EV and Green Energy Model Portfolio in India | Model Stock Portfolio | Yadnya Investment Academy (Methodology Document)

Albert Einstein once said, “Everything is energy and that’s all there is to it. Match the frequency of the reality you want, and you cannot help but get that reality. It can be no other way. This is not philosophy. This is physics.”

The onus of leaving a greener and cleaner climate for future generations lies with us and what could be a better step than the adoption of Electric Vehicles and Green Energy? Green energy is generated from natural resources, such as sunlight, wind, or water. We expect the electric vehicle and green energy revolution to be accepted and become more advanced over time. This is going to be akin to the popularity and adoption of computers and cell phones.

At the recently concluded COP26, India pledged to reduce its carbon emissions to net zero by the year 2070. India has set a goal to achieve EV sales accounting for 30% of private cars, 70% of commercial vehicles, and 80% of two and three-wheelers by the year 2030.

According to recent research by Accelerated e-Mobility Revolution for India’s Transportation (e-AMRIT) portal in India, only 7,96,000 Electric vehicles have been registered till December 2021, and the installation of 1,800 charging stations in public places. It shows that the country has a long way to go to achieve the recommended ratio.

The Indian budget for 2022 also made a big push towards mainstreaming electric mobility. In addition to boosting charging infrastructure, the Indian budget provided for battery battery-swapping policy, special mobility zones for EVs, ratifying building bylaws, cleantech in public transport, and much more. These programs signal the Indian government’s commitment to growing the EV market.

As a part of thematic investing, we are looking to expand the universe of our portfolio. We have already employed major disruptive themes like future mobility and climate change, in which we have introduced companies engaged in the Electric Vehicles and Green Energy domain. Now, we are hunting some new disruptive themes that are going to drive the next cycle of innovation.

Disruption is a sub-category of thematic investing. By investing in such disruptor companies, the investors can ride on the outsized investment opportunity over the next 10, 20, 30 years. As most of these themes will likely grow for decades, some may experience plateauing growth as their industries mature.

So, let’s position your portfolio for the ideas that are already shaping tomorrow. Structural shifts are transforming how and where money is being invested. Understanding and addressing these changes is crucial. By providing new perspectives, these themes can help us think beyond the traditional ways of classifying investments. These new disruptive themes offer important ways to make sense of and navigate some of the complex forces that will drive tomorrow’s returns. They represent solutions for the future and an action case today.

We have used a proprietary methodology to optimise portfolio allocations with appropriate weights, and diversification across different themes.

Here we are with a portfolio that benefits from the adoption of future disruptive innovations across different industries. The portfolio is based on the next big ideas over the coming decades. We have considered the entire life cycle of Future Mobility which includes companies with products and services in these areas - Commodities, Battery Chemicals, OEMs (2,3,4 wheelers & CV), Automation, Ancillary, Charging Infra and Software.  Here are the different stages in the Electric Vehicle Value chain.

Under the Climate change theme, for Green Energy, we have considered companies engaged in the production, transmission, distribution, exchange, and allied activities of Solar, Wind, Hydrogen, and Natural Gas.

As a part of expanding the universe of this portfolio, we are looking for some new disruptive themes driving the next cycle of innovation.

We have tried to do an in-depth analysis of the stocks in these two themes by providing scores to stocks based on many quantitative and qualitative parameters like PE ratio, PB, Debt to Equity ratio, PEG Ratio, EV/EBITDA, Beta, ROCE, Sales Growth, Profit Growth, Market Share Analysis, Moat and Moat Dynamics scores, Employee Reviews, Management Compensation as a % of Sales, Earnings Quality and many more.

An important factor that has been considered is the obligation of the company towards the theme, so the capital investments committed by these companies as a percentage of their revenue into these themes have played a critical role in the stock selection process.

Investment objective

The aim is to generate long-term returns by investing in a concentrated portfolio of Indian companies in the next big ideas with disruptive themes. The idea is to pick stocks that are performing well and have the potential to grow based on the in-depth FIVE G analysis.

Strategy

This portfolio is meant for seasoned investors with a high-risk appetite with a time horizon of at least 5 years. The stock weights are calculated using their respective scores as per our proprietary FIVE G analysis.

The expected average rate of return from a portfolio is 15-18% over time. In its best year, it might gain 25-30% and in its worst year, it could decline by the same scale.

“Embracing disruption ultimately means investors should consider not just risks – but even so future opportunities”

The growth in disruptive investments has been substantial with increased investor interest and the arrival of next-big ideas. Disruptive companies may shape what the market looks like for years to come. Thematic investing with new disruptive themes may focus on long-term trends that are still developing and in a nascent stage.

Hence, we recommend this portfolio for seasoned equity investors with high-risk appetites who are looking for extra growth and alpha. Such aggressive investors can consider this investment opportunity and become a part of upcoming decade-growth stories.

This chart shows the portfolio’s cumulative performance since inception until the latest month-end. The EV and Green Energy Portfolio is compared against the BSE500 TRI Index’s cumulative returns