EV Charging Stocks Short Thesis

I've been looking at a lot of potential sectors and stocks for short opportunities the past few months. I've been trading in and out of EV charging companies put options on stocks like Chargepoint CHPT, Blink BLNK and EVgo EVGO. The big picture on it is the EV market sentiment has readjusted to reality and peak EV hype is down now.

Another major factor is Tesla has a position in the EV charging space with their own charging stations and continue to get more major car manufacturers to sign on. This I believe was a big blow to these much smaller EV charging stocks that I mentioned. I don't see how these companies will compete with Tesla chargers if Tesla decides to try and corner the market. The stock prices continue to fall monthly making equity raises less and less helpful. Evgo EVGO was able to raise some capital recently. The cash burn is significant with them and BLNK. I recently added more BLNK puts and now have put options of various strikes as far out as January 21st.

The cracks are now starting to emerge in the industry as Chargepoint's CHPT CEO and CFO both announced their resignation on the same day as revenue forecast was slashed! Here is an article. Apparently, Chargepoint is "the leader" in this space which is sure something telling.

I got this graph from another account on Twitter that highlights cash burn at Chargepoint and EVgo. The recent overall stock market rally has caused minor rallies in BLNK and EVGO stocks that I see as better prices for long dated puts. There has been a turn in the press and I'm seeing negative press on these chargers. The Wallstreet Journal had an article a week ago on how the stations are not working.

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Disclosure: I am long put options in CHPT BLNK EVGO and will continue to add more.

Global Equity Indices Now All Weaking

I've been tracking a few countries that have had very resiliant stock markets in the second half of this year. We all know the U.S. equity market has had a major pull-back. Well, up until a month or so ago for Vietnam or just this week in some there has been relative strength. Others include Turkey and UAE even with a declining U.S. market. Vietnam finally had a technical correction in the end of September and UAE and Turkey yesterday. Turkey is still near it's highs on the year however.

Vietnam is still one of my favorite long-term investment prospects with their superior GDP growth and forecasts. Below are the respective charts of these countries equity indices. First is the iShares MSCI Emerging Markets ETF (EEM) that is near lows on the year.

The Vietnam (VNM) pull-back was pretty forcefull off the highs in September.

UAE just had a big red day coinciding with the geopolitical events and conflict. I expect to see more short-term downside here.

Lastly, beginning to weaken Turkey (TUR). I see an opportunity for a short on this market with uptrend levels being broken and the fact it hasn't had a significant pull-back yet. Also, there is the proximity to the conflict that just started in the region that may be bringing some uncertainty to the market there.

I see a short setup or a long put options setup in Teva Pharma (TEVA) based in Israel. I noticed the IZRL ETF that is the Israel Pharma ETF took a large downside move and has downside momentum going off a big gap down.

There is also a very good short setup in (TKC) Turkcell a Turkey company that has just come off a clear bear flag and is making new lows.

Defensive Opportunities In A Continued Risk Off Quarter

I continue to see a risk off environment in equities that has spilled over to emerging markets. The consensus from American conglomerates on China demand and now Chinese data itself is pointing to significant economic contraction in China. The markets in Turkey (TUR), Vietnam (VNM) are holding strong. Vietnam continues to be my favorite opportunity in emerging markets over the long-term.

Last week Bitcoin saw increased selling and volatility. This just adds to the risk off sentiment as Bitcoin, one of the best performing assets this year is joining in on the selling. Below is the breakdown of the trend support currently in the works on Bitcoin. I alerted on the recent top for Bitcoin here on the blog in early 2022.

In light of this overall market weakness I see opportunity in pharmaceuticals with ETF's like VanEck Pharmaceutical ETF (PPH) and I-Shares Pharma ETF (IHE). The ETF's have recently broken out to new 52 week highs and shown relative strength in the market. I'm particularly bullish on the sector because breakthroughs in AI machine learning should improve drug development costs and increase speed of discovery and research.

I've done extensive research on the newest AI via large LLM's(large language models) and the promise of smaller ones. Drugs and biotech are some of the industries they will transform initially. They are the perfect fit for industries where scanning large language databases is key and processing large amounts of data is needed.

The pharma ETF PPH is coming up on a key support level.

Merger Arb Opportunities

There are opportunites in merger arbitrage with Spirit Airlines (SAVE) and I-Robot (IRBT). Spirit is trying to get an all cash deal done with Jetblue for $33.50 a share. Amazon has been in the works and shareholder approved to buy I-Robot for all cash or $51 a share too.

Oil and Gas Energy

Apart from pharma I have seen relative strength in energy stocks. I have particularly been looking at oil and gas stocks as natural gas has pretty much been written off. I'm not particularly bullish on natural gas but the contrarian trade now is nat gas as harsh winter weather is likely not priced in. The best gas ETF is US 12 month Fund (UNL) at it holds long dated contracts and thus has less decay than ETF (UNG). Nobody is bullish on natural gas prices as the technicals have shown a bottom formation forming.

Some of the energy stocks I added to my watchlists were VAALCO (EGY),Helix Energy (HLX), Nextier Oilfield (NEX), KLX Energy (KLXE).

Solar Weakness Continues

Another industry that caught my attention was Solar. It caught my attention as a short opportunity as the weakness in solar continues as evidenced by the Invesco ETF (TAN). I noticed short selling technical setups in stocks like JKS and MAXN too.

