Friday, July 7, 2017

Buying Tesla Stock

As I've previously reported, I've made a decent living trading Apple for years now. Its stock plunges always coincide with a sudden hailstorm of half-baked crappy little rumors and concerns, few significant and none existential. Eventually, the price settles at a low plateau, I buy, and, just as suddenly, celebration bells ring, everyone notices anew that Apple's still printing money, and the stock boisterously pops up to a new high. I make my 30% return (sometimes after waiting a year or more, but, great, that means low taxes on the long term gain). Rinse and repeat.

The process seems highly orchestrated, given that Apple itself never really flinches, despite the periodic hysterical freak-outs. Yet the shenanigans work every time, showing that people are remarkably oblivious to manipulation. It's not even subtle. The freak-out occurs at some random moment, when a few analysts and a phalanx of dodgy bloggers you've never heard of suddenly get super pessimistic about Apple. Journalists, who love nothing more than drama, jump on, and, without fail, the masses compliantly shift their sentiment and down goes the stock. Someone's hacked our trend-following faculties.

I see the same thing happening right now with Tesla, which is down 16% this week, 20% off its recent high. All of a sudden, a few people you've heard of - and tons of people you haven't - are super pessimistic. The stock price tumbles, and, voila: self-fulfilling prophecy. As with Apple, the rumors seem devised to bypass frontal lobes and go straight to the fearful amygdala. They appear important until you examine them.

Advance deposits for Tesla's upcoming Model 3 may be slipping.
Accent on "may be", as there's no way to actually know. Listen, the phenomenon of many people tying up a grand of their savings years in advance for a car they've never seen (much less test driven) was a display of breathtaking enthusiasm. A decrease in the number of such people doesn't spell doom for the model, it means customers are merely "thrilled and excited"....and only if this rumor is even true. And we don't know if it is. I myself am curious as hell about the Model 3, but I sure haven't laid out a whopping deposit!

Tesla's luxury models are selling merely adequately
Given that the much cheaper Model 3 is getting closer and closer, and zillions of other carmakers are moving into electric, the fact that the luxury models - which are very expensive - continue to sell ok is good news, not bad. Nobody in their right mind - including Elon Musk - imagined the luxury models would be increasing in sales at this point. Yet their failure to exceed projected sales is what precipitated this sell-off. Whuh?

Zillions of other carmakers are moving into electric
Yup. And if you think they'll produce anything close to Tesla's standards, at similar price and scale, with consistent and reliable results, right off the bat, you're nuts. Tesla isn't a scrappy little start-up about to see how the big boys do. Battery tech is hard, and they've been at it for a long while in a smart and well-funded way. Same for the advanced interface stuff (necessary in any modern car, but especially electric and increasingly autonomous vehicles).

Furthermore, Teslas have off-the-charts fahrvergn├╝gen (driving pleasure) and coolness factor, and that's why car people go crazy for them. Volvo (which is going all electric), for example, will not challenge either. EV engine aside, Tesla's fun/coolness has been shaming all other carmakers, and those guys won't suddenly develop the secret sauce - and certainly not while also managing a tech transition Tesla's already completed.

If the competition's first (or even second) generation EVs manage to crush Tesla's established price, range, and quality, Tesla will indeed lose. If any of those parameters fall short (and they will), Tesla will remain the one to beat for a while. The millions of Tesla enthusiasts (many of whom, like me, can't afford a luxury Tesla, but drool over Model 3) will not lose their ardor if a Honda or a Volvo merely comes close. And even coming close will be tough...for now.

Tesla's still struggling to produce batteries en masse
This one is the ribbon of actual truth laced into the bullshit. But it's also a given. Battery production is hard, and Tesla's always struggled with scale and blown deadlines. Lofty as Tesla's stock price has been, production scale issues are priced in. No news here.

And, again, Musk's firm is not some scrappy little startup. If they can't get batteries made en masse on schedule, then I doubt anyone else can - at least not as cheaply, nor with as long a range ("range anxiety" is the all-important factor in all this). Tesla's been at this a long while, with great minds and resources, so I'm figuring some company won't blithely crash through this challenge...at least not in the short term. And in the long term I expect Tesla, with their head start, to remain ahead of the pack for a while.


So: I'll wait for a plateau, and then buy some. But with a caveat.

The difference between Tesla and Apple is that Apple isn't going anywhere. With its obscene cash horde of $260 billion, it can weather utter catastrophe - several, in fact - and still be able to to easily swallow up, say, Starbucks and Boeing (yes, both!). No matter what, Apple won't, like, disappear, taking your investment with it. A giant metaphorical spring undergirds all its stock movement. The most successful company in history is not imperiled (heck, isn't even affected) by passing trends of manipulation and skittishness.

Tesla's a whole other game. There's no giant spring. But the current drama carries a familiar stench of manipulation. The entities hoping to crater this stock certainly intend to profit on the stock's recovery. So I'll just quietly, calmly ride along.

Finally, wherever I buy, the price will almost certainly sink lower - perhaps much lower ("buy low/sell high" should never be confused with "buy bottom/sell top", an impossible aim). And it may take quite a while before it recovers. And without the giant spring, that might be stressful. I'm patient, and appreciate the low tax rate of long term capital gains. But if I were someone who got anxious about on-paper losses, this would probably not be a good strategy for me.

No comments:

Blog Archive