The latest ad I was asked about from John Persinos makes a bold claim: ““I’ve Uncovered the World’s First EV Blue Chip Stock!”

And you can immediately see the appeal — we all know that electric vehicles (EVs) are growing in importance, with sales picking up quickly now that there are a dozen or so companies who sell meaningful numbers of electric cars in the US. But we also know, as investors, that most of the stocks are scary — the real “pure play” EV stocks, like Tesla (TSLA) and the next-generation contenders Polestar (PSNY) or Lucid Motors (LCID) or Rivian (RIVN) or (enter your favorite name here) are frighteningly expensive or, in the case of everyone except Tesla, nowhere near even dreaming about becoming profitable. And on the other side, the automakers who have begun to focus on building up their EV production are showing good signs of traction, with hits like Ford’s F-150 Lightning, are dirt cheap… but they’re also dirt cheap for a reason, because car sales in general are slipping, there is investor consensus that the COVID peak in car sales is in the rear view mirror, everyone’s afraid of a recession, and most of them carry a lot of debt, which is becoming more expensive to service as interest rates rise.

In other words, the “growth” stocks are too expensive… and the “value” stocks are not growing enough. So what’s this “Blue Chip” that Persinos says he has found? Let’s check out the tease and see if the Thinkolator can throw out a new for us.

The ad is for subscriptions to Personal Finance ($39 first year, renews at $99), which is one of the oldest investment newsletters in the US but has been through a handful of different editors in the past decade — John Persinos signs this ad, but I think the other Investing Daily folks like Jim Pearce, Robert Rapier and Jim Fink also contribute to this “entry level” generalist investing newsletter… here’s the headline:

“INSIDE: How One Unusual Company is Secretly Siphoning the EV Industry’s Trillion Dollar Profits into Investor Accounts Over and Over Again… Like Clockwork”

That sounds nice, right? The EV industry does not have “trillion-dollar profits,” of course, the only profitable EV maker of any size in the US is Tesla and, whose annual profit is only in the $10 billion neighborhood right now. I would guess that the only profitable suppliers at this point are probably the lithium producers (like Albemarle (ALB)) and the battery makers (like Panasonic (PCRFY)), but it’s still fun to daydream. The big guys like Ford (F) and GM (GM) and Volkswagen (VWAGY) and Stellantis (STLA) are still in the “ramp up” phase and will be losing money on their EV production for a while, and the EV-only companies are a decade behind Tesla in scaling up production.

But still, yes, we all see the writing on the wall — electric vehicles are becoming a big business, both because of government clean-energy incentives and because of rapidly increasing customer demand. There were more than six million EVs of all kinds sold in 2021 (including plug-in hybrids), roughly doubling the production of the previous year, and there are more than ten million battery-only EVs on the road globally. That’s still only about 10% of global auto sales, but that’s a real number. It’s not a niche anymore… though in some US communities it probably still feels that way.

China is the global leader in adoption of EVs at scale, and in the US our perception depends a lot on the community where we live — it’s still California that pulls the most weight. California alone is about 40% of the US EV market, and in some states you might go weeks without seeing a Tesla (in Alabama, for example, just because it’s at the top of the list alphabetically, there were about 5,000 EVs registered in the state in 2021, out of a little more than five million cars and trucks… and even California has a very long way to go, with about 30 million registered cars and trucks on the road and roughly 560,000 EVs registered last year — if you want some context, that means 0.1% of vehicles on the road in Alabama are EVs, in California it’s about 1.9%).

A little more context: EVs as a percent of new cars sold is growing pretty dramatically in a lot of places, and in the US that number is now close to 5%… but cars last a long time. The impact on the US fleet of automobiles is still quite gradual, and in some places it’s practically glacial.

And in case you’re curious, more than half of the new EVs sold are still Teslas… though Ford, Hyundai and Kia are making some inroads with popular new models, and a lot of manufacturers are planning to scale up EV production pretty dramatically over the next several years.

OK, back to the sales pitch. What’s this “Blue Chip” that Persinos is talking up? He says we can “Rake in EV Riches Without The Stomach-Churning ‘Rollercoaster Ride'”

Here’s a little more from the ad:

“I’ve just uncovered what I believe is a “hidden gem” of the EV industry…

“A stock that’s perfectly positioned to siphon billions of dollars a year out of this lucrative and surging industry…

“And deposit it directly into the pockets of everyday investors like you…

“Over and over again… like clockwork.

