Okay, the ongoing Covid-19 crisis means the economic outlook remains fraught with danger. But I’d still buy this cheap UK share and cutting-edge US stock in my Stocks and Shares ISA. I think they could make me chunky investment returns this decade.
Riding the electric revolution
Investing in UK and US shares involved in the production and running of electric vehicles (or EVs) seems like a good idea right now. According to UBS, EVs will make up 40% of all new car sales by the end of the decade.
I think buying shares in US-listed Chinese car manufacturer NIO (NYSE: NIO) is a great way to play this theme. Bear in mind, though, that City analysts don’t expect the business to turn a profit within the next two years at least.
There are still around 1bn citizens in China who are yet to buy a car, according to Mckinsey, meaning there are plenty of customers for NIO to win. And the Chinese government is making efforts to put EVs at the front of its green agenda. It’s why the Chinese Society of Automotive Engineers expects so-called new energy vehicles (or NEVs) to account for 50% of all new auto sales in the country by 2035.
There’s a chance that NIO might not have things all its own way though. This is because competition in the EV field is picking up as demand for these green machines grows. It’s also because hydrogen fuel cells also look set to soar in popularity. The Hydrogen Council estimates that there could be 13m hydrogen-powered vehicles on the road by 2030. That’s a risk to NIO’s investment case that I have to bear in mind.
A green UK share
I think another great way to ride the green transport agenda is to buy Sylvania Platinum (LSE: SLP). This is because this UK share’s product is used in higher and higher amounts in the production of catalytic converters. Platinum and palladium are used in these devices to shrink cars’ exhaust emissions, helping countries to meet their carbon reduction targets.
Don’t think that prices of Sylvania’s product will rise only because of increasing industrial demand though. There are also more and more signs that investor interest in platinum group metals (PGMs) is poised to soar. A survey by the Global Palladium Fund showed that 49% of investors and wealth managers plan to “significantly” increase their platinum holdings. And 37% expect to report a slight rise. It’s no surprise to me that investor interest is expected to keep rising either. Precious metals are classic safe-havens in times of rising inflation.
City analysts expect Sylvania’s annual earnings to rocket 174% in this fiscal year (to June 2021). This leaves the mining play trading on a dirt-cheap forward price-to-earnings (P/E) ratio of 5 times.
But be warned: the production of raw materials is packed with perils that can harm earnings, like safety-related stoppages, disappointing payloads and rising labour costs, to name just a few. It’s quite possible that this UK share’s bright profits forecasts could be blown wildly off course.
