There are two ways to invest in driverless car stocks at the moment: buy shares in autonomous vehicle makers, or buy shares in companies making the technology automakers have to use in their vehicles.
While the first may seem like a more direct play, the latter will be more profitable. Auto manufacturers, like they do now, will battle each other for customers. Meanwhile, there will only be a handful of companies that car makers trust with the advanced technology to make autonomous vehicles operate safely.
And Money Morning Director of Technology & Venture Capital Research Michael A. Robinson has pinpointed a leading manufacturer in self-driving car technology.
Since he last spoke about this company on March 21, its stock price has already climbed 6.14%. In comparison, the Dow Jones Industrial Average is up just 0.5% during that time.
And that's just the start for this driverless car stock...
"At the time, we considered this storied auto-supply firm a great stock to own because it's looking at a lot of growth in an unstoppable tech trend. And I went on to predict that we'd see 30% gains over the next 24 to 28 months. We're already well on our way," Robinson said on May 22.
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This investment gives tech investors a ground-floor window to watch the driverless vehicle mega-trend take shape.
The Future of Self-Driving Cars
"And it will be a very profitable view for years and years to come," Robinson said.
According to a 2015 Boston Consulting Group report, the autonomous car market could be worth $42 billion by 2025. And this stock is perfectly positioned to profit from this industry's massive growth.
Here's how Money Morning readers can profit before this self-driving car stock provides its shareholders with market-beating gains...
How to Cash In on the Future $42 Billion Driverless Car Market
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Delphi Automotive Plc. (NYSE: DLPH) designs and manufactures vehicle components, as well as provides electrical and electronic technology solutions.
And its Electrical/Electronic Architecture division could be the biggest catalyst for the stock.
Delphi has acquired 11 companies since 2012 that specialize in electrical architecture and software. This electrical architecture is required for autonomous vehicles and connected technology in cars to work.
The Electrical/Electronic Architecture division made it possible for an Audi SQ5 SUV to begin a 3,500-mile trip from San Francisco to New York City without a driver. There was only one person onboard to make observations and monitor the technology.
The driverless car was able to merge with highway traffic, navigate four-way intersections, and maneuver around pedestrians and bicyclists.
It cost Delphi more than $1 million to equip the car with sensors and software, but the company was glad to do it. Delphi can boast that it outfitted the vehicle that made the first driverless auto crossing of the United States.
Delphi CEO Kevin Clark told USA Today in a May 4 report that Delphi is "the only supplier in the industry that has both the electrical architecture that controls computing power, controls signal distribution, and the software capability to develop the systems for autonomous driving."
And Clark just made an aggressive move to ensure his company stays at the forefront of the self-driving car market.
On May 3, Delphi announced its plans to spin off its $4.5 billion Powertrain Systems division into a separate, publicly traded company by May 2018.
"The breakup will make it possible for Wall Street to more highly value Delphi's core high-tech unit - which has developed industry-leading artificial intelligence computing platforms, self-driving systems, and anti-collision technologies. So we're getting a two-for-one here: a winner in the 'car of the future' and - with the Powertrain spin-off - a stake in the 'car of the now.' That's okay, because 95% of the world's cars will still run on gasoline through 2025," Robinson said.
Shareholders will receive stock in both companies in the tax-free deal, according to USA Today.
"We really like spin-offs here - because they work. A Lehman Bros. study found that spin-off companies beat the market by 40% in the first two years. And a Penn State University study found a three-year return of 76% - enough to beat the market by 31%," Robinson said.
On top of the 30% gains in the next 24 to 28 months that Robinson predicted in March 2017, the company also pays its shareholders a dividend.
While it's modest at $0.29 (a yield of 1.34%), it's an additional bonus for tech investors. Generally, tech companies reinvest profits back into the business and don't pay dividends. For example, Tesla Inc. (Nasdaq: TSLA) doesn't pay shareholders a dividend.
So not only is DLPH a growth stock, it also provides shareholders with more money through dividend payouts.
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