The webinar was recorded May 20, 2021.
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find the slides here.
Chris Preston [00:00:04] Hello and welcome to today’s Cabot Wealth webinar, Three Power Stocks to Buy Right Now. I’m your host, Chris Preston, chief analyst of the Cabot Wealth Daily advisory and Vice President of Content here at Cabot Wealth Network. With me today is Carl Delfeld, chief analyst of our Cabot Explorer advisory. Today, Carl’s here to identify several of the highest growth power trends driving the global economy and to give you three stocks to play those trends. This is an interactive webinar, which means we’ll be fielding your questions after Carl’s presentation concludes. So if you have a question, feel free to ask it at any time. We’ll try to get to as many of them as time allows once Carl wraps up. Just keep in mind that we cannot offer advice in regards to your own personal investment situation or portfolio. First, let me introduce Carl. Carl received his masters in law and diplomacy at the Tufts Fletcher School, worked for the Fi rst National Bank of Boston. Now Bank of America in London, serving as director of the Japan and South Korea group. He served as Vice President of the investment bank, Robert W. Baird and Co., developing new business in Tokyo, Hong Kong and Sydney. He was Asia adviser to the US Congressional Joint Economic Committee, the US Finance Committee and the US Department of the Treasury. He wrote for Forbes Asia and the Far Eastern Economic Review, served as a member on the US National Committee on Pacific Economic Cooperation and the Japan US Friendship Commission, was chairman of the Asian Pension Forum and wrote a book titled Red, White and Bold: The New American Century. Carl joined Cabot as chief analyst of our Cabot Explorer advisory in January 2019, where his current recommendations have an average return of 143%. Bottom line, Carl knows what he’s talking about when it comes to the global economy, global trends and how to profit from them as individual investors. So I’ll let him do just that. Carl, take it away.
Carl Delfeld [00:01:53] Thank you, Chris. Thanks to everyone for joining me this afternoon for our webinar about three power stocks from three power sectors. I thought I’d start today with just very briefly, an overview of how I see the market especially since it’s showing a little bit of volatility. I think there’s some good things and some concerns that investors have. On the positive side, It’s pretty clear in terms of the U.S. That we’re we’re headed towards a post pandemic economic recovery, which seems underway. And the evidence of this is the solid earnings that in general are being reported. In addition, given that we’ve come back so, so robustly from the lows in March 2020, it certainly is normal to have some churning and some sector rotation after this sharp rebound. But I think it’s also prompting investors to look closely at valuations. In other words, our valuations overstretched. Are they about where they should be or where’s the value? And then on top of that, you have a lot of a fair amount of uncertainty, you know, covid is still a big problem in countries like Japan and India and in Europe as well. And then there’s a fair amount of political and economic uncertainty even in the US, you know, regarding taxes, spending and so on. And then the big issue is inflation. You know, there’s evidence that inflation is flaring up. Is it temporary? Is it something that the Fed is going to have to step in abruptly and raise rates, pull back? Stimulus policies and so all this is happening, and so that’s sort of a backdrop. So I think in general you should be fairly conservative, weed out the weak performers in your portfolio, but also be alert to new ideas and and have a target list that you keep an eye on. So as when markets come back a bit, you can you can start building a position.
