By David Forest, editor, Strategic Trader
We got game-changing news in the electric vehicle (EV) space this week…
If you have investments in EV stocks – or if you’re thinking about it – you need to know this stuff.
Most investors haven’t connected the dots. But if we follow the money, this week’s news adds up to billions, maybe even trillions, in potential profits.
The announcement came from one of America’s oldest companies. It’s a firm that’s been in business for 118 years. It was founded in 1903, the year the first modern World Series was won by the Boston Americans (now the Boston Red Sox).
The Electric Vehicle Space Is Accelerating
I’m talking about Ford.
The iconic carmaker dropped some big news yesterday. Ford announced it’s splitting electric vehicles and regular cars into two separate businesses.
Both EVs and ICEs (internal combustion engines) will still run under Ford’s NYSE-listed parent company… for now.
But the split tells us something big is coming down the pipe for Ford’s EV business.
Ford dicing up the EV silo sets the stage for a spinout. It’s the first logical step in preparing “Ford EV” to run on its own.
An EV spinout makes sense for Ford. Right now, Ford trades at a price-to-earnings (P/E) ratio of 4x. That means its market value is 4 times higher than its yearly profits.
Compare that to a pure EV firm like Tesla. That EV giant trades at a P/E ratio of 175x. Investors love the stock so much, they’ve driven its valuation up over 100 times its yearly profits.
That’s put Tesla in a commanding position. The company raises cash easily, without much dilution. Tesla’s grown like crazy the last several years, in big part due to easily accessing billions in investor dough.
Could Ford do the same?
Ford Is Gunning for Tesla’s Market Share
The idea seems crazy. Ford’s market value is about $70 billion right now. The company’s EV business makes up a fraction of profits – less than 10%.
That means the value of Ford’s EV division is probably no more than $5 billion. At least, that’s the valuation it’s getting while locked up inside Ford’s parent company.
Now imagine Ford spinning out the EV business. As a pure EV play, could Ford Electric trade at values like Tesla?
That’s an intriguing question… Tesla’s current market value is over $884 billion. Ford’s EV business sits at about 1% of that.
The implication: as a spinout, Ford’s EV business could rocket 100 times higher. That’d be a 10,000% gain.
In other words, a $10,000 investment here would turn into a cool $1 million.
Again, these numbers sound insane. But one recent spinout shows it’s not crazy at all…
It’s Happened Before, and It Will Happen Again
As I discussed a few weeks ago, South Korea recently saw a massive EV spinout. Giant conglomerate LG shifted its electric vehicle battery business into a new company.
LG enjoys a $33 billion market valuation. Its EV battery business brought in about 40% of revenues.
That suggests the EV business should be worth about $13 billion by itself.
But guess what happened after the EV spinout?
The new battery company rocketed much higher than that.
The new company – called LG Energy Solutions – trades at a valuation of $85 billion. The spinout multiplied the EV company’s value by 650%.
In fact, LG’s battery spinout is worth more than its parent company. Much more.
That’s an incredible result. It shows the power of spinouts. You can bet everyone on Wall Street – and all the executives at Ford – took notice.
A Ford spinout would be larger than LG. The LG spinout was mostly sold to Korean investors. But a spinout from an industry legend like Ford would get deeper interest. Think of investors all over the world lining up for a piece…
More money flowing in could mean higher multiples. You can bet analysts will use Tesla as a benchmark. It’s not impossible that Ford EV could trade up to Tesla-like valuations.
If so, our next 100-bagger might come from one of the oldest stocks on the market.
And it won’t stop there.
EVs Will Keep on Spinning
A successful spinout like Ford would start a trend. We’ll have bankers scouring America for EV divisions to spin out. A whole new class of pure EV companies will be born, nearly overnight.
My sources tell me its already happening. Companies with tiny EV divisions are getting pitched for spinouts or takeovers.
This could unlock trillions of dollars in profits. Like with LG, we might see massive new stocks created in the blink of an eye.
However… the biggest money will be made before that happens. Owners of the current “old world” stocks will reap front-row profits.
I’m working on positioning my subscribers in the best ones right now for both my Strategic Trader and Strategic Investor advisories.
This is going to be a bull market for the ages… and Ford just kicked us to the tipping point of a profit explosion.
Keep walking the path,
Editor, Strategic Trader
P.S. Across my core portfolio of EV picks, I’ve already secured my readers an average 867% gain.
But last night, I went live with an urgent profit opportunity to take advantage of this “tipping point” in the EV market…
It’s a way to potentially make 49 years of S&P 500 gains… in just 12 months.
And it only costs $3 to get in.
If you couldn’t attend last night, I urge you to check out the replay right here before it’s taken down.
Don’t miss out. The biggest gains in the EV space are yet to come.