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Don Dion
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Don Dion (donalddion@gmail.com, @DRDInvestments) is the owner and Chief Investment Officer of DRD Investments, LLC, based in Naples, FL. and Williamstown, MA., a family office focused on managing a long/short hedge fund, real estate assets and various other financial assets for the Dion family.... More
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  • Tesla Is A Strong Buy Ahead Of Rollout Of Model 3

    Tesla Motors (NASDAQ:TSLA) continues to expand in a big way by leasing a 500,000 square foot manufacturing facility in Palo Alto. The additional plant, and its new Gigafactory in Reno, signal that Tesla plans to aggressively pursue the development of its new Model 3 cars.

    Consumers have been anticipating Tesla's latest line in high-performance electrical cars. According to initial designs, the Model 3 will act as a family of vehicles, where consumers can choose from sedans or variants of sedans. Analysts speculate that the Model 3 will take Tesla to the next level, and justify the company's current $32 billion market cap.

    Revenues Continue To Drive Company Forward

    Tesla reported revenues totaling $939.9 million in the quarter ending March 31, 2015, up from $620.5 million in the same quarter last year. Although the company reported a total loss of $154.2 million for the quarter, the company reports most of the losses were attributed to its recent investments in infrastructure. Tesla expects revenues will continue to increase and costs will fall as it plans to deliver the widely anticipated Model X in the next three to four months.

    Competitors Rev Their Engines

    Tesla Motors faces stiff completion as General Motors (NYSE:GM) and Honda (NYSE:HMC) plan to spend billions of dollars developing the next line in hybrid and battery-powered cars. Honda ditched its current Civic hybrid and natural gas cars to focus more on the development of hydrogen-powered cars.

    GM plans to compete directly with Tesla by developing a new line of electric cars based on the Chevrolet Bolt EV. Although the company did not announce any production details, insiders speculate that GM will start production late next year. GM claims the electric car will have a driving range of 200-miles per charge and cost $30,000.

    Yet Tesla developed the groundbreaking Model S, the only electric car on the market with a 200-mile per charge driving range. Although the Model S costs around $70,000 after taxes, Tesla reports that its Model 3 will have the same range as the Model S without the price tag. Elon Musk, CEO of Tesla Motors, states that the Model 3 will cost consumers around $30,000.

    All Time Highs Ahead

    According to analysts who regularly follow Tesla, the outlook remains strong if the company delivers on its 3 to 4 month rollout schedule for the new Model X. Adam Jones, Morgan Stanley's Tesla analyst, states that the company can set all-time highs by the end of the year if it can deliver the new Model X and Model 3 as scheduled. With the lease of the new 500,000 square foot facility in Palo Alto and its mega Gigafactory in Reno, Tesla should be able to deliver as promised.

    Conclusion: Buy TSLA Ahead of Rollout

    Despite established firms attempting to edge innovator Tesla out of its reputable position as an EV leader, GM in particular has not proven the versatility that Musk's company has. Still weighed down by a host of recalls, GM stock shows no signs of ceasing its slow decline.

    (click to enlarge)

    (Nasdaq.com)

    Despite TSLA's impressive growth, we agree that upside is still to come. For the year, we are seeing TSLA trading below its high close to $286. This could be an excellent buying opportunity ahead of the rollout of a more consumer-friendly model.

    (click to enlarge)

    (Nasdaq.com)

    Moreover, EV charging stations for Teslas are proliferating; infrastructure is in place to drive forward.

    (Source)

    Tags: GM, HMC, TSLA, long-ideas
    Jun 19 9:26 AM | Link | Comment!
  • Bank Of America- The Troubles Continue To Mount

    Bank of America (NYSE: BAC) faces another investigation by the SEC, alleging that the multi-national financial institution failed to protect sensitive client account information. The SEC claims that BofA executed sophisticated trades using millions of dollars that the bank would otherwise use for funding costs. In order to execute the trades, the SEC alleges Bank of America violated their brokerage account customer's consumer protection rights.

    Several analysts who follow BofA continue to place a buy rating on the stock. However, the analysts fail to mention the turmoil brewing within the company's hierarchy. The latest SEC investigation adds fuel to the fire of speculation that a major shake-up in leadership is closer than most analysts with a buy rating, or a financial stake, want to believe.