Carl Delfeld [00:04:24] OK, so let’s get started on today’s presentation. First of all, what is a power stock? Well, let me start with explaining kind of how the world has changed, in particular over the last decade and maybe two decades. And that is the best way to describe it is the world is filling in. And I talk in my Explorer newsletter, I talk a lot about the US and China, and I refer to it as the US-China rivalry, because China really has over the last four decades and even two decades come come from almost nowhere to become a rival to the US in terms of economics and other things as well. For example, China was only three percent of the world’s GDP in 2000. Now it’s 17 percent, whereas the US is twenty three percent. And some people think that by the end of this decade, China’s economy will be larger. Of course, they have four times the population, so that shouldn’t come as a complete surprise to anyone. But over the last two decades, China’s growth rate has been three times the US growth rate every year, every single year, which is quite an amazing run. And we got to keep in mind that Asia is a big place. So, for example, if you take North America and South America together, OK, that’s the whole Western Hemisphere. You’re looking at 13 percent of the world’s population. And 29 percent call it 30 percent of the world’s GDP the world’s economy. You take Asia, it’s 60 percent of the world’s population. So more than between four and five times more people and 37 percent of the world’s GDP. So Asia is already significantly larger from an economic point of view than North and South America combined. And then everybody sort of dismisses Europe as sort of this slow growth Disneyland, but Europe, which represents 10 percent of the world’s population, is twenty four percent of the world’s GDP. So. Even though the US is still the sole superpower, it’s facing a lot of pressures because Asia and Europe are we really have three power centers, North and South America, Asia and Europe. So that’s sort of the big picture. And you’re seeing that play in stocks, for example, in terms of multinational companies from Apple to Tesla going to China, manufacturing there trying to sell into that huge market and then China taking advantage of their leverage, pushing back. For example, Volkswagen. We’re going to talk about Volkswagen in a moment. But 40 percent of Volkswagen auto sales are to China. BMW sells three times more BMW cars in China, as they do in the United States. So you get the picture. It’s really a new economic world. And I think investors, some investors get it. A lot of other investors are still a little bit behind.
Carl Delfeld [00:07:51] So let’s get the power sectors by power sectors. I mean, these critical sectors that are strategically important to the US and other countries, that competition is keen and each country is trying to make sure that they have an edge, that they’re they have the most advanced companies, the most advanced technologies. They have the resources they need to compete in the world marketplace, and these also have significant growth potential because they’re in markets, for example, clean tech, we’re going to talk about electric vehicles. We’re going to talk about rare earths today and rare metals, which are very much in the news. Semiconductors, of course, where competition is very keen, where China is behind and trying to catch up. And Taiwan plays such a key role in all this plays into these strategic sectors which spawn these power stocks. And then the other thing I like to look for is stocks in a dominant position. In a powerful position in their market, in other words, they have market share, they have the best products, they have the more money to pour into research and development, and they have the best brand. So that’s that’s what a stock is.
Carl Delfeld [00:09:19] OK, I already talked about some of these issues, the US China rivalry, to me, it’s the dominant theme of this decade. And in fact, I’m working on a book which will be out, I think, probably by January 1st of next year on U.S. China rivalry. I call it Power Rivals. As the US and China jockey for position, because China definitely aims to be the number one economy in the world and wants to be considered a superpower right alongside or even ahead of the United States. So there’s going to be very it’s going to be a very, somewhat turbulent and very interesting decade to watch. Asia, I already told you the numbers behind the rise of Asia. It definitely is where the bulk of manufacturing and technology development is happening right now and the US has kind of woken up a bit late in the last four or five years and is scrambling to keep its lead. Now, the third is very important as well. You know, if you really look at the last 20 years, the big story is finance and technology rules all. You know, you know, I mean, manufacturing and industrial companies are at the bottom of the S&P 500 as most of them cannot deliver the growth rates and the margins that investors seem to favor. So it’s really caused a lot of upheaval in the US in terms of politics, in terms of economics. And then the other issue is finance and finance, instead of sort of being the tool to raise capital has sort of even lead the market. So financial companies, again, can deliver the growth and the high margins that investors want. And then there’s this interesting subset of finance and technology, which is called fintech. And fintech is all these payments companies, the cryptocurrency is part of fintech, e-commerce. You know, even the smartphone has really changed the world and allowed people all over the world to really have a bank in their phone to be able to make payments, to be able to save, to be able to invest using their phone. And so it’s allowed emerging markets to catch up quickly to the US.
