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Aug. 11, 2017, 3:30 a.m. EDT

Contrarian investor: Reports of the internal combustion engine’s death are greatly exaggerated

U.K. joins France, China’s Volvo with diss to gasoline-powered cars

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By Victor Reklaitis, MarketWatch


Getty Images
Cars charge up on a London street.

The U.K has promised to ban the sale of new gasoline and diesel cars by 2040, in another swipe at the internal combustion engine.

All new vehicles in Britain will have to be fully electric in 23 years, and that comes after France announced a similar plan in early July. The U.K. news also follows Chinese-owned auto maker Volvo’s /zigman2/quotes/208939564/delayed SE:VOLV.B -1.19% announcement that it will phase out gas-only cars within two years.

But the reports of the internal combustion engine’s death are greatly exaggerated, according to Bill Smead, CEO of Smead Capital Management, which bills itself as a contrarian and value-focused shop.

“Burying internal combustion engines takes a great deal longer to happen than people think,” Smead writes in a recent blog post.

His seventh-grade science class literally buried an internal combustion engine in 1971, reflecting the “assumption that it was a relic whose use would be phased out in the coming decades,” he notes.

“Forty-five years later in 2016, electric car sales amounted to about one percent of auto sales in the U.S.,” he adds.

Check out: More than half of new cars sold by 2040 will be electric, report says

Smead has advice for investors amid the excitement over Tesla /zigman2/quotes/203558040/composite TSLA -1.07%  and other electric car plays. (The possible investments aren’t just car makers, as the rise of electric vehicles — whose batteries need copper  , cobalt and other commodities — could boost U.K. mining heavyweight Glencore /zigman2/quotes/201400686/delayed UK:GLEN -1.36%  and its peers .)

“What should a sensible stock picker do with these super-exciting technology trends? First, you must respect the fact that time is a cruel disciplinarian,” the Smead Capital boss says.

“Most everything takes way longer than optimists believe in the middle of maniacal excitement.”

Smead is also not impressed by the buzz around Amazon.com /zigman2/quotes/210331248/composite AMZN -0.31% , Netflix /zigman2/quotes/202353025/composite NFLX -0.33%  and Alphabet’s /zigman2/quotes/205453964/composite GOOG +0.04%   /zigman2/quotes/202490156/composite GOOGL +0.03%  YouTube, as noted in our Need to Know column.

Go here to read his full post.

This story was first published on July 26, 2017.

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Victor Reklaitis is a London-based markets writer for MarketWatch. Follow him on Twitter @VicRek.

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