Robots are slowly taking over the world, for better or worse.
Surgical robots are already performing surgeries on soft tissue, like intestines, with greater proficiency than human surgeons. Airbus is developing humanoid robots that will work with human employees to build aircrafts, working inside the aircraft and on assembly lines.
Then there’s the news that Alphabet’s (NASDAQ: GOOGL) Google division may launch a full-blown driverless taxi service for its employees later this year. Self-driving cars are the future, and they might be closer to reality than many expect – possibly by year-end.
The self-driving car market has gone from 0-to-60 relatively quickly. Despite some hesitation by drivers, to whom turning the wheel over to a robot sounds frightening, the benefits will ultimately win people over.
Autonomous driving will free up time while traveling for other things like watching movies or catching up on email. It will also help cut down on vehicle deaths and traffic congestion – some 90% of car crashes are due to human error, per safety regulators.
We now have a race to build self-driving cars and get them to market. Everyone wants in on the action, including automakers, auto-parts companies and big tech firms.
Soon enough, we’ll have a race to invest in companies at the forefront of the self-driving boom. But instead of picking through direct driverless tech companies that provide sensors and such, we’re taking the safer bet: automakers.
The beauty of playing self-driving cars with automakers is that even if the self-driving car movement goes bust – or takes longer than expected to hit mass scale – they have a sound business to fall back on.
That’s right, selling cars is a good business to be in these days. Last month was the best April ever for U.S. auto sales, topping April 2005. The annual auto sales pace is up to 17.4 million vehicles, close to the all-time record of 17.5 million set last year.
With that in mind, here are the top two self-driving car investments to play the driverless movement:
Top Self-Driving Car Stock No. 1: General Motors (NYSE: GM)
General Motors, which announced a $500 million investment in ride-sharing company Lyft earlier this year, has taken a big step toward driverless cars. Last week, GM and Lyft announced a plan to roll out a fleet of self-driving Chevy Bolt vehicles in a select U.S. city within a year. Also, recall that GM bought Cruise Automation, a driverless car tech company, for $1 billion in March.
GM was a big winner at the 2016 Consumer Electronics Show when it hinted at plans to work with Lyft to make self-driving cars “for rent.” Basically, that means ride sharing without the driver. With the latest initiative, GM’s will tackle two very hot markets – driverless cars and ride sharing.
Lest we forget General Motors’ hefty dividend yield, with GM shares falling 10% in 2016, its dividend yield is up to 5%.
Top Self-Driving Car Stock No. 2: Fiat Chrysler Automobiles (NYSE: FCAU)
Google has been one of the longest promoters of self-driving cars, and it took the next step to bringing driverless cars to the masses this month. Google inked its first deal with a major car maker, Fiat Chrysler, which includes building a fleet of self-driving cars.
The two companies will build and test 100 driverless Chrysler Pacifica vehicles, with plans to make self-driving cars publicly available by 2020. This move pushes Fiat to the front of the pack among automakers when it comes to exposure to the self-driving movement.
And what better partner than Google, which briefly passed Apple (NASDAQ: AAPL) as the largest public company in the world last week. It has the wherewithal and the resources to make a quick and mass rollout of driverless vehicles a reality.
Fiat shares have fallen 15% since spinning off Ferrari (NYSE: RACE) in January, making it the cheapest major automaker around. The U.K.-based maker of brands like Jeep and Chrysler trades at just 4.5 times next year’s earnings estimates. Meanwhile, Tesla Motors (NASDAQ: TSLA) is trading at more than 60 times forward earnings.
Fiat and GM aren’t as exciting as Tesla, but they also don’t come with nearly as much risk. GM offers a prodigious dividend and is the one of the world’s largest automakers. Fiat has been a rumored buyout target, actively trying to sell itself, and could get renewed interest given its new Google partnership.
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