This Revolutionary Business Isn’t Going Anywhere But Up
November 12, 2021
Never before has a company, its CEO, and its stock fluctuations created such a rabid, passionate response among investors as Tesla (TSLA) and its founder Elon Musk have…
Eccentric and sometimes erratic in his behavior, Tweet-loving Musk is making waves again…
He sold $5 billion worth of stock this week, but not without a whole lot of drama leading up to the moment.
Over the weekend, Musk threatened to sell 10% of Tesla based on the results of a Twitter poll (should he sell his stock to pay for the capital-gains tax lawmakers wanted to impose on him?) and 58% of Twitter said, “sell.” So he did.
It’s debatable if he was trying to make a political point about taxes or if he was just deflecting commentary about why he was selling his stock. The tweets could even put him in hot water (again) with the Securities and Exchange Commission (“SEC”) after the Twitter controversy caused a 15% sell-off in Tesla stock earlier in the week (before recovering).
But, hey… what’s another tweet? Shares of Tesla have already fallen more than 5% ten times this year, and there’s still a month and a half to go…
I think most Tesla investors would agree: A little bit of crazy is something most people are willing to put up with considering the massive returns they have enjoyed. Tesla shares have more than doubled from one year ago.
Ultimately, Musk and the trillion-dollar company he has created are still worth the headache.
A new system shows which stocks could soon rise 100% thanks to a Connecticut couple’s catastrophic 401(k) loss.
Heads Tesla Wins, Tails It Wins More
In the summer of 2020, when I first began recording my daily podcast, The Trish Regan Show, I told viewers I was bullish on TSLA. (For those who bought the stock then, it’s been a bet that has paid off in spades.)
I was already a longtime believer in the company. And ahead of the November 2020 election, I felt confident Tesla would see even more gains regardless of who won the House, the Senate, and the Oval Office.
Investing ahead of such an election, with so much policy on the line, is not easy. But this stock pick was worth the gamble. I even titled my show that day, “Tesla: The Ultimate Election Hedge.”
“It’s a win-win scenario,” I explained to my listeners. “If Biden wins, Tesla benefits. If Trump wins, Tesla benefits… Tesla represents one of the few market opportunities that investors can use to shield themselves against political risks.”
Think about it: Tesla does well either way. If President Trump is successful in his reelection bid, the economy is expected to continue its growth path – thanks to an expected continuation of low corporate and individual taxes. A strong economy means plenty of Tesla sales.
And If Biden is successful, the company also wins. Even if the economic environment grows weaker from higher corporate and investment taxes – there will be plenty of spending on environmentally friendly companies… And electric vehicles are poised to benefit significantly.
Case in point… The infrastructure spending bill that just passed through Congress will spend more than $7 billion creating a network of 550,000 charging stations. Whatever you may think of that kind of government spending… it’s a HUGE boost to electric vehicle (EV) adoption and companies like Tesla.
As I said last summer…
So, no matter what, Tesla comes out a winner, and it’s full speed ahead for Elon Musk’s transformative company.
As we approach 2022 midterms and 2024’s presidential election, Tesla is still a great election hedge for the same reasons I touted in 2020.
The company has since grown into a $1 trillion-plus entity, and made Elon Musk the richest person in the world…
While last year’s 5-for-1 stock split made Tesla even more attractive to individual investors since shares became more affordable, thereby increasing demand for the stock. Tesla is far more than just retail meme activity…
It’s pure raw innovation that’s powering this company. In fact, Tesla’s use of cutting-edge artificial intelligence, in-car hardware, and software integration have created an electric vehicle (“EV”) that’s a cut above anything else on the market.
Meanwhile, the future of the company seems limitless… Who’s to say the technology that’s powering Tesla vehicles couldn’t one day be harnessed to power your home?
I am certain we are on the cusp of a structural economic shift that will include electronic vehicles in ways we cannot even imagine, and Tesla is leading the way.
