Discussions about electric vehicle investing have long centered stocks, especially shares of automobile manufacturers.
For years, Tesla (NASDAQ:TSLA) has rightfully dominated those conversations. More recently, Ford (NYSE:F) and a spate of new, dedicated EV entrants have been getting in on the action, but there’s more to the story, namely the often-overlooked point that investors don’t need to own auto equities to participate in the EV boom.
Enter the newly minted Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT). EVMT, which debuted in late April, looks to top the S&P GSCI Electric Vehicle Metals Index. That index is home to metals essential in the production of EVs.
EVMT is pertinent because EVs are essential to the broader renewable energy thesis, and pushing for broader adoption of EVs is an idea that many governments are supporting, meaning that demand for related metals is soaring.
“Governments across the globe have placed heavy emphasis on reducing gas emissions from vehicles. At the same time, automotive manufacturers and suppliers have been allocating resources to the development of EVs to meet consumer demand and government initiatives,” according to Invesco research. “By 2035, some of the largest auto markets (European Union, US, China) are expected be fully electric, a reflection of the ongoing shift to decarbonize transportation worldwide.”
Another benefit of EVMT is that the fund is concentrated. While investors are taught to be diversified, EV commodities investing lends itself to ramping up concentration. Likewise, while a variety of commodities and materials are pivotal to producing renewable energy, the reality is that only a small number really power EV production.
EVMT is home to commodities futures contracts on nickel, copper, aluminum, and iron ore. The new Invesco fund allocates between 8.14% and 36.26% of its weight to those commodities. The long-term outlook for the new ETF is potentially bright.
In response to soaring demand, “auto manufacturers are racing to gather the necessary metals needed to ramp up EV production to meet consumer needs as well as government guidelines. The development of this theme can provide investors an opportunity to participate in the upside potential of the EV sector by having exposure to in-demand metals needed in the infrastructure of EVs,” concludes Invesco.
Plus, EVMT offers investors an avenue for beating inflation while reducing correlations in portfolios.
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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.