“So while the stock prices of companies like Telsa, Rivian, and Lucid whip around wildly any time Elon Musk tweets something controversial…

“You could be living in relaxed luxury…

“Calmly sipping your morning coffee as deposits of $826… $1,652 … even as much as $3,302… show up in your investment account…”

And he tells us what he’s not recommending:

“When you follow my lead today, you could set yourself up for a shot at cashing in on the EV megatrend…

“Without buying bloated, overvalued, or volatile stock in an electric carmaker…

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...

“Without taking a flyer on a mining company searching for rare battery metals in a corrupt third world country…

“And without gambling on an obscure semiconductor chipmaker who may or may not be around a year from now.”

So what is he talking about? He says it profits “through an almost-secret ‘side door.'”

And if you’re like me, that “Royalties” word in our headline caught your attention — that’s part of the appeal here. Persinos says that you can start “leveraging this global megatrend to see what I’m calling ‘EV Royalties’ of up to $1,652 or more arrive in your account on a schedule so predictable… You could almost set your wristwatch to them.”

With the Personal Finance folks that kind of income and “royalties” talk almost always means “dividends” — but we’ll keep an open mind. What other clues do we get about Persinos’ secret stock?

More from the pitch:

“The Unusual Source of these ‘EV Royalties’

“… electric vehicles come in all shapes and sizes….

“They have one undeniable common thread…

“They all need to be charged.

“And that one simple fact holds the key to handing you repeat payouts of $826… $1,652… $3,302, or more.”

OK, so we’re working from the charger end of the EV space — that’s a popular theme, particularly as the government has incentivized the buildout of a larger public EV charging network, and as the early adopters are beginning to share their stories about the complexity of charging your electric vehicle on road trips or finding chargers for apartment dwellers. A lot of pundits have predicted riches for the companies making the chargers or running the charger networks… but that’s not the story here, none of those companies are profitable or pay dividends, and most of them still trade at very speculative valuations (~10X sales), even after collapsing over the past year (the most-teased leader in this space is still ChargePoint (CHPT), though smaller players like EVgo (EVGO) Blink Charging (BLNK) and Beam Global (BEEM) have also gotten some attention).

Where does that leave us?

Thankfully, with more clues… what’s the secret with the dramatically growing demand for EV chargers? From Persinos…

“In order to capture the kind of wealth that’s coming, they have to be in locations where there’s a ton of EV traffic.

“And the ‘EV Blue Chip’ I’m going to detail for you now has mastered the magic formula…

“They own the country’s best-in-class locations…

“Locations that are practically GUARANTEED to see immense EV traffic.”

Ah, so it’s a real estate company. Which means it’s probably a Real Estate Investment Trust (REIT), given the focus on those “royalties” (REIT’s are pass-through entities, they don’t pay corporate income tax as long as they pass along 90% of their income to shareholders in the form of dividends).

Which one? More from the ad:

“Every last one of the millions of EV charging stations installed in America in the years ahead will be bolted down to a piece of real estate. It’s unavoidable.

“So anyone who owns the real estate these chargers are attached to…

“Can essentially collect a ‘royalty’ payment every time an electric car, truck, bus, or SUV stops to charge up.”

Some more specifics…

“… the ‘EV Blue Chip’ offers all the benefits of owning prime real estate… that already has a foothold in the growing EV charging market…..

“They own some of the best-in-breed properties in the entire nation.

“Properties that already see an almost limitless supply of EV traffic….

“The juggernaut I’ve been following closely was an uber-successful real estate management company long before the EV revolution began….

“… way back in 2011… a year when just a little over 17,000 electric cars were sold nationwide and the ‘EV Revolution’ was far from looking like a sure thing…

“This company’s top brass shrewdly predicted that electric cars would very soon become more than just a novelty for rich folks…

“And began installing charging stations at its properties across the nation.”

So we’re told that these chargers are installed in places where EV users spend time anyway, and that they’ve now built up, over the past decade, to a pretty large installed base…

“Today, the company in question has over 1,100 charging ports at 129 locations across 20 states.”

So now we get to the meat of it… he makes a connection between the fact that most EV owners are relatively wealthy right now… and that they shop in nicer malls. So no more wild guesses about what kind of REIT this is…

“The company specializes in high-end retail space… what are known in the property management business as ‘Class-A’ shopping centers….

“This ‘EV Blue Chip’ owns over 200 Class-A properties across the U.S., Canada, Europe, and Asia totaling over 240 million square feet of leasable retail space.”

