Fossil fuel powered vehicles dominate the automobile market today, but the tipping-point for electric vehicles (EVs) can’t be far. Estimates suggest that EVs can become mainstream in this decade even. Consider the clean energy and electric vehicle company, Tesla. In its latest quarterly report, the company says it delivered a record number of vehicles. Tesla needs no introduction and its high share price even less so. It has been called the most overvalued company today. This can make investors question if it’s a good time to buy the stock. Luckily, there are other EV plays too, including among FTSE 100 stocks.
Battery material provider
One is the FTSE 100 speciality chemicals manufacturer, Johnson Matthey. Among other things it develops a battery material for EVs called eLNO. In its latest trading update, the company said that its Polish plant producing eLON will be operational by 2022. This may indicate expansion in the segment.
So far, the company’s clean air segment, which provides emission reduction technologies, is the dominant source of revenue. The new markets segment, which covers eLNO, is promising too. I reckon as it expands eLNO production, the segment can be a winner for the company.
I think there’s a case for investing in JMAT in any case because of its strong financial position, dividends and fairly reasonable price-to-earnings ratio of 18 times. It’s going through a rough patch in the slowdown, but I reckon it can overcome that. In fact, this may just be the best time to buy JMAT and hold it for the long term.
Lithium mining play
FTSE 100 miner Rio Tinto is another one to consider for an EV play. The company reported a ‘eureka’ moment last year when it stumbled upon lithium deposits in the US. RIO believes that if all goes well, it could become the biggest supplier of lithium for EV batteries in the country according to a Financial Times report. More recently, it also made investments in its lithium project in Serbia.
Much like JMAT, lithium isn’t the only reason to buy Rio Tinto’s stock. For instance, despite being a cyclical stock, it has recovered quite well since the stock market crash. It also has a high dividend yield of 6.4%, which is impressive at the present time. In fact, it actually increased its dividends recently, contrary to the broader trend of either dividend reduction or suspension.
I have liked Rio Tinto for a while now, and with these developments I’m only further convinced that it will keep providing shareholder returns in the years to come. If the EV wave does get much bigger, this stock could be an outlier among other FTSE 100 miners, making it a really promising long-term buy.
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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.