an example as to why share markets are in a bubble about to pop, just like 1929 and 2000.

"As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over US$600 billion, amounts to over US$1.25 million per car sold each year versus US$9,000 per car for General Motors Company (NYSE: GM)," he said in a letter to investors.

"What has 1929 got to equal that?"

The post Elon Musk is now world's wealthiest person appeared first on The Motley Fool Australia.

And that it will all end in tears very soon.

GMO co-founder Jeremy Grantham wrote in a letter to investors this week that the very long bull market that started in 2009 has now "matured" into a "fully fledged epic bubble". 

"Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history – right along with the South Sea bubble, 1929, and 2000."

The S&P/ASX 200 Index (ASX: XJO) and S&P 500 Index (INDEXSP: .INX) have climbed 48% and 68% respectively since March.

Governments have poured in unprecedented support and central banks have erased interest rates to get the world through COVID-19. But none of that matters now, according to Grantham, because this bubble is about to burst.

"Make no mistake – for the majority of investors today, this could very well be the most important event of your investing lives," he said.

"Speaking as an old student and historian of markets, it is intellectually exciting and terrifying at the same time."

Grantham reminded his readers that the Nasdaq Composite (INDEXNASDAQ: .IXIC) fell 82% when the tech bubble popped 20 years ago.

"And here we are again, waiting for the last dance and, eventually, for the music to stop."

He took the unstoppable rise of Tesla Inc (NASDAQ: TSLA) as a demonstration of a bubble at play.

"As a Model 3 owner, my personal favorite Tesla tidbit is that its market cap, now over US$600 billion, amounts to over US$1.25 million per car sold each year versus US$9,000 per car for General Motors Company (NYSE: GM)," Grantham said.

"What has 1929 got to equal that?"

When will this bubble burst?

Trying to predict the end of a bubble is always a mug's game, according to Grantham. But he took a stab at when he thought share investors might get a rude wake-up call.

"My best guess as to the longest this bubble might survive is the late [northern] spring or early summer, coinciding with the broad rollout of the COVID vaccine," he said.

"At that moment, the most pressing issue facing the world economy will have been solved. Market participants will breathe a sigh of relief, look around, and immediately realise that the economy is still in poor shape, stimulus will shortly be cut back with the end of the COVID crisis, and valuations are absurd."

One big sign of a bubble imminently about to burst is a "rising hostility toward bears".

"In the last few months the hostile tone has been rapidly ratcheting up," said Grantham.

"The irony for bears though is that it's exactly what we want to hear. It's a classic precursor of the ultimate break – together with stocks rising, not for their fundamentals, but simply because they are rising."

According to Grantham, the bursting of a bubble is hard to pick because it often happens when conditions for stocks are still excellent.

"The great bull markets typically turn down when the market conditions are very favorable – just subtly less favorable than they were yesterday. And that is why they are always missed."

The entire financial industry is rigged to be bullish

Even with a crash looming, bears will always be in the minority, according to Grantham.

"Every career incentive in the industry and every fault of individual human psychology will work toward sucking investors in."

You would always see the big investment houses and fund managers be bullish because it's "good for business and intellectually undemanding". 

"It is appealing to most investors who much prefer optimism to realistic appraisal, as witnessed so vividly with COVID," Grantham said.

"And when it all ends, you will as a persistent bull have overwhelming company. This is why you have always had bullish advice in a bubble and always will."

What to do with your shares to prepare for a bubble burst

A major feature of bubbles is a massive disparity between the valuations of different asset classes or sectors, according to Grantham.

This time around, this gap is between growth and value stocks.

"Those at the very cheap end include traditional value stocks all over the world, relative to growth stocks. Value stocks have had their worst-ever relative decade ending December 2019, followed by the worst-ever year in 2020, with spreads between growth and value performance averaging between 20 and 30 percentage points for the single year!"

Another disparity is between shares in the US and developing nations. Australian stocks often mimic the fortunes of the US market.

"Emerging market equities are at 1 of their 3, more or less co-equal, relative lows against the US of the last 50 years."

So Grantham recommends positioning your portfolio to take advantage of both of these imbalances.

"We believe it is in the overlap of these two ideas, value and emerging, that your relative bets should go, along with the greatest avoidance of US growth stocks that your career and business risk will allow."

