Archive for the ‘TSLA’ Category

There’s a lot of noise in the market.

But there’s usually a lot of noise.

By definition — at any point in time — 50% of people think there’s enough bad in the market to sell their shares to the other 50% who thinks there’s good.

Can’t have a market otherwise.  That’s why I always scoff when someone refers to “easy” trading periods.  It’s never easy.

What helps guide you through the noise is whether your fundamental investment thesis is still intact.

Is mine?  I think the two biggest drivers of corporate profits — which drive the market — are the price of oil and interest rates.  Let’s see where they stand:

* While oil took a little run to the upside, I wouldn’t call it misbehaving.  In fact, it’s shed much of its 2018 gain

* Interest rates are spooking everyone… but 10-year is sneaking back down… and Trump’s on fire about the Fed messing things up — so much so that a few Fed governors have had to reiterate that they won’t, uhm, mess things up (i.e., “will still be accommodative for quite a while”)

* Sentiment is negative.  While that’s not comfortable, as a contrarian I prefer this

So, for me, at least right now, the noise is… just noise… and what we’re seeing is some healthy “letting some air out of the balloon”… which we like… so it doesn’t pop.

 

P.S.  A great example of “noise” was Caterpillar earnings.  They beat top & bottom line.  But everyone was fretting about China and tariffs… and the stock got pounded… even though if you read their commentary, you find CAT itself wasn’t so worried about the effect of China or tariffs on its business.  Here’s some commentary from their 10/23/18 earnings call:

* CATERPILLAR SAYS FEEL GOOD ABOUT EQUIPMENT DEMAND IN CHINA NEXT YEAR

* CATERPILLAR SAYS EXPECT BUSINESS TO CONTINUE TO IMPROVE IN 2019 VERSUS 2018

* CATERPILLAR SAYS CONTINUE TO EXPECT INDUSTRY SALES IN CHINA FOR 10-TON-AND-ABOVE EXCAVATORS TO BE UP ABOUT 40 PERCENT FOR THE FULL YEAR

* CATERPILLAR SAYS EXPECT IMPACT OF 25 PERCENT IMPORT TARIFF ON ADDITIONAL $200 BILLION CHINESE GOODS TO BE ‘QUITE MINOR’

These are all good things, right?!

Here’s a lesson about what not to do as CEO:  Trash your own stock.

TSLA… which was headed into $300-$320 territory… just hit an iron wall.

Unbelievably, Elon Musk came out with the following statement last night:

“I think our stock price is kind of high right now,” Musk said Thursday, responding to a question from CNBC at the news conference in Carson City. “If you care about the long term, Tesla, I think the stock is a good price. If you look at the short term, it is less clear.”

Stock price goes up and down by itself… it’s never, never, never a good idea to actually open your mouth about stock price, though… as TSLA is learning this morning with it sharply falling.

Wonder how all those folks that put their butts’ on the line to support Musk’s vision feel now?

Employees dreaming of buying cars & houses with well-earned stock appreciation?  Seems like there might be some morale issues around the ‘ole water-cooler this morning.

How about analysts like Stifel Nicolaus’ James Albertine, who recently gave TSLA a full vote of confidence with a $400 price target?

Elon, the proper answer to the question of whether your shares are overpriced is:  “It certainly reflects the enthusiasm that investors — and our customers — have for our products.”  

Duh.

What a terrible thing to do to shareholders.

I finally figured out what bugs me about the GM vs. Telsa stock comparisons…

… you know the ones that say it’s insane that Tesla shouldn’t be valued anywhere near GM because GM sells millions of cars and Telsa only tens of thousands?

Maybe Telsa isn’t valued so high… maybe GM is just valued as the broken company it is?

GM should have gone bankrupt a few years ago.  It makes relatively unexciting cars… and has for decades.  (Oh, to be able to buy a Cadillac worthy of attention again!)  Worse, it carries around the bloated vestiges of an old and out-dated infrastructure created by old and out-dated management.  Too bad the free market system wasn’t allowed to clean this up.

In contrast, TSLA makes exciting cars… and, with the gigafactory, possibly a lot more.

So, while GM may be a more powerful car company right now, it’s not a more power investment… which is clearly reflected in the market.

Telsa just got hit with some bad news last week… sales are apparently way down in Norway… which was a pretty hot area last quarter.

Investors freaked on Wednesday, not only stopping forward momentum, but reversing course and sending shares down double-digits.

Here’s the flaw I see with the news reporting:

Telsa isn’t demand constrained… they are production constrained… meaning, they have tons of demand… and are just trying to figure out how to dole cars to all the markets screaming for product around the world.

So if sales are “down” in Norway, they will be “up” somewhere else.  But the negative articles that came out last week didn’t contemplate that.

This reminds me of what happened many months ago when TSLA was hit by one or two people claiming their cars “automatically” caught fire… implying something awful and dangerous about the vehicles.

Despite the company clearly communicating the evidence in each case with the public (that the fires had nothing to do with the vehicles)… the vast majority of Tesla owners backing up the company saying it was the best car they have ever owned… and Consumer Reports reporting it as their best ranked car ever

…these negative news stories drove TSLA downward.  Who wants to buy a car that automatically catches fire?

TSLA was eventually cleared by the National Highway Traffic Safety Administration… well, not just cleared, but when the safety data was exposed, resoundingly applauded for having one of the safest cars on the road.  The artificial dive made the move upward even more impressive, with TSLA eventually hitting its high of $265.

The point of all of this is don’t just read the news — evaluate the news… every news story has the potential to be biased…

… and therefore a potentially wonderful trading opportunity.

P.S.  Regarding Tesla, I don’t worry about sales right now… I worry about production… if we heard news that something has happened on a production line — something that would stop them from meeting/exceeding their stated production levels — now THAT would be concerning.