I'm bullish on the prospects of breakthrough technology like quantum computing with the help of AI. The quantum computer ETF is Defiance Quantum ETF (QTUM). I also particulary like the quantum computing stock Rigetti Computing (RGTI) as they have one on the cloud.

I continue to believe the investment of our lifetimes going forward will be in artificial intelligence. The best plays on this are the actively managed Roundhill ETF (CHAT) and long established Global X AI ETF (BOTZ) and Robo Global ETF (ROBO).

One good speculative investment opportunity I saw was in the Nigeria country specific Nigeria ETF (NGE). Nigeria NGE has a trailing twelve month 16% dividend yield. 0.83% expense ratio. Politics might be a partial driver of the 28% YTD performance of Nigerian stocks.

"The Tinubu admin also formed a committee on fiscal policy and tax reforms headed by Taiwo Oyedele, signalling the possibility of critical tax reforms"... " Banking and oil gas stocks have been very strong drivers of market performance. Oil and Gas stocks have been on the rise since they took out fuel subsidy from the sector. Added with banking, they are the top two sectors.”

On specific stocks on the long side I see a buy setup in Payments Holdings (PAY) as it saw large buying volume after earnings and is consolidating in a flag now. It needs to hit 14.05 for a long trade. The company has strong revenue and earnings growth. They recently revised quarterly earnings forecasts to the upside. Next years earnings guidance has been raised to $.24 EPS vs previous $.14.

Full disclosure: I have been actively trading the PPH ETF, RGTI. I have puts on JKS, long BOTZ, CHAT. May long NGE in future.

Spok Holdings (SPOK): Healthcare IT Company With a 9% Dividend Yield

Spok (SPOK) provides healthcare communication solutions in the United States, Europe, Canada, Australia, Asia, and the Middle East. They offer subscriptions to one and two-way messaging services, voicemail, and equipment loss or maintenance protection services. They serve over 2,200 health care facilities and 83% of their revenue is re-occurring in nature. The current market cap is $271 million with the stock price at $13.60 a share.

Valuation and Metrics

The trailing twelve month PE ratio is 8. Price to sales ratio is around 2. I find this to be a compelling valuation in the current market. Free cash flow has been positive since 2019, except for 2021 which was driven by unusually large capex.

The company has been profitable since the second quarter of 2022. In 2019 to 2021 net income was negative. I didn't look at any years before 2019. Return on equity has been trending upward the past few years. The current ROE is 13% for Q2 2023.

Strong Dividend History

From 2018 to 2021 the company payed $.50 in dividends per share. In 2022 the dividend was raised to $1.25 per share.

In the years prior to 2018 the company made a total of $467 million in dividend payments.

The current quarterly payments are $.3125 per share. With the stock at $13.60 a share the dividend yield is 9% well above the risk free rate.

In addition to shareholder friendly dividends the company also has a history of returning value through share repurchases. In 2018 and 2019 they spent a combined $40 million on sharebuybacks.

Industry Long-term Outlook

The prospects for health IT is strong.

Gobal healthcare information system market size was valued at USD 406.4 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 13.3% from 2023 to 2030. Rise in healthcare expenditure and advancements in its IT infrastructure are some of the primary drivers boosting the market. High demand for remote patient monitoring is also significantly driving its adoption rate.

source: https://www.grandviewresearch.com/industry-analysis/healthcare-information-system-market

Other sources share similar growth rates. While the company has not experienced rapidly growing sales the industry growth does provide good defensive stability. The nature of the business doesn't require large debt loads and margins are healthy and stable. This lends to the prospect of meeting future dividend payments.

Technical Analysis

The stock price has been uptrending since the summer of 2022. It formed a base and recently broke out to a new 52 week high on earnings.

It has good short-term technicals with a clean bull flag on the daily chart highlighted in red.

If you like this keep it simple analysis be sure to subscribe to my free Substack where I do analysis on deep value stocks trading below net tangible and net current asset value.





Full disclosure: I have no position at the time of writing. I many take a long position in the future.

More Fast Growing Technology Companies

Yalla Group (YALA) is a middle eastern social networking and entertainment platform primarily in the Middle East and North Africa region. It's a $872 million company and a fast grower. The previous 5 year sales compound annual growth rate was 24%. The trailing twelve month gross margin was 62%. Trailing twelve month net profit margin is roughly 18%.

They have been free cash flow positive for the last four years. In 2022 free cash flow came in at a robust $103 million. 2021 had $142 mil in free cash flow, 2020 saw $64 mil.

Yalla is trading at 12 times earnings with forward growth forecasted significantly higher.

The price action is resembling the overall Chinese stock market. It just broke over a resistance level.

The technicals combined with valuation, fundamentals and recent strength in China make this a good long watch.

Nerdy, Inc. (NRDY) an $811 million company in the online education industry that utilizes AI. The companies CEO is the founder. Revenue is forecasted to grow 29%. Earnings are estimated to turn to profitablity next year.

On the balance sheet current ratio is 3. The largest mutual fund holder is Franklin Strategic Series-Franklin Small Cap Growth Fund. Goldman Sachs, Vanguard Group and Blackrock all hold over 2% of the stock each.