How many shares of Tesla do you own?

[HaulingAss]

One question, have you watched the Now You Know episode I referenced? Guessing not, too much of your time needed or whatever.

You THINK I have bought into FUD. I am merely pointing out areas that they need to do better and it is from people far, far more experienced with Tesla than either of us. Don’t be an ostrich — you know, a real animal, not a myth — and hide from things right in front of you if you care to observe. Tesla is a great company that can do better. Or be a blind Fanboi. Your choice free country and all.

I'm not sticking my head in the sand - I'm looking at the big picture. In other words, judging Tesla service relative to that available for legacy auto. I never said there is not room for improvement - that will always be the case.

Zach and Jesse live in a bubble. I used to watch every episode, warts and all. I stopped watching about a year ago, as they are not very good analysts. They live in a strange idealistic cloud where reality doesn't always apply. Some stuff they have a good perspective on, on other subjects they are woefully lacking in knowledge and experience. Don't get me wrong, I think they are both fine people, they are just not "big picture" guys and there is a ton of stuff they simply don't understand when it comes to business and manufacturing and (especially) the world of investing. Here's where they went wrong on the service issue:

They live in an area that is under-served and probably where it's difficult to find qualified employees. They take their local experiences and, combined with anecdotal evidence from other regions that has been amplified by Tesla detractors, draw the conclusion that the issues they have seen are endemic to the entire organization. They do this without hard data to back up their opinions.

On the other hand, top management at Tesla has that data and they constantly use it to determine when and how to expand the service network. Is the service network perfect? Of course not, no organization growing at such a break-neck pace is and it will never be perfect. Could it be made better? Yes, of course. Zach and Jesse think they should throw money at the problem, but they have no experience deploying capital to solve problems. They naively think that spending money will magically fix it. But Tesla is already deploying capital to constantly grow and improve the service network in a capital efficient manner. Here's the issue J and Z are missing:

Tesla's number one job is to offer value to their customers in order to drive the adoption of sustainable transport and energy. It would cost almost twice as much to make the service experience 10% better, that's just the nature of solving problems like this by throwing money at them. That reduces their competitiveness against ICE vehicles because they would have to raise prices to compensate. That's unacceptable when the Tesla service experience is already better than the ICE service experience by leaps and bounds. Z and J miss this important point. They are not seeing the big picture. All they know is its not perfect. But it never will be. It's a balancing act.

The situation is far less dire than they think and the people at the top have the actual data to back it up. They are actually very experienced at deploying large amounts of capital effectively. It's not easy but Z and J naively believe more money would solve everything. They don't understand how throwing money at a such a service network tends to snowball. It would turn the service network into a black hole that consumed vast amounts of capital for very little gain. Management is being smart about this and that is reflected in the value of the company. It's valuable because management wisely allocates capital in an efficient manner. This flies right over Zach and Jesse's heads - they don't understand the concepts involved.

 

[HaulingAss]

As good as Tesla company is, I’m not giving up investing with the FAANG stocks. Facebook. Apple. Amazon. Netflix. Google. Disney. Microsoft. These companies have the monopoly in their sector.

Don't neglect smaller companies that have a lock on their space like Qualcomm which I expect to outperform Netflix and Disney over the next 5 years. It's all about risk/reward in terms of execution.

 

[Cybertruckee]

It's not either/or -- buy them all. The FAANGs, Tesla and Ford too.

It's not called growth stocks for nothing. And they will dominate in the next decades. All humanity's progress and advances will be from the offshoot of hii-tech.

 

[HaulingAss]

It's not either/or -- buy them all. The FAANGs, Tesla and Ford too.

It's not called growth stocks for nothing. And they will dominate in the next decades. All humanity's progress and advances will be from the offshoot of hii-tech.

Some people like the 'shotgun' approach to investing but I think that is the surest sign that someone doesn't know what they are doing. Because some companies have better DNA than others. Ford has never been a 'growth' stock and their efforts toward electrification do not put them in that category either. The reason for this is simple: Sales of new energy vehicles displace sales of their legacy products. It's not growth if the other side of the business, the more profitable side, is shrinking for every new energy vehicle Ford sells.

Innovation is what produces wealth. Ford has had very slow and limited innovation this century which is why their shares are actually worth less than they were in 1999. And that's in real dollars, in inflation adjusted dollars Ford investors have lost huge amounts of wealth. Even worse is the lost opportunity of investing in innovative companies like Tesla. Ford's poor performance over the last 2 decades + is all due to very slow innovation and huge debt loads. I wouldn't touch Ford stock at this point in time with a 10-foot pole.

Ford stock has had a very nice run since the COVID depression in the spring of 2020 and most of it is based upon the (mostly false) impression that Ford is leading in EV's. Now is the time for any Ford shareholder who cares about investment performance to sell. Because Ford is going to find it very difficult to compete in the electric vehicle space. Successful competition requires good margins. Otherwise, your competitors with better margins can simply lower prices and steal most of your sales. That's why being able to build a good EV doesn't equate with long-term success. It's also necessary to be able to do it at a competitive price. Ford could do this reasonably well, at least in the N. American market, with their big ICE vehicles but only because they didn't have any direct competitors who were significantly more efficient.

That story has changed with EV's as Tesla is striving relentlessly to build in ever increasing volumes at increasingly lower costs. Their innovation is not focused on where to put extra cupholders or toe-sensing tailgates/trunks, no, they focus their innovations in streamlining production, making more cars, of a higher quality, for less money. Tesla is even changing the way a chassis is manufactured to increase production speed, reduce costs and simultaneously giving the cars a more solid ride and crisper handling. These are innovations that create lasting value for investors and most auto analysts still don't fully understand how Tesla is leading the auto manufacturing industry into the 21st century. The losers will fail dramatically and suddenly.

I can't predict whether Ford will make it or not which is why I think there are better places to invest your capital. Some diversification is a good thing but avoid the 'shotgun' investment approach. You want a handful of companies that are leaders in their spaces with high quality management that are continually innovating and improving processes.

It is absolutely critical to avoid companies with an above average chance of under-performance or failure unless the potential reward is worth the risk. I would argue with Ford, it's not. Not even close. It's more than fully valued right now and is unlikely to make new highs ever again.

 

[Ogre]

How does Tesla become a $10T company in 9 years? By earning $1T in revenue.

 

[Crissa]

That's literally a forecast, Mr Ferragu.

A plausible one, but anyhow.

-Crissa

 

[HaulingAss]

That's literally a forecast, Mr Ferragu.

A plausible one, but anyhow.

-Crissa

To be clear, he's saying it is a possible scenario, not his personal forecast of what he thinks is most likely. The difference is the former is simply one way it could play out while the latter would be a prediction of the most likely outcome.

I know, kind of splitting hairs linguistically but I think it's a good distinction he made to clarify his figures. Personally, while the future is far from certain or even easy to project with any accuracy, I think the most likely revenue of TSLA in 2030 is above 1Tn which would put the most likely appreciation between now and then above 10X.

Tesla has a number of very interesting irons in the fire from a revenue perspective (that Pierre has not included) and I'm thinking it's likely that at least a couple of them will take off in a big way. Also, some of them that he does include might end up being much bigger than he has modelled.

 

[Ogre]

That's literally a forecast, Mr Ferragu.

A plausible one, but anyhow.

-Crissa

Hopefully not slicing the hair too thin here, but I think it’s more along the lines of::

”I believe it is possible Tesla could hit $10T by 2030. Here is the most likely way it could happen”

It is up to the reader to assign probabilities.

 

[Crissa]

Forecasts include the improbable.

No hair to split. Harumph.

-Crissa