I've been following Tesla Motors (NASDAQ:TSLA) with a bit of interest lately, as have many market watchers and potential investors. For those who are unaware, Tesla manufactures luxury electric vehicles in California, which is also currently their primary market. Tesla has been in the news recently (hence, this blog) because of their very positive sales numbers. According to a USA Today story, Tesla's solitary product, a luxury performance sedan, outsold Porsche, Lincoln, Land Rover, Jaguar... in fact, the first half of 2013, the Model S even outsold the Audi A6 and Lexus GS in California, beating Tesla's sales target for the entire year, and turning a profit.
I'm pretty impressed, but there is not enough here for me to invest. Here's why.
Like most investors of any size (and I'm definitely in the small category), I'm pretty careful about where my money goes. Also, like most investors, I've had my share of hits, misses and "woulda, coulda, shoulda" investments. I looked at Tesla, much like everyone that has an interest in "The Market" when that story came out; at that time I think the stock closed just under 132 USD per share. Today it is around 167 USD per share. When Tesla was an IPO (initial public offering) it was offered at around 37 USD per share. So as of today, this stock is essentially a "four-bagger"; that is, it has quadrupled in price. If you had purchased it at the IPO, you'd be sitting on a pretty profit.
Of course, if you had purchased Ford (NYSE:F) in the dark days of 2008, you could have had a share for less than 1 USD, I believe. It closed today just under 16 USD per share. A 16 bagger.
When it comes to investing, one of the greatest voices I've ever heard was Peter Lynch. Lynch was the first fund manager to take a mutual fund over the 1 billion USD valuation. I've learned much from his book One Up On Wall Street and I highly recommend it to all investors. Lynch said he learned much from watching his wife: while he concentrated on the "gee-whiz" high tech stocks of the era, she would continuously shop at the same stores and purchase the same brands. Of course, she was not an investor- she was a consumer. But, when he started observing her behavior, he ran the numbers on some of her favorites and had one of those epiphanies: these companies were not merely solid investments, but were growing! After some time, her purchasing patterns changed, and he asked her about this. She gave her views and then he checked the numbers. Sure enough, they were no longer growing and he saw "sell" written all over their balance sheets (figuratively speaking).
So, my takeaway from Mr. Lynch regarding stocks is this: more than anything else, if you can't explain what a company does- no matter how good the fundamentals look- walk away, McFly. These equities are not the equities you're looking for. My extrapolated corollary is this: if you can't see, feel, taste or touch it, walk away.
And so it goes, sadly, with Tesla Motors. I really like the story: an efficient, high performance, high-tech automobile- even made in the United States! But after that, it goes south for me really fast. First, there's the ~90K USD entry price. The company has announced more models are in the pipeline, including a more down-to-earth ~30K USD model. That's good. However, even though I learned today that Tesla does have dealerships outside of California (in several parts of the world, including two in the Chicago area), I have never seen one, nor do I know anyone that owns one, nor have I ever seen one of their charging stations.
So, although this may be the next Google or Apple, it just isn't a good fit for my investing style, and I'm going to take a pass.
As always, I am hochspeyer, blogging data analysis and management so you don't have to.
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