EV stocks are 'overpriced' — but there's a good way to play them, says strategist

Published Fri, Jun 11 20211:32 AM EDTUpdated Fri, Jun 11 20214:13 AM EDT

There's been a rush for electric vehicles and investors are piling money into green cars and the batteries that power them — but one top investment strategist says he's avoiding the sector for now. As more and more people jump on the electric bandwagon, experts predict that global penetration of electric cars could top 80% by 2040 . Demand for EV batteries is also expected to rise. David Roche, who correctly predicted the 1997 Asian financial crisis and the 2008 global financial crisis, explains why he's not investing directly into electric vehicle makers and battery producers at the moment. "One is, the electric vehicle producers seem to me to be overpriced," Roche, president and global strategist at Independent Strategy, said during CNBC PRO Talks with Tanvir Gill on Wednesday. "Secondly, the battery producers are probably moving — within the next five years — into an oversupply situation." Here's how Roche will be investing in the sector instead: Through commodity plays. "The major way that we hold investments in electric vehicles and the supply chain is through the commodities," he said. "Of course, some of these commodities are difficult to invest in — like cobalt and lithium. But some like copper are not." Cobalt and lithium are typically used in batteries that power electric vehicles. Roche explained that copper is used five to six times more in electric vehicles than in traditional internal combustion engine vehicles. Winners and losers Without naming specific stocks, the strategist predicted that among the top players in the electric vehicle sector, there will be one survivor and one dominant producer in various economic blocs. That includes a major player in Germany, one in China and another one in the United States, Roche said. "I think the interesting thing is that I cannot name (a winner) in Japan," Roche said. He pointed out that Asia's second-largest economy was the market leader in the auto race in the 1970s and 1980s. However, it "seems to be the big loser out of the EV race." Japan's automakers have been less aggressive in their response to the shift toward electric vehicles. Nissan , for example, plans to release eight all-electric vehicles by 2023 but the company said it views EVs as a "consequence" and not the objective. Toyota may have popularized hybrid electric vehicles with its Prius line in 1997, but the Japanese carmaker only committed to making a high volume of pure battery-powered EVs in 2019 . Top automakers in Germany — including Volkswagen , Audi, Daimler -subsidiary Mercedes-Benz, and BMW — have already announced their electric vehicle offerings. While Tesla is a household name in the U.S., Chinese start-ups like Nio , Xpeng and Li Auto h