Carl Delfeld [00:11:54] OK, so let’s head to some stocks that we can look at closely. The first is in the electric vehicles. Now, let me start by saying I’ve - for a long time, I was what you might call an EV skeptic. I always thought it was over hyped, but I think last year we hit an inflection point. Now, keep in mind EVs, as a percentage of total cars sold in a given year are still really small, but they’re rising quite quickly. And that’s why it’s an exciting area to look at because the growth is potentially quite incredible. So, for example, last year there was about three point four million EVs, meaning EVs, pure EVs and hybrid EVs, sold. Three point four million out of maybe 60 million cars sold in the world. So it’s still a small percentage, but the growth rate is just quite remarkable. For example, and this might surprise you, the biggest market for EVs is Europe. Of all the cars sold last year, about twenty one percent in Europe were EVs, in China was about nine percent, in the US, it’s about four percent. China is dedicated to EVs because they’re already becoming the center of the ecosystem for the batteries and the battery is really important, that really is the EV, about a third of the cost of an EV is the batteries. And then there’s the motor and then there’s the the frame and the electronics. So this is a completely different animal than your internal combustion engine car. It’s full of semiconductors. It’s easier to put together, easier to maintain, and it’s really going to cause some upheaval. So where are we going? Well, projections are from this three point four million this year, we’re going to hit about 15 million in 2025 so you can do the math - four to five times growth. And that’s pretty conservative. Because China wants EVs because they want to dominate the industry, but also they want to clean up their environment. And they see this as a real strategic industry and they’re well on their way to achieving that. Now, after that, you can chart it. I mean, it could just keep going. So I really think we’ve passed an inflection point.
Carl Delfeld [00:14:49] So let’s look at a company, QuantumScape (QS). Some of you may have known know the stock, it came public through us back and we’ll get to the chart in a moment. But this stock really took off. It went to considerably over one hundred dollars. And since then, it’s pulled back quite sharply. We’ll talk a little bit more why that happened and how you should look at the stock right now. But let me tell you a little bit about the company. So most EV batteries are what they call lithium ion cobalt batteries. And the chemistry behind them is quite fluid, and there’s literally hundreds of companies trying to improve the batteries because this is what you really need to bring the cost of these EVs down and to really bump those numbers I talked about earlier up. So in a battery, you’re looking for cost. You’re looking at range. In other words, when you charge the battery, how far can you go before you have to recharge? There’s safety and then there’s charge times. How fast, how long does it take to recharge the battery? Those are the four key areas. So QuantumScape is basically trying to revolutionize the business, the battery business, by developing a solid state battery. Now, QuantumScape has a lot of smart people behind it. Bill Gates is an investor. John Doerr, who you might know is the silicon of famous Silicon Valley investor who invested in Google in the early days. Their investors and most importantly, Volkswagen, which is arguably the largest automaker in the world, has invested three hundred million dollars and has a 20 percent equity stake in the company. And VW, by the way, is the biggest EV maker in the world, and their sales were up 200 percent in 2020, but QuantumScape is a pre- revenue company. It’s developing this technology, but a prototype won’t be ready until 2022. So the idea is with a solid state battery, for example, the range could go to 400 to 500 miles, which is quite a jump from where it is now and the charge time - a battery could be 80 percent charge in 15 minutes, and I think the Tesla supercharger I, I don’t know, I don’t want a Tesla, but I believe that’s about twice as fast as the Tesla supercharger right now. So it would be quite a jump. And of course, Volkswagen hopes to use this technology for its own EV architecture, but of course, it also could be used for other automakers as well. So this is one of those stocks that you have to kind of look out a bit. The stock - Oh, I’m sorry. I should have had this up. Sorry. I apologize. So this is sort of some of the stuff I’ve already been talking about. So you see here, QuantumScape stock climbed in late 2020 to hundred fourteen. Now it’s at twenty seven. And so it’s kind of a judgment call, I’ll I’ll be honest with you, I bought it in the high 40s and I hold it. I’m holding on to it. I think this is, you know, who knows where the floor might be. It’s a judgment call, but you can move incrementally, slowly. You know, this is, again, from a technology point of view, a pretty aggressive play. But I think it’s something well worth having a small stake in your portfolio. If you’re extremely conservative, you might just want to watch it right now. So that’s QuantumScape. Oh, by the way, I just want to mention I mentioned the stock’s at twenty seven, and I just want to mention that in terms of big brokerage companies, in terms of price targets, Goldman Sachs has a thirty three price target for QuantumScape. Morgan Stanley, very aggressive, has a seventy dollar target. And Robert Baird, the firm I used to work for, has a thirty six dollars target. So it’s very hard to value these pre revenue companies. But that’s that’s where it sits right now. And there’s the chart, as you can see, quite a sharp rise and then kind of a staggered down. So from a technical point of view, I mean, it doesn’t look that terrific, but I tend to like charts like this to to some degree. But again, move slowly, incrementally.