He also says that they’ll be meeting the “charging needs” of ever more customers in the years ahead, as their latest plans include “a $4+ billion investment in… ‘integrated community centers” that go beyond just shopping malls, adding stuff like apartments, restaurants, gyms, offices, churches, etc. to their developments. That’s not exactly brand new, the suburbs have been built up with “Town Center” developments for decades now, but it’s certainly a new focus for some mall owners.

And that they did unusually well during the COVID pandemic, when retail businesses were destroyed… he says they maintained occupancy rates above 91%, collected 90% of the rent owed, and raised their dividends three times in five months… and the company “recently purchased one of its most successful competitors for $3.4 billion in cash.”

So what’s our “EV Blue Chip?”

Thinkolator sez that Persinos is touting Simon Property Group (SPG), the largest mall-owning REIT in the United States… and one of the largest REITs, period, with a market cap of about $40 billion (at points they have been the largest US REIT, though others like Prologis (PLD) and digital REITs like American Tower (AMT) and Equinix (EQIX) are now far larger).

Simon Property Group has grown dramatically over time, partly through acquisitions of other mall owners (and retailers — they have also partnered with others to buy troubled brands like JC Penney and Eddie Bauer, and they even launched a SPAC during the mania in 2021, Simon Property Group Acquisition Holdings (SPGS), though that is being disbanded and the money returned to shareholders), and they have certainly focused on the “experiential” and “town center” trends in shopping malls. And yes, they did make a big acquisition of one of their larger competitors — they acquired Taubman Centers (was TCO) for $3.4 billion, adding 26 more properties… though that “recent” acquisition that Persinos teases actually closed two years ago.

So yes, SPG is certainly a rational play on shopping malls, they’re by far the biggest “pure play” investment on that kind of real estate, and size does generally give extra stability and flexibility — as is highlighted by their relatively resilient recovery from the COVID crash. Here’s a chart of a bunch of retail-focused REITs over the past three years, going back to just before COVID — that’s SPG in purple, with performance that’s dramatically better than fellow mall owner Macerich (MAC, orange), which was much slower than SPG to recover from COVID and begin raising the dividend again, thanks largely to a larger debt burden, but a little worse than the more “necessity” retail REITs who own fast food properties and grocery store locations, like National Retail Properties (NNN, light green), SITE Centers (SITC) or Realty Income (O, pink), and below average for REITs in general (the Vanguard Real Estate ETF (VNQ, dark green)). The huge winner has been, surprisingly enough, Tanger Factory Outlet Centers (SKT, light blue), the largest pure-play owner of outlet malls — their revenue and dividends have not bounced back any faster or more robustly than SPG’s have, but they’ve still caught the fancy of investors).

The SPG dividend is still below where it was in February of 2020, when so many malls shut down for months and they cut the payout from $2.10 per quarter to $1.30… but as the world settled down a little bit in late 2021, they did ramp up the dividend pretty quickly, and it’s now at $1.80 per share (the ex-dividend date was December 8, so if you buy today you won’t get that one — the next dividend will probably be declared in early February). At about $120 per share right now, the dividend provides almost exactly a 6% yield.

So… is there any kind of EV connection? This is how Persinos puts it in his ad:

“Every time an electric vehicle plugs in at one of their properties…

“The company effectively collects what I’ll call a ‘royalty.’

“As these ‘royalties’ grow… so do the company’s revenues.

“And as revenues grow… the company’s ‘profit pie’ expands in size…

“Meaning there’s more money available to payout to shareholders. For instance…

“If you own 1,000 shares, what might start as a healthy $1,652 quarterly payout today could potentially double… triple… or even quadruple in the years ahead.”

There’s a lot of mushy language in there, of course, “might” and “potentially” and “in the years ahead.” The payout would actually be higher than that now, 1,000 shares of SPG would get you a dividend payment of $1,800 this quarter — though, of course, buying those 1,000 shares today would cost you about $120,000.

And Simon did indeed buy in pretty early, with their first EV chargers going into shopping malls in 2011… though that was very much piecemeal, adding one or two chargers to a couple of their mall parking garages. Interestingly, the press release at that time reminded us of the rampup in EVs that was expected, with a forecast of 27 million EVs on the road in 2020 (as of 2022, there are still fewer than two million)… and of how much money can evaporate in a hype cycle. Their partner at the time was the first real “EV Charging” stock, Car Charging (CCGI), which almost disappeared a few years later as the EV rollout disappointed… and then changed its name to Blink Charging (BLNK) and got a new lease on life about five years ago, increased its share count 50-fold, and soared into the EV mania of 2021… but if you had bought way back in those early days, around the time of that SPG deal, and just held on, you would have lost at least 90% of your money.

