Some Members of This Transport ETF Have Big Upside Potential

Led in part by Tesla (NASDAQ:TSLA), January was a banner month for shares of electric vehicle manufacturers and other companies with exposure to the clean transport ecosystem.

Renewed strength among electric vehicle equities and related fare is good news for exchange traded funds such as the IQ Cleaner Transport ETF (CLNR). Yes, Tesla is one of the stocks residing in CLNR, but the ETF is home to several electric vehicle makers and related companies that sell-side analysts are bullish on.

“EV makers in the ETF, such as Tesla, BYD and Lucid, led the gains this year, jumping 40%, 27% and 71% respectively in January,” reported Weizhen Tan for CNBC. “Automakers have been in the spotlight this month, with Tesla slashing prices to boost demand and Ford following suit. Analysts say Tesla’s price cuts could spur an EV pricing war.”

Analysts being constructive on BYD, in which Warren Buffett’s Berkshire Hathaway is an investor, is relevant to market participants considering CLNR because that Chinese automaker is the ETF’s largest holding at a weight of 4%, according to issuer data.

Another CLNR member firm that offers significant upside potential relative to analyst price targets is Japan-based TDK Corp. While TDK is something of a technology conglomerate, it does have exposure to the electric vehicle industry, making it a pertinent fit in the CLNR portfolio.

“DK supplies a wide range of automotive electronic components that can withstand severe conditions of use, including vibration or shock, or engine room heat. Also, TDK’s ferrite and other material technologies show their true worth by improving fuel efficiency in HEV,” according to the company. “Today, TDK’s DC-DC converters are used in hybrid electric vehicles both in Japan and internationally, helping to reduce power consumption during operation.”

Speaking of Japan, CLNR’s nearly 11% weight to that country could be a point in the ETF’s favor because the yen is likely to remain weak this year, potentially supporting upside for the country’s various automotive manufacturers and other export stories, including TDK.

Further enhancing the long-term appeal of CLNR are long-term projections indicating that this year could be the start of a lengthy run of expansion for electric vehicle adoption.

“The Global Electric Vehicle Market Was Estimated At USD 170 Billion In 2022 And Is Expected To Reach Over USD 1103.17 Billion By 2030, Poised To Grow At A CAGR Of 23.1% During The Forecast Period 2023 To 2030. The market for electric cars is expected to have exploded around the world by the end of 2030,” according to Contrive Datum Insights.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.