Carl Delfeld [00:20:05] OK, there’s the White House and now we’re headed to the power stock number two, which is MP Materials. Now MP Materials is a mining and processing company of rare earth. They have a mine in Mountain Pass, California. Some of you may remember a company called Molycorp which was based in Denver, which owned Mountain Pass, which made a series of blunders causing it to basically slide into bankruptcy. MP Materials is basically two private equity groups that that basically bought it out of Chapter 11 and the company is basically has a monopoly on the production of rare earth, what I call rare earth concentrate. Now, rare earths are in the news because eighty five percent of rare earth production is done by China. They’re basically the king of rare earths. The US used to have the lead in rare earth and then after Molycorp basically went down, China over the last two decades has steadily improved its lead. So rare earths are the 17 elements at the bottom of the periodic chart. They’re very important in technology. Sometimes they refer to them as technology metals because they’re sort of the secret ingredients. They make things. They have magnetic properties that make technology work faster. They make like super alloys stronger. They make them more resilient, lighter. And in particular, they’re very important in making what’s called permanent magnets. Permanent magnets are in so many different. There’s permanent magnets are in so many different products. And for example, your iPhone, if you have an iPhone, it probably has seven or eight rare earths in it. An EV, electric vehicle, it’s motor has probably three pounds of permanent magnet rare earths in it. So you’re projecting out over time if EVs, wind turbines, clean tech in general. But technology in general really relies on rare earths. And Mountain Pass is our only mine. But believe it or not, there’s a Chinese company that owns nine percent of Mountain Pass called Shenghe, and that’s a refinery in rare earths refinery in China. And so now Mountain Pass is shipping what we call rare earth concentrate to China for processing. So technically, we really don’t produce any rare earths, but I don’t know how how we let that happen. So what MP Materials is trying to do is refine its own rare earths, and so they have a program underway right now where they’re attempting to do that and I believe by the end of next year, they hope to be able to refine the rare earth concentrate in the United States. So rare earths would be available here. Now, Mountain Pass again became public through a SPAC and went from 10 to, I believe the high was forty six. I’ll have the chart up in a moment, since then it’s come back and by coincidence it’s trading at twenty seven, the same as QuantumScape. So this is a US monopoly play. And I think, you know, again, where is this going to end up? I mean, you’ve taken some of the price risk out of it, obviously going from forty six to twenty seven. Where where would be the the bottom? I don’t know. It seems to be stabilizing a bit for me. Sort of a bottom in the mid 20s. So again, similar to QuantumScape, I would either watch it if you’re very conservative or move incrementally. And of course if you’re a very aggressive investor, I think this is a good entry point. So rare earths, you’re going to say in the news now, the other the other thing about rare earths is that given the US China rivalry, which I described earlier, which I believe will intensify in the decade, you know, there’s always the possibility that China could hold back on exporting rare earths to the rest of the world, which would put Japanese, Korean, American, European tech companies in a real bind and it could cause a real spike in rare earth prices. So in a way, I see MP as a hedge on geopolitica, China risk. Call it what you may. And so I think that that might be a useful thing given given the the state of US China relations going forward. And in rare earths is an excellent play in climate change, changing clean tech as well. So that’s MP.
Carl Delfeld [00:25:41] This is a chart just showing what I described earlier. So this chart shows where EV sales could go. Remember, I talked about 2025, the 15 million and then the projections going forward? Well, you can see by right around 2030, EVs alone could consume all the NdPr - Neodymium and Praseodymium, which is a rare Earth combo which is key to those permanent magnets and the motors EV motors I mentioned earlier. So in other words, EVs alone could absorb all the rare earths alone, leaving nothing for anything else. In other words, showing that the demand could easily outstrip supply, which you would think would lead to higher prices. So this is why.
Carl Delfeld [00:26:43] Now there’s one other company I mentioned. Which I’ve recommended through the Explorer. And that’s Lynas, L-Y-N-A-S. That’s an Australian company. And that has about a 15 percent market share in rare earth, so that’s the only big alternative to China right now. And that trades on the I believe, the OTC, not good liquidity, it’s probably better to buy it in Australia on the Australian stock market, but that’s another one. Now, that stock has really done well over the last year, but I have recommended in the past. So I’d be a little bit careful jumping into that one right now. But I just wanted to mention that’s another alternative to MP Partners. Here’s another slide of what I mentioned before, showing how China has in the last, well, 20, 30 years grown to dominate rare earth. And here’s the chart. You can see a sharp rise and then a pretty significant pullback.
