ValueWorks founder Charles Lemonides: Rivian is one of the longterm winners in auto space

Key Concepts

• Value Stock: A stock that is trading at a price below its intrinsic value.
• Gross Margins: The difference between revenue and cost of goods sold, expressed as a percentage.
• FAA Certification: Approval from the Federal Aviation Administration for an aircraft to be used commercially.
• Electric Vertical Takeoff and Landing (eVTOL): Aircraft that can take off and land vertically using electric power.
• Barriers to Entry: Obstacles that prevent new competitors from easily entering an industry or market.

Rivian as a Value Stock

• Valuation: Charles Laminitis views Rivian as a value stock because its current market capitalization (around $14-15 billion) is less than the value of its assets and future potential.
• Production and Revenue: Rivian is currently selling 45,000 cars per year and expects to roll out a new model that will increase production to a couple of hundred thousand cars. This growth is projected to increase revenue from $5 billion this year to $15-20 billion in three years.
• Gross Margins and Capital: Rivian has achieved positive gross margins and recently received a $1 billion investment from Volkswagen, indicating confidence in Rivian's technology. Laminitis believes Rivian has largely overcome the capital-intensive startup phase.
• Market Position: Rivian is positioned as one of the two standalone EV makers, distinguishing it from smaller players like Lucid and Fisker.
• Tax Credits: The impact of tax credit phase-outs is less significant for Rivian because its vehicles are priced around $100,000, and buyers at that price point are less likely to qualify for the credits due to income limitations.
• Chinese Competition: Laminitis focuses on Rivian's opportunity in the US market and the challenges Chinese EV makers face in entering the US. He notes the difficulty of convincing consumers to spend $40,000-$50,000 on an unfamiliar Chinese brand.

Joby Aviation and the eVTOL Market

• Market Overview: The electric vertical takeoff space is considered super interesting, with products being developed for 10-15 years and nearing widespread adoption.
• Progress and Timeline: Joby has started flying its aircraft in the Middle East and has been selling some to the government for about a year and a half. FAA approval is expected in about a year, with production ramping up.
• Valuation and Growth: Value Works bought Joby at a $3 billion valuation, considering it a great growth story at a value price. Laminitis believes it's easy to reach a couple of hundred million dollars in sales when selling aircraft for $5 billion each.
• Barriers to Entry: Joby is expected to have the market largely to itself for five years due to high barriers to entry.
• Comparison with Archer: While Archer has created public perception and raised money, Joby is considered further along in terms of aircraft production and certification. Laminitis states that Joby is a solid year, year and a half ahead of Archer.

Notable Quotes

• "Rivian is a value stock because you're paying $14 billion for assets that today are worth more than $14 billion." - Charles Laminitis
• "Value works to us is trying to buy great growth stories at value prices. And we did it right in Joby." - Charles Laminitis

Technical Terms and Concepts

• Value Stock: A stock that is trading at a price below its intrinsic value, often identified by metrics like price-to-earnings ratio, price-to-book ratio, and dividend yield.
• Gross Margins: The percentage of revenue remaining after subtracting the cost of goods sold (COGS). It indicates a company's efficiency in producing goods or services.
• FAA Certification: The process by which the Federal Aviation Administration (FAA) approves an aircraft design and manufacturing process, ensuring it meets safety standards.
• Electric Vertical Takeoff and Landing (eVTOL): A type of aircraft that uses electric power to take off and land vertically, often envisioned for urban air mobility.
• Barriers to Entry: Factors that make it difficult for new companies to enter a market, such as high capital requirements, regulatory hurdles, or established brand loyalty.

Logical Connections

The discussion moves from Rivian to Joby, both being examples of how Value Works identifies value stocks in high-growth sectors. The common thread is finding companies where the current market valuation doesn't fully reflect the potential for future growth and market dominance.

Synthesis/Conclusion

Charles Laminitis presents a case for Rivian and Joby as value stocks, despite their presence in high-growth, capital-intensive industries. His argument rests on the belief that these companies are undervalued relative to their assets, technological advantages, and future revenue potential. He emphasizes Rivian's progress in scaling production and securing investments, as well as Joby's lead in the eVTOL market and its proximity to FAA certification. The key takeaway is that value investing can extend beyond traditional metrics to encompass companies with strong growth prospects and defensible market positions.