It has been a momentous year for electric vehicles (EVs). Tesla (NASDAQ:TSLA) began delivery of its Model Y, Ford's (NYSE:F) Mustang Mach-E will start showing up late in 2020, and a slew of other electric and hybrid models have started popping up at other automakers. And let's not forget booming EV stocks. As of this writing, Tesla shares are up 360% 2020 to-date alone, and Nikola Motors (NASDAQ:NKLA) made its debut as well (by way of merger with SPAC VectoIQ) and is up over 260% on the year -- not to mention myriad other small stocks all vying for a slice of the EV future.

But for investors who want to bet on the migration to a greener mode of transportation, chasing sky-high EV manufacturer stocks (some with a more than uncertain outlook) need not be the game. Three alternatives worth putting on your watch list are Ferrari (NYSE:RACE), Texas Instruments (NASDAQ:TXN), and Intel (NASDAQ:INTC).

A man in a suit sitting in a car receiving keys from someone off screen.

Image source: Getty Images.

Super luxury gets green racing stripes

Okay, I'm cheating a little with this first pick, but hear me out. Ferrari is not an EV automaker at this juncture in time. Besides the obvious financial prerequisites, Ferrari supercars are purchased for the exclusivity and performance, not for environmental reasons. And CEO Louis Camilleri has alluded to an all-electric car likely not coming to market until after 2025, citing needed battery technology advances as holding back a more aggressive timeline.  

Instead, Ferrari is focusing on hybridization, with engineering innovation coming from its work on its Formula 1 hybrid system. The latest iteration: The SF90 Stradale, the first-ever plug-in hybrid from the Italian automaker and the most powerful street-legal Ferrari to date, with 986 horsepower. The SF90 is the next step in Ferrari's plans to have roughly 60% of its supercar line-up hybrid by 2022.

Out of all the automakers out there, why pick Ferrari for an EV stock? For one, race track innovation has a history of eventually trickling down to everyday drivers, and Ferrari's work on hybrid vehicle engineering (and eventually an all-electric vehicle) could do the same. As for the case for owning a slice of the company itself, Ferrari -- much like Tesla -- is not your typical automaker. Typical operating profit margins for an auto manufacturer dwell in the low single-digit range. Not Ferrari. Brand power and its ultra-wealthy customers make this a durable company that boasts a 21% operating profit margin over the last 12 months. 

RACE Operating Margin (TTM) Chart

Data by YCharts.

And even uncertain times like now have done little to dent Ferrari's financial strength. Cash and equivalents on the books at the end of June 2020 was 1.11 billion Euros ($1.32 billion using exchange rates on Sept. 10, 2020), and debt was 2.76 billion Euros ($3.27 billion). For a legacy automaker, this qualifies as quite nimble, a fitting balance sheet for the Ferrari badge -- and giving the company the ability to continuously innovate on the technological front and keep its customers coming back for more.

Forget the end product -- buy the components

Technology has done a great deal to improve the driving experience, from increased safety to reliability and fuel economy. And at the heart of auto technology lies the semiconductor. Many chip types have become highly commoditized staples of the auto manufacturing industry, but that hasn't stopped it from gobbling up a huge slice of a car's cost. According to researcher Deloitte, some 40% of a car's production cost is electronic components (up from 27% a decade ago). And thanks to vehicle electrification and other technology, that percentage of production cost could rise to 45% or higher in the next 10 years.

That makes tech hardware a great place to invest if you see EVs as the future of transportation. And Texas Instruments is a good place to start. TI supplies all sorts of electrical components and chips to the auto industry -- including hybrid and electric powertrain systems. 21% of the chipmaker's 2019 revenue came from the industry.

Granted, that hasn't been a great end market this year. Because of COVID-19 and the ensuing recession, auto sales have taken a hit. TI, for its part, has reported a 10% decline in total sales over the last trailing 12 months, which includes a 12% year-over-year revenue decline during the second quarter of 2020 to $3.24 billion. However, this remains a highly profitable semiconductor stock. Free cash flow (revenue less cash operating and capital expenses) is down only 4% in the last 12 months to $5.71 billion -- good for a free cash flow margin of 42%.  

TI uses its highly lucrative margins to improve its chip designs and manufacturing process, as well as pay a dividend (currently yielding 2.6%) and share repurchases. The stock trades for 22.5 times trailing 12-month free cash flow, but the premium is well-earned. As the economy (and auto industry) recovers and technology like electrification becomes a larger slice of the auto industry pie, Texas Instruments stands to benefit.

Even "chipzilla" is in on the action

Texas Instruments isn't the only semiconductor stock that could benefit from EVs. Intel, the world's largest semiconductor pure-play by revenue, has a hand in an electrified future. It supplies everything from processors for use in charging stations to field programmable gate arrays (FPGAs) that can be used in multiple powertrain applications. It also has a hand in the adjacent advanced driver assist and autonomous vehicle systems via its Mobileye subsidiary.

However, unlike Texas Instruments -- which is close to trading at all-time highs -- Intel's stock has fallen on hard times as of late. Due to delays in its next-gen chip manufacturing architecture and constant worry that small incumbents are taking market share, Intel shares are down 18% so far in 2020 as of this writing. That's in spite of reporting a year-over-year 20% increase in Q2 revenue to $19.7 billion.  

The rub is with the full-year outlook, which calls for revenue to be up "only" 4% to $75 billion, and free cash flow to come in at $17.5 billion (up from $16.9 billion in 2019). The drop in Intel's stock looks overdone to me, leaving shares trading for a lowly 9.7 times trailing 12-month free cash flow and a dividend that yields 2.7% a year.

Short-term worry aside, Intel looks like one cheap stock right now. It's just one growth lever at its disposal, but automotive technology plays in the chip giant's favor. For investors looking to play the coming EV boom, Intel most certainly belongs in the conversation.