Carl Delfeld [00:28:06] OK, on to semiconductors. So Taiwan Semiconductor, you know, semiconductors are all in the news because a little bit like rare earths, they’re in everything. You might think of them as the brains in our technology world - from your car, just about everything you can think of that’s technical of nature, computer, any kind of computer related product has quite a bit of semiconductors. Now, there’s different sorts of semiconductors of course. There’s the ones, the generic ones that are used in all sorts of things. And then there’s the ones that are premium or at the very top end of performance. And in all the companies, semiconductor companies, they all have their own strategy. Now, Taiwan Semiconductor is the king of semiconductors. It started and believe it or not, it’s only been around since like 1986 when Taiwan Sovereign Wealth Fund did a deal with Philips, the Dutch electronics company. And they start they basically started this from scratch. 1986. And it’s grown leaps and bounds to now it dominates semiconductor production. You see different numbers but it has a majority, it makes the majority of the semiconductor chips that are made in the world. And I’ve seen numbers as high as eighty four percent market share for the very, very high performance chips. This is a very capital intensive business. For example, Taiwan Semiconductor plans to spend one hundred billion dollars in capital investments over the next three years to keep its lead. Now, semiconductors is another industry, unfortunately, where the US used to lead. You remember Intel, Intel stock is struggling because it’s falling behind in terms of technology. It’s really the only big American Semiconductor firm that that both designs and manufactures or what they call fabricates its own chips. But the stock has as if you own any stock, you felt the pain as it’s pulled back, primarily because it just failed to keep up. And I can’t explain whether it’s mismanagement, but it’s it’s not keeping up with its competitors. A lot of semiconductor companies that you think of as manufacturers of chips, like, for example, NVIDIA, which has been a great stock AMD. Which has been a great stock, they don’t actually make chips, they just design them and then they send the packet to Taiwan Semiconductor or Samsung and they make the chip. And so it’s a it’s an issue in the US in terms of economic security and people are trying to scramble to figure out ways to solve the problem. But Taiwan Semiconductor is definitely in the lead. Now just to give you an idea of where things are going in. Just one minute. I have a little note here. The amount of chips. Or bits on a chip the size of your thumbnail. In 1990, Samsung had had to lead with sixty four million bits. Believe it or not, on a chip the size of your thumbnail. This year, they’re coming out with one with 16 billion chips. So it’s it’s just amazing the constant improvement. And that’s the only way you stay ahead is to pour huge amounts of money to stay ahead of the competition. Now, China is behind. This is one of the areas that they’re most sensitive to because they’ve fallen behind, because it’s so hard to catch up. So they’re scrambling to catch up with Samsung, Taiwan Semiconductor and Europe and the US. And they’re they’re also pouring huge amounts of money in trying to develop a competitor. But so far, they’ve been unsuccessful. This market is huge. Globally, four hundred and fifty billion dollars worth of chips were sold last year. And Taiwan Semiconductor accounted for 56 percent of that, they have good margins. And they’re spending big money and they have a huge amount of talent, most of this is done in Taiwan. They have some factories or fabs in China. They have some fabs in Singapore, they have some in the United States as well as Samsung does. So this company, I think, is one of the most strategically important companies in the world. But it’s in Taiwan, which, of course, is in the news because it’s sort of in this tussle between the US and China over maintaining China’s functional independence as a separately functioning, governing country. You can see here, Asia has greatly increased its market share in semiconductor production, whereas the US and Europe has pulled back.
