In recent years, Tesla has shaken up the auto industry, demonstrating the viability and commercial success of its luxury Model S sedan and Model X crossover SUV, and proving that an electric car can be fast, fun, sexy, and practical. While the company hasn't really taken a big bite out of global auto sales despite its success so far, it has certainly fired a shot across the bow of the industry, playing a role in the biggest automakers' accelerating development of their own electric vehicles.
Tesla's investors have certainly been rewarded, with shares in the company up a mind-boggling 1,070% in the past five years alone. And while those gains are due in part to investors counting on Tesla's future performance, it's an absolutely remarkable record.
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Looking for the next Tesla? In fairness, it's probably too much to expect a return of nearly 11 times your investment from any stock in such a short period. But if you're looking for market-beating returns from an unexpected and potentially disruptive place, three of our contributing investors have stocks they want you to consider: branchless banking upstart BofI Holding, Inc. (AX -0.20%); solar-panel innovator First Solar, Inc. (FSLR 2.85%); and a surprising cash-burner that may be set for massive profits if its big bet pays off, Northern Dynasty Minerals Ltd. (NAK -11.91%).
Banking is being disrupted, too (and this small bank could be a big winner)
Jason Hall (BofI Holding): There's a lot of talk about the massive shift traditional retail is experiencing, as billions of consumer dollars exit the mall and are spent through e-commerce instead. And while most people think of this as affecting department stores and specialty retailers, Americans are also changing the way they bank, using apps to conduct many of the transactions they used to make in person.
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BofI Holding, which operates totally online, with no branches, is already taking advantage of this shift. Last year, BofI grew deposits 14% to $6.9 billion, loans and leases 16% to $7.4 billion, earnings per share 9%, and book value per share 21%. One of my favorite things about BofI is that the vast majority of its deposits are in checking and savings accounts, at almost 90% of total deposits. These kinds of accounts are far more "sticky" than CDs, which many online banks grow by offering high interest yields, only to lose when customers find a better yield. Transactional accounts such as business and personal checking are far more reliable sources of cash for BofI.
And there's plenty of reason to expect BofI to continue growing at a fast pace. With only $8.5 billion in assets and a market cap less than $1.8 billion at recent prices, the bank is a very small player. Trading for 13.2 times trailing earnings and 2.1 times tangible book value, it's cheap, considering the potential.
Looking a decade into the future, it's a near-certainty there will be fewer physical bank branches open. In other words, more banks will start looking like BofI. That could drive Tesla-like growth for BofI in the years to come.
Somebody has to power all those electric cars
Chuck Saletta (First Solar): Assuming Tesla is successful at bringing electric cars into the mainstream, it will radically change the way power is used in the United States. According to the U.S. Energy Information Agency, transportation consumes nearly a quarter of all energy that Americans use. Switching the way transportation is powered from oil to electricity will put pressure on the already stressed energy grid in the U.S., which gives First Solar an opportunity for tremendous growth.
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First Solar produces some of the lowest-cost-per-watt solar panels in the industry. With its new Series 6 panels on their way to market, it expects to lower the non-panel costs per watt of installing its power-generating capabilities, keeping its total costs competitive in the industry. Sure, it took a substantial profit hit when it restructured around that new series of panels and resulting way of doing business, but the company's underlying financial strength enables it to make that investment in its future.
Even if electric cars don't ever grow much beyond a niche, the relentless march of progress is making solar power cost-competitive with fossil-fuel-based power generation. That gives First Solar and its focus on utility-scale projects an opportunity for growth from base power generation. After all, power plants age and need to be upgraded or replaced, and when bean counters determine that solar is a lower-cost option than coal or natural gas, it expands the opportunity to pick First Solar.
This mine could be one company's Model S
Reuben Gregg Brewer (Northern Dynasty Minerals Ltd.): Tesla's stock bumbled around for a bit while the company was working toward the introduction of its electric vehicles. All that time it was burning cash...something it's still doing, by the way. Northern Dynasty Minerals is in a similar boat, but in a vastly different industry: mining.
Northern Dynasty is working through the complicated process of getting a mine in Alaska, known as the Pebble Project, off the ground. It's burning through cash in the process, since it won't have anything to show for its spending until the project starts producing. The potential is huge, with the company claiming Pebble is the world's largest undeveloped copper and gold mine. Northern Dynasty estimates it holds 57 billion pounds of copper, 70 million ounces of gold, 3.4 billion pounds of molybdenum, and 344 million ounces of silver. Furthermore, it believes that its mining costs for copper could be among the lowest in the world.
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The problem is that production looks to be around seven years away. That means continued losses. But assuming the mine starts producing, revenues and profits should start to flow, without the need to prove out a new technology or develop a following. Since Northern Dynasty will sell commodities, it's hard to put a dollar value on what Pebble would be worth as an operating mine, but based on the size of the opportunity the number is large.
This is not an investment for conservative investors. Building a new mine from the ground up is hard and costly, and there's a risk that the mine never gets built. Commodity prices, meanwhile, are volatile. And the company is likely to keep tapping the capital markets to pay for the project, potentially diluting current shareholders. But when copper, gold, and silver start coming out of the mine, investors could be looking at the company in a very different light, much as they did when Tesla struck it big with the Model S.