    More Dissatisfaction With Management

    Since ascending to the role of CEO in 2010, Bank of America's Brian Moynihan has been putting out fires on a number of fronts while at the same time, attempting to keep shareholders happy. It has been an arduous battle, and the recent quarterly report blackened the future even further. Even when B of A reports profits, he still receives scathing criticism, albeit not without justification.

    Moynihan has a "top down" dictatorial management style that has been at odds with Merrill's entrepreneurial one from the start. Moynihan has incorporated cross selling of B of A products to Merrill clients - but without reciprocation of business from B of A to Merrill brokers. Moynihan's strategies focus on capturing as many millionaire accounts as possible.

    Merrill has long built its loyal client base by helping people with small accounts grow their net worth through participation in Merrill IPOs and other products. B of A decreed that any accounts under $250,000 were not to be opened by Merrill brokers and were to be referred to an 800 toll free number.

    In a NY Post article, a former Merrill broker with over 30 years of history there took his team to Raymond James due to the "bank first" philosophy of B of A executives vs. the "client first" reputation that Merrill has cultivated throughout much of the latter half of the 20th century.

    Additional Issues Weigh on Latest Earnings Report

    Bank of America has a significant portion of its business still tied to interest rates. Commercial lending and many of its other banking products are all interest rate dependent. With the vestiges of the huge but troubled Countrywide Mortgage portfolio continuing to drain a significant amount of funds for servicing, there are remaining trailing legal liabilities, but they are finally winding down.

    B of A posted profits, but much of the numbers were due to reduced legal costs of up to $6 billion vs same quarter last year. Moynihan also deployed drastic cost cutting measures, which reduced expenses by almost 30%. However, a good portion of this cost cutting was in personnel, which equated to almost 19,000 employees, or 7% of B of A's workforce receiving pink slips.

    Competitors Gain Traction

    Bank of America's top competitors, Wells Fargo (NYSE:WFC) and JP Morgan Chase (NYSE:JPM), continue to outperform while BACs stock price remains stuck in a tight vacuum. BofA stock charts show very little price movement over the past couple of months, trading within the $15 to $17 range during that time. Although BofA reported 3.6 billion in net income, the year-to-date stock price is down nearly 12 percent.

    (click to enlarge)

    (Nasdaq.com)

    Executives Gain, Shareholders Lose

    It appears that executives at Bank of America have lost sight of the fact that shareholders own the company. While top-level executives take home millions of dollars in salary and bonuses, the shareholders earn next to nothing from the stock, especially with a dividend payment of 1 percent. BofA currently pays a .20 cent per share dividend on preferred stocks, as of April 2015. Compare that with Wells Fargo and JP Morgan, who pay 2.6 percent per share of preferred stock owned.

    (click to enlarge)

    (Source)

    Conclusion: Consider BAC's Competitors Instead

    The announcement of an SEC investigation into BofA's attempt to free up cash by compromising its customers personal information may cause analysts to change their tune. With a lack of real leadership needed to run a so-called "too big to fail" bank, the buy and hold recommendation by analysts may lose its luster with investors who are still skeptical of banks and their business practices.

    The great recession of 2008 is still fresh in many people's minds, and it may take several more years for banks to win back some degree of trust among their customers. A federal investigation certainly does not help BofA and its effort to win back consumer confidence.

    We remain very cautious on prospects for BAC shareholders in 2015.

    We encourage those looking for timely and technical research to sign up for Don Dion's IPO Analysis, a new Premium Service from Seeking Alpha.

    Tags: JPM, WFC, BAC, short-ideas
    Apr 30 12:30 PM | Link | Comment!
  • IPO Lockup Expiration - Sientra Inc. - 4.27
    • April 27, 2015 concludes the 180-day lockup period for SIEN, developer of medical aesthetics products, specifically silicone gel breast implants.
    • At this point, SIEN's major pre-IPO shareholders will have a first chance to sell their holdings, likely flooding the market and temporarily depressing SIEN's share price.
    • Research shows abnormal negative returns of ~(5%) in a window of approx. one week prior to the lockup expiration event.
    • Given SIEN's growth, these insiders could be ready to take profits; investors should be ready for a short sale.
    • Additional analysis here.
    Tags: SIEN
    Apr 23 9:02 PM | Link | Comment!
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