Carl Delfeld [00:34:06] OK, here’s the chart. This one’s a little bit different than the one the previous two. You can see Taiwan Semiconductor in the past is seen as a little bit of a sleepy stock. But now with what’s happening in the world, the tensions in Asia, the US China rivalry, Taiwan rising to the front page, there’s a lot more attention paid to it. And also as its performance has improved in terms of growth, profitability, profit margins. And also, when people realized how important the company is, money has poured into Taiwan Semiconductor and I should add, it’s also poured into the Taiwan stock market or the TAIEX, which is going on quite a run. As you can guess. It’s technology intensive. About 60 percent of the market value of the Taiwan stock market is in technology. And by far, Taiwan Semiconductor is the largest company. Now, it’s pulled back here a little bit. I’m very comfortable entering at this price. It’s like 113, I think, today. But I would look at this as a core technology holding, which I think will do well over time. So those are other ways to play the semiconductors. Of course, Samsung doesn’t trade here. That’s the the only big competitor to Taiwan Semiconductor. You can look at Intel. I mean, Intel is trying to go to the US government for help in terms of government money to help it right the ship and become more competitive. But Intel is also talking about shifting some of its production of chips from Intel doing it or one of its fabs to actually selling the package to Taiwan Semiconductor like everybody else as well. So that tells you something. But Intel could could come back and then the developers are all doing well. And that’s the irony, the real irony of the business, and this is why governments get involved in semiconductors, is that, you know, they’re very capital intensive. And so most investors shy away from them because it’s a lower return than you can get, for example, then just developing the chips. So NVIDIA doesn’t have to worry about having spending 30, 40 billion dollars to build a fabrication plant. They could just ship their design to Taiwan Semiconductor. But most countries wouldn’t be comfortable with that, right? They want to control. They want to make sure that their companies that their defense industry has access to semiconductor chips, so therefore they find a way to make sure that it stays home, whereas the US, for good or bad, takes the market approach, which sometimes works but sometimes doesn’t work. So these power stocks are are are interesting for that point alone. So, Chris, I think we’ll will wrap it up here and I’ll turn it over to you and hopefully some questions.
Chris Preston [00:37:43] Yeah. Thanks, Carl. Me give you a minute to catch your breath before we open it up to questions. And I see we’ve got a few rolling in, but just wanted to go through some housekeeping. If you like what you heard from Carl so far today and interest in signing up for his Cabot Explorer advisory, we have a special introductory offer reserved exclusively for listeners of today’s webinar - it’s just one dollar for the first 30 days. And what you get in return is a monthly subscription to Cabot Explorer, weekly updates every Thursday alerting you to new developments, twenty-four seven online access to the exclusive member website and analyst archives, premium special reports that provide ongoing investment, education, research and, of course, direct access to Carl to answer your questions. And again, if you’re listening to today’s webinar, it’s just one dollar for the first 30 days so you can act now by visiting CabotWealth.com/webinarspecial to receive your special introductory offer. Now, let’s get to your questions. Carl, if you don’t mind just advance to the next slide.
Chris Preston [00:38:57] Let’s start with one from Dylan. Dylan says, “Good evening, Carl, from the U.K. Thank you for the insightful webinar today. My question is regarding the battery technology plays. Are there any other companies that you have had time to research and look into in depth, alongside QuantumScape, possibly other stocks to keep an eye on in this space?”
Carl Delfeld [00:39:20] Well, the key the key players. Thank you. Thank you for the question. The key players, there’s so many there’s so many different companies working on it. So the chemistry is so fluid. But I will tell you that the three leaders are CATL, which is a Chinese company. I don’t even know if it’s listed. It’s probably a state owned company. It may or may not be listed. Panasonic is another leader in battery technology, and the third would be LG, which is a Korean company. Now there’s a lot of smaller companies, but. You know, I’ll take that I’ll take that question to heart and in see if off the top of my head, I don’t have an investment idea for you, but let me let me do some research and think about it. I think that’s a good idea for an upcoming issue and recommendation.
Chris Preston [00:40:29] OK, question from Rick, Rick asks, “Does Canada have any rare earth mining?”