Teslas, Teslas Everywhere
Everywhere I turn now, I see them… It seems my entire little New England town is driving Teslas.
Sales have skyrocketed. In the three months ending this September, the company pulled in $1.6 billion in net income – the second-straight quarter of profits exceeding the billion-dollar mark.
Much of the growth is a result of Tesla’s affordable mid-size Model Y. The company delivered 241,000 cars in the quarter, up from 140,000 vehicles a year ago. And that number should continue moving higher. Sales are growing not just in the U.S., but in China and Europe as well.
And the more popular these cars become? The more popular they’ll grow. After all, popularity often begets more popularity.
You might question how long Tesla can continue its momentum before other players, including traditional car manufacturers, take over the market. The answer, it turns out, is quite a while…
American capitalism typically rewards the smartest, most innovative product… And we should consider the history of another car maker to understand how the future might play out.
The Brass Era
At the turn of the century – from 1896 to 1915 – America gave birth to a whole new industry. This boom time was dubbed “The Brass Era,” named for the brass fittings that adorned headlights and other parts of the newly popular “horseless carriages” of the time.
There were loads of manufacturers trying to break into this industry…
Rickenbacker made sporting coupes, touring cars, sedans, and roadsters. Peerless, based out of Ohio, sold a racecar called “The Green Dragon.”
In Detroit, Packard made a popular car… while Studebaker, based out of Ohio, sold an American roadster.
There were dozens, if not hundreds, of manufacturers. But only one car manufacturer would ultimately triumph…
Henry Ford’s Model T became the car that everyone wanted, everyone needed, and importantly, everyone could afford.
Ford, not unlike Elon Musk, understood that innovation was key.
Nonetheless, there’s a key difference between Henry Ford’s approach and Elon Musk’s… While Ford developed success with a mass-market, bottom-up approach that provided access to as many people as possible…
Musk started small. He began his company with a niche, affluent buyer. He’s used those resources to grow his business, improve his technology… and is only now making his way to the masses with Tesla’s more affordable Model 3.
BMW’s EV sales grew by 121.4% in the first nine months of 2021, selling 59,688 units (a small sliver of what Tesla is doing). The carmaker says it wants fully electric vehicles to represent at least 50% of its deliveries by the year 2030.
But, keep in mind, its goal is for just HALF of its business to be EV, at best… in nearly 10 years.
Ford Motor and Porsche have also released high-end EVs. But their sales have been modest, and, like BMW, they’re not dedicating all their resources to EVs.
Rivian Automotive (RIVN), the EV company that just went public with a nearly $90 billion valuation, may be the one company that could someday rival Tesla. It produces an electric pickup truck, but so far it has only delivered a small number to customers.
As I said, an investment in Tesla comes with a little bit of crazy…
Musk is well known for his market-moving comments online. In 2018, he agreed to step down as Tesla’s chairman after the SEC investigated him for a string of tweets he unleashed suggesting he had secured funding to take Tesla private.
As for his latest stunt on Twitter? Like I mentioned, there is serious debate about what really motivated Elon’s tweets… After all, the capital-gains issue had already been taken off the table by lawmakers who realized it was going nowhere weeks ago… And there was allegedly a different tax bill he had coming due.
Also, keep in mind, he did sell $5 billion dollars’ worth of stock at a time when EV competitor Rivian just went public, meaning the timing of his sale was bound to cause shareholders to grow skeptical. (Shareholders typically get nervous when insiders sell because they think those insiders know something they don’t.)
Perhaps the tweet was a distraction designed to make everyone think Musk was being impetuous, when in fact… it was actually a deliberately thought-out PR trick.
Regardless, Tesla expects its sales to grow 50% or so on average for the next four years.
And as long as Elon is in control of the company and its future, I, for one, am willing to put up with a few market-moving tweets.
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Publisher, American Consequences
With Editorial Staff
November 12, 2021