But while EVs are indeed part of Simon Property Group’s plan to meet its customers needs (and they’ve been on top of sharing this story for years, including this piece about their rollout with Electrify America in 2018, and some of the rollouts of free charging with EVgo in 2015 , and they are really growing the installed base of chargers at their properties, it’s hard to see that having a measurable impact on their cash flow in the next five years.

It may help incrementally, attracting more EV drivers or enticing them to stay a little longer or spend a little more, but we’re still talking about a tiny percentage of SPG property visitors… so it’s largely marketing for SPG, both in attracting incrementally more customers and because they consider it to be part of their “sustainability” commitment that makes shoppers and tenants feel better about their connection to these malls.

EV charging has been available at most Simon Property Group malls for at least five or six years, and ten years at some, and I don’t think it has ever reached the level of being mentioned in relation to the costs of or income from those charging stations — my guess would be that they’re making the space available to the charging companies in exchange for either lower cost for their customers or free charging, or perhaps just getting free equipment, but they don’t disclose that. And they probably won’t ever have to, because it’s very likely that the financial details of any of those charging deals will never be meaningful enough to impact Simon Property Group’s earnings (this is a truly massive company — their revenue, mostly from rent and revenue share from their tenants, is about $5 billion a year). The deals themselves are a hodgepodge, they have some EVgo stations, some Electrify America, some self-managed, and some Tesla Superchargers, but other than the Tesla installations (usually 15-20 superchargers at the malls where those are hosted), they mostly consist of two or three chargers at each mall.

This is an evolving area of interest for both public policy and the companies directly involved, the retailers, charging equipment companies and networks, and landowners. So far, most of what I’ve read indicates to me that the indirect benefit of having EV charging available at your shopping mall is quite small… but is also vastly larger than any direct financial return from either charging for the electricity or hosting advertising on the charging equipment. The benefit comes from marketing yourself as EV friendly, and from the small bump you might get because the person who’s charging a car might stay a few minutes longer in the mall, and spend a little more money. I do think malls are going to need a lot more EV charging stations… but I don’t think big mall owners will make any money from them directly, at least not in the next decade.

Some context: As of 2020, King of Prussia Mall in the Philadelphia suburbs was Simon Property Group’s largest mall, and it’s a high-end one, with a lot of luxury brands and retail sales generated on the property of over a billion dollars a year. It gets more than twenty million visitors a year, and has 12,500 parking spaces (often not enough, in busy times). So… what’s the EV impact there? It has three EV charging stations. Similar-sized malls in California might have thirty, but that still means that the number of visitors who aren’t drawn by the EV chargers would be something in the 99.9% range most of the time.

So sure, you can buy Simon Property Group (SPG) if you like the 6% dividend, or think they’re doing the right things in their high-end mall locations, including adding more “experience” attractions to bring in shoppers who are no longer interested in department stores (or, indeed, just to fill those JC Penney locations with mini golf or go karts or whatever else), and I wouldn’t argue with you. But no, they’re not an “EV blue chip” in my mind, and there’s very little possibility that the company could ever be even a meaningful indirect play on the rise of electric vehicles — they certainly won’t be making a measurable amount of money from EV charging in any direct way.

And really, that’s fine — it’s a good company, they have some amazing properties, shopping is America’s favorite hobby, and retail is certainly recovering (pending the next recession, at least), and as a society we don’t really need massive numbers of EV chargers at malls at this point… we will in the future, I imagine, but right now almost all EV charging is done at home, and I’m sure that almost all mall visitors live within 20 or 30 miles of the mall, which is not a long-enough trip that you would need to recharge. For a mall operator, EV charging is probably like any other amenity — making sure you have enough parking in general, putting up good signage, offering stroller rentals, having a playground for kids… it doesn’t have to make money, and you don’t even necessarily have to be first or have to be the leader, but you do have to keep up with customer expectations and demands. Seems to me like SPG is doing that.

Sound like your cup of tea? Have you bought your first EV and figured out your charging routines, with or without any dependence on the local mall? Like SPG’s relatively high dividend and huge size, or prefer someone smaller or more exciting? Let us know with a comment below. Thanks for reading!