Carl Delfeld [00:40:38] Yes, Canada does have some rare earth miners, some junior miners, what we call junior miners, and there’s some potential rare earths. But here’s here’s it’s so I. I don’t have a name for you. I know there’s a number of mines in Canada where they’re looking at developing more. So so the key question is, the rare earths are sort of everywhere, but what you really need in a rare earth, mine is a certain concentration. Right. So it’s got to be you know, I just throw out a number seven, eight percent rare earths and then within rare earths, I mentioned there’s 17 of them, but there’s four or five of them that are really, really important. So that’s the way you have to look at these mines. But I just caution you to be a little bit careful with whether it’s Canadian or other mining company, because there’s there’s a lot of companies that are trying to get on the rare earth bandwagon. Some are even changing their name from ABC mine to Rare Earths Canada or something like that. So you have to be a little bit wary. But I but there are some what we call junior miners, meaning, you know, they’re not actually producing rare earth ore but they have a mine that they want to develop. So just be a little bit careful with that. And the other point I would make is that it’s one thing to get the ore out of the ground and crush it. It’s another thing to take it to the next step, which is to extract the rare earths into what we call a concentrate. Think of it like a cocktail with all 17 rare earths in it. And then the next step is even more difficult and environmentally problematic, and that is taking each of these 17 rare earth oxides out. So and that’s why almost all of this stuff right now, except for the Lynas, which does the refining in Malaysia, it all goes back to China. So there are some companies, smaller companies working on rare earth refining technology, which I find very exciting. But none of them, none of them are publicly traded.
Chris Preston [00:42:59] OK, question from Tony, it’s another one related to QunatumScape, “I just heard this potential deal between QuantumScape and Ford. Is that something you’ve heard about and what are your thoughts?”
Carl Delfeld [00:43:11] Well, that would be interesting, because people people tend to think because Volkswagen invested I think it’s like three hundred million dollars. In QuantumScape, so they have a big market share, they do not have a like a monopoly on the technology, so they probably will have the lead, right? In terms of incorporating QuantumScape technology into Volkswagen cars. But there’s no reason that Ford or someone else could also get in on the technology. And I would not be surprised at all because the US is a little bit behind. And so. Ford certainly has the capital. And I believe wasn’t it just yesterday that President Biden visited Ford and drove that pickup truck, which looks quite interesting? So I think I think definitely see if you can if you can get the right battery technology, that’s really the most important thing. So I wouldn’t be surprised at all.
Chris Preston [00:44:22] All right, I think we have time for one or two more questions. Question about SPACs, special purpose acquisition corporations or companies, “They took off. Now they’re pulling back. What do you what do you think investors should do with them now and and what’s happening to them?”
Carl Delfeld [00:44:40] OK, so I’ve had a few SPACs in the portfolio. But one thing I want to make clear, you don’t you shouldn’t buy a SPAC or not buy a SPAC because it’s a SPAC. In other words, a SPAC is really just a way for a company to go public. And basically what happens really briefly is someone forms a SPAC means a group of investors form a SPAC, which is a special acquisition company. And then they go out and they have within a certain time they have to find a target company to acquire. And so they find a private company. For example, in our case today, QuantumScape and MP Partners, and then they basically negotiate a deal to buy that company. And then the company goes public. As QuantumScape and Mountain Pass has. Now, the thing is that because of the publicity about and the fact that some of them came out public in a very robust way, in other words, just jumping in price, suddenly everybody thought that, you know, you just invest in a SPAC and it’s going to go up. But the key is if you just invest in the spec, all you’re betting on is the people behind this back. You don’t even know what company they’re going to buy. So I would be relatively cautious. Now, the problem is some people have very good record at buying and selling companies. So that’s where the money went. But, you know, you’re really it’s a blind you’re making a blind bet. For the most part, I have tried to wait to see what the target company is and then you can decide whether to invest or not. So just basically be careful. Don’t don’t buy a SPAC just because it’s a SPAC and don’t sell a SPAC. Look at the underlying company and look at the valuation of that company and the reason they’ve come back recently is that I think there were some bad deals done and these companies overpaid for the company they acquired.
Chris Preston [00:46:52] OK, I think that’s a that’s a good one to end on. Thanks. Thanks, Carl. And thanks for for everyone for joining us today. We’ll be back next month on Thursday, June 17th, with a webinar titled Two Contrarian Stocks for a Momentum World, hosted by Bruce Kaser, chief analyst of our Cabot Turnaround Letter and Cabot Undervalued Stocks Advisor. So come back next month for that presentation, again that’ll be Thursday, June 17th, at 2:00 p.m. Eastern, just like today. And also, if you are interested in signing up for Carl’s Cabot Explorer advisory again, that place to sign up is CabotWealth.com/webinarspecial. That does it for us. For Carl Delfeld and the entire Cabot Wealth Network team. I’m Chris Preston and we’ll see you next time.