After buying a few too many ice cream cones this summer, I'm back to pinching my pennies and working to build up a cash position I can use to buy some new stocks. There are lots of tickers that I'd love to add to my portfolio, but three prominent names on my radar are Rivian (RIVN 6.10%), Enphase Energy (ENPH 3.80%), and QuantumScape (QS 5.69%).
I imagine it'll take me some time before I have the capital to go shopping for stocks, but if a $1,000 check from a long-lost uncle showed up in the mail today, this is how I'd allot it toward these three growth stocks.
1. Rivian
While electric cars have become an increasingly common sight on America's highways and byways, electric pickup trucks are far less frequently seen. Rivian, however, is working to change that situation.
In addition to its electric vehicle (EV) manufacturing facility in Illinois, Rivian is developing a production plant in Georgia. There has been some opposition to the manufacturing facility in the Peach State, but its road to development became clearer this summer after clearing a legal hurdle.
Rivian expects its vehicle production will accelerate in 2023. While the company produced 24,337 vehicles in 2022, it forecasts vehicle production of 52,000 in 2023. Once the manufacturing facility in Georgia commences operations, investors can expect considerably more electric pickup trucks to appear on the road as the plant is expected to have an annual production capacity of 400,000 vehicles.
Although there's some competition in the electric pickup space -- including the Ford F-150 Lightning and the Tesla Cybertruck -- there's bound to be more than one winner in that segment, and Rivian has garnered high praise from critics. Car and Driver magazine, for example, dubbed the Rivian R1T "one of the most capable EVs ever."
2. Enphase Energy
A name familiar to those bullish on the future of residential solar power and energy management solutions is Enphase Energy. This company has come a long way from its origins as a manufacturer of microinverters -- hardware that converts the DC (direct current) generated by a solar panel into the AC (alternating current) that we use to supply our electricity needs. Today, Enphase Energy offers homeowners sophisticated energy management solutions that include battery storage and EV charging to complement the solar panels on their roofs.
For some time, Enphase Energy's stock had traded at a high valuation. Its five-year average price-to-operating-cash-flow multiple is about 70. However, its shares have retreated to a much more reasonable valuation of 18.6.
Skeptics contend that the Sun has set on Enphase's growth prospects, but that seems to be a short-sighted view as the company continually innovates. In 2024, Enphase expects to launch its fourth-generation battery and an improved microinverter, the IQ9. These advancements bode well for the company as markets continue to grow.
The solar market in the United States is expected to grow at an average annual rate of 6% over the next five years, while the residential solar market in Europe is forecast to grow at a compound annual rate of 9.6% from 2022 through 2027.
3. QuantumScape
Another EV-related company that has appeared on my radar recently is solid-state battery maker QuantumScape, which is developing a cutting-edge battery for EVs that is safer and can recharge quicker than traditional lithium-ion batteries.
Although QuantumScape has attracted considerable enthusiasm from some investors, others question whether the company will be able to manufacture solid-state batteries at scale. While the company's not there yet, it has made strides toward achieving this feat that offer encouragement. After shipping its high cathode-loading unit cells to automakers this summer, QuantumScape believes it can start production by the end of 2023.
The support that QuantumScape has received from automakers is another positive sign. Volkswagen has been a longtime partner and is currently QuantumScape's largest shareholder. Additionally, QuantumScape has signed agreements with six original equipment manufacturers.
How I'd cut up the cake
I'm optimistic that Rivian, Enphase, and QuantumScape will climb higher in the coming years, but I'd still take a cautious tack if I had to split $1,000 between these three investments. First, I'd allocate $500 to Enphase Energy. The company has steadily increased its free cash flow over the past five years, helping to put it on the most financially sound footing of these three stocks.
With regards to Rivian and QuantumScape, I'd deploy $300 and $200, respectively. Rivian has vehicles on the road and is making strong progress toward growing its shareholder value. Although QuantumScape has made progress, it's still not generating revenue, so I'd want to keep that as my smallest slice of this $1,000 cake.
