Electric Dreams: Why I’m Defying Conventional Wisdom with Archer Aviation
As a seasoned investor, I’ve learned to trust my instincts and adapt to changing market conditions. One time-tested rule of thumb is to sell half of a speculative growth stock when it doubles in value. This strategy helps lock in profits while allowing winners to continue growing, protecting investors from potential downturns. However, I’m choosing to break this rule with Archer Aviation (NYSE: ACHR), and here’s why.
A Dream Team of Investors
Archer’s impressive roster of investors sets it apart from typical early-stage growth stocks. Global automaker Stellantis N.V. has taken a 20% stake and partnered with Archer on manufacturing, demonstrating strong conviction in the company’s vision. Heavyweight funds like BlackRock, Vanguard, and billionaire Israel Englander’s Millennium Management have also built significant positions, providing validation and suggesting room for further investment flows.
Tailwinds Abound
The recent market rotation toward small-cap stocks adds another tailwind to Archer’s momentum. As investors hunt for value beyond megacap names, the Russell 2000 Index has gained nearly 9% over the past 30 days, outpacing the S&P 500’s 2.97% rise. Archer has benefited from this shift, surging 93.5% during this period. Additionally, a significant short-seller overhang of approximately 20% of the company’s float could fuel further gains as these investors are forced to reconsider their positions.
Catalysts Converge
Archer’s recent earnings report revealed several developments that could propel the company forward. The completion of its manufacturing facility, nearing certification from the FAA, and planned commercial launch in the UAE all demonstrate real-world progress toward revenue generation. Furthermore, the company’s strategic global partnerships, including a recent agreement with Japan Airlines and Sumitomo Corporation’s joint venture Soracle, add up to $500 million to its order book, bringing the total to over $6 billion.
Undervalued and Poised for Growth
With a current market cap of just $2.6 billion and comparable aerospace companies trading at 3.6 times sales, Archer appears significantly undervalued relative to its commercial potential. Morgan Stanley projects the electric vertical takeoff and landing (eVTOL) market could exceed $1 trillion by 2040, and Archer is emerging as a leading contender in this nascent space.
Breaking the Rules
While maintaining my full position in Archer increases both risk and potential volatility, I believe the convergence of catalysts justifies this departure from conventional wisdom. I’ve built my position methodically, using market weakness to establish a favorable average cost basis, providing some cushion against potential drawdowns. Additionally, the company’s transition from concept to reality, combined with strong institutional backing and a potential short squeeze, creates an asymmetric risk-reward profile that makes this an exception worth considering.
Position Sizing Remains Crucial
As always with early-stage growth companies, position sizing remains crucial. However, for investors who’ve built their stake carefully, letting this winner ride could prove rewarding. By defying conventional wisdom and holding onto my Archer Aviation position, I’m betting on the company’s unique combination of catalysts to drive further growth and success.
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