This money manager drives a Tesla — but he won’t buy the stock

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“Although I am an enthusiastic Tesla Model 3 owner … Neither my investment firm nor I own Tesla shares.” OPINION

If you had put a gun to my head a few months ago and asked me, “Long or short Tesla?” I’d have said “Short.” Today, I’d ask you to read my in-depth analysis on Tesla as a stock. .

This business model creates high fixed-costs and so requires a higher escape velocity to reach profitability. To make things more difficult, Tesla is still young for a car company, and excellence in car production comes from iteration. Tesla’s production techniques are still improving. Then there is the scenario where Tesla achieves escape velocity, turns profitable, and starts minting money. At this point Tesla’s success will again depend not only on its own prowess but on the strength of its competitors. As I discuss in my previous Tesla articles, it is not a foregone conclusion that every ICE automaker will successfully transition to become a profitable EV maker.

Think of a complex system as a pot of soup that is prepared by one of those fancy French chefs with a big mustache and a toque, who proudly uses dozens of ingredients in everything he cooks. Even if you identified, properly pronounced, and tasted each ingredient separately, you’d still have no idea what that soup would taste like.

If Tesla shares plunge to $50, then in my highly hypothetical scenarios, the best-case offers 20x upside , while there is zero downside at $50. At that price you really don’t have to have brilliant insight into what lies ahead for Tesla. If you own Tesla stock and are in the bull cave, you feel like you are surrounded by Tesla bears who are attacking you. You stick close to your tribe of bulls. You are looking for your views to be constantly confirmed by the braying of your tribe. And they will be. You’ll only hear bullish talking points. Your fellow tribesmen will withhold contradictory evidence and put a positive spin on any negative news.

The fundamentals of a stock are the “truth.” In our research we make a proactive effort not to avoid being part of either the bull- or bear tribe. If you are truly trying to be a truth seeker, you need to have an open mind – something you won’t be able to have if you are a permanent resident of an insular camp. When we are analyzing a company we are considering buying , we seek out bearish arguments from bears who have done their own primary research. Bears’ words won’t harm us.

 

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