Electric cars polarize investor sentiment

Despite the bumpy road affecting manufacturers of electric cars, China has announced aggressive investment in R&D as it seeks to dominate the market, according to The Economist. Last week, shares of BYD Co, the Chinese electric carmaker rose by 46% in its Shenzhen debut, amid speculation it may benefit from Chinese government funding. We look at investor sentiment towards e-mobility related stocks.

There has been much speculation about the driver behind the surge in BYD Co. (HKG:1211) shares following its IPO, despite weak first-quarter earnings and a bearish market. A look at the established Hong Kong listing shows holdings of institutional investors who lend have fallen to annual lows, mirroring the decline in the shares. However, shorts have been covering and have halved their holdings to 2% of total shares outstanding.

Tesla Motors (NASDAQ:TSLA), the manufacturer of the electric Roadster sports car, is a regular feature in our weekly screen of stocks reaching new 52-week highs in short interest. This his risen to 14% of the total shares, which represents almost all the supply of shares that can be borrowed, meaning it would be hard to short more of this stock. This bearish sentiment contrasts with the strong positive sentiment from the long side of the market. Although the share price has increased only incrementally over this year, institutional ownership has doubled.

We created a screen of 20 stocks associated with the electric motor industry, including car manufacturers, component suppliers and makers of lithium batteries. Magna International Inc. (NYSE:MGA) was the only stock to be highlighted as seeing positive sentiment. This Canadian company is a diversified global automotive supplier with a key division that serves hybrid and electric vehicle programs world-wide. Although short interest is stable at 3% of total shares outstanding, institutional investors have more than doubled their holdings over the past year to 40% of the total shares.

Harbin Electric Inc. (NASDAQ:HRBN) recently announced that its board has agreed to a management buyout, including the chairman, in order to take the business private. Short interest has fallen off its recent annual high of 15% to 13% of total shares.

UQM Technologies (AMEX:UQM) is a small cap company that specializes in the manufacture of electric motors. As the stock price has fallen, short sellers have doubled their positions since the start of the year to 9.5% of total shares. With institutional investors holding steady at 14% of total shares, we currently see almost two thirds of the available shares out on loan.

Another regular in our screen of stocks seeing fresh annual highs in short interest is Borgwarner Inc.(NYSE:BWA), the maker of auto part supplies for hybrids from Honda, Toyota and Ford. Short interest has risen to 20% of total shares. Yet the share price continues to rally and reach new annual highs, accompanied by institutional ownership by funds who lend their shares. These holdings have continuously increased since the start of the year to 35% of all shares. It should be noted there may also be convertible arbitrage in play.