The post We're in a massive bubble: This is when it'll pop appeared first on The Motley Fool Australia.

What happened

Shares of General Motors (NYSE: GM) were revving higher after the automaker delivered a strong third-quarter earnings report and benefited from bullish sentiment in the electric-vehicle sector as investors are beginning to appreciate the company's exposure to EVs. 

Consequently, the stock finished the month of November up 27%, according to data from S&P Global Market Intelligence. It also benefited from broad market trends around coronavirus vaccine news and a positive response to the election results.

As you can see from the chart below, General Motors stock gained consistently over most of November following its earnings release at the beginning of the month.

GM data by YCharts

So what

General Motors shares rose 5.4% on 5 November after the company smashed through estimates in its Q3 report. Automakers have bounced back rapidly from the early days of the pandemic as demand for vehicles has soared in part because of an aversion to public transportation, and General Motors has been a beneficiary. Profits jumped thanks to consumers buying higher-margin SUVs and crossover vehicles.

The company's revenue in the quarter was flat at $35.5 billion, which essentially matched estimates. However, the factors above as well as cost-cutting and fewer markdowns drove a surge in adjusted earnings per share from $1.72 a year ago to $2.83, well ahead of the consensus at $1.38.

The following week the stock climbed again on news that Pfizer and BioNTech had produced a successful coronavirus vaccine and that General Motors said it would hire 3,000 engineers to accelerate its push into electric vehicles and autonomous vehicles (AVs). The week after that, General Motors again asserted that EVs were a priority, stating that it planned 30 electric-vehicle launches by 2025.

With the market now viewing traditional combustion vehicles as a declining industry, it's key that the automaker pivot toward new technologies.

Now what

Towards the end of the month, General Motors restructured its partnership with Nikola and said it would not take a $2 billion stake in the EV start-up, though GM still plans to supply fuel cell systems to the company. 

As it focuses on EVs and AVs, General Motors offers investors an interesting opportunity since it is still priced as value stock even though it could be a leader in those new sectors. The challenge for General Motors will be to manage the decline of tradition combustion vehicles while transitioning to EVs and AVs.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Gold miners

The gold price is the king of all commodity trends. It remains at an all time high in Australian dollars. Recent falls have been more influenced by the exchange rate with the US dollar than giant swings in the gold price. The easy analysis is to say gold is a hedge against uncertainty. An asset that rises when equities fall. However, there is more to it than that. 

Record low interest rates, even negative interest rates, around the world have combined with immense levels of quantitative easing. This means more available cash. Where there is a high demand, like investment assets, we see inflationary pressures. 

Within this space there are still S&P/ASX 200 (INDEXASX: XJO) shares selling at reasonable prices. The Regis Resources Limited (ASX: RRL) share price fell by 5.5% last week for no discernible reason. The company has maintained a 9-year compound annual growth rate for sales at 22%. An 8-year earnings per share CAGR at 17.2% and a share price CAGR at 22.9%.

Battery Metals

Rumours this week that Tesla Inc (NYSE: TSLA) had developed a million mile battery caused a lot of speculation.  Including a claim from General Motors Company (NYSE: GMC) that they too had almost completed a million mile battery. This means a renewed upward commodity trend for future facing metals such as nickel, silver, and copper in particular. Companies like BHP Group Ltd (ASX: BHP) and Sandfire Resources Ltd (ASX: SFR) are ASX 200 shares that may benefit from any rise in the copper price, with BHP also heavily involved in global nickel production.

South32 Ltd (ASX: S32) is a large scale player in the nickel industry. It is also a high volume producer of silver from the Cannington mine in Queensland. Both of these are used on battery manufacture as well as across the board in the renewables sector. 

Grain industry

The upward commodity trend in grain has continued despite the Chinese 80% tariffs. The share price of Australian producer Graincorp Ltd (ASX: GNC) has continued its upward momentum. GrainCorp is not very exposed to the tariffs imposed thus far.

Food security is quietly becoming a very important issue. Over the past three months we have seen the worst locust plagues for a generation across Africa, The Middle East and South Asia. Ukraine, the food bowl of Europe, is also expecting a markedly lower harvest in 20/21 after a record crop in 19/20. Moreover, the UN has raised the spectre of starvation at "biblical" levels.

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