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Mark Bruns

 
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  • Tesla: 6 Reasons Why Put Options Look Undervalued Relative To The Risks [View article]
    Thanks for the helpful comment!

    As I indicated in the first paragraph is short squeeze is likely, perhaps even imminent. Perhaps what we are seeing right now is the short squeeze. When the squeeze does happen, there will at least modest amount of profit-taking by institutions and the supply of stock will larger and unless other buyers jump in, the stock will be ripe for collapse. Well-capitalized shorts or well-capitalized longs may ultimately prevail, but that sort of thing is really-tough for me to predict. The price may go higher, but I don't necessarily understand why the price pattern since last August wouldn't be repeated. That is why I believe the options are undervalued.

    As for the investments by other parties such as Toyota, Panasonic, Daimler -- I am not familiar with the specifics of the agreements, but I know that companies make investments in lots of companies; normally, when they make those investments -- they have something that they want from their investment OTHER than simply a good return on investment. For example, the Toyota "investment" in Tesla is that it basically was a way for Toyota to extract value from its interest in the NUMMI facility; Toyota also has agreements with Tesla to supply powertrains and powertrain equipment which might be lot cheaper than getting sucked into developing the expertise for something that might not pan out. The Toyota investment and the agreement together represent something that might be worth hundreds of millions of dollars of commitment, but not billions of dollars of commitment. The total magnitude of value is all of the relationships together should be discounted by other investors [not inflated] because of the highly speculative nature electrical vehicle industry, in general, and Tesla's ability to execute, specifically. The record of performance of investments [in other companies] made by Toyota, Panasonic and Daimler is frankly quite spotty, particularly the last 10 or 25 years ... Tesla might be one of the few that work, but you almost have to be irrationally exuberant about electrical vehicles to believe that. There is a lot of unexamined euphoria surrounding the EV industry -- it's one thing to be hopeful about the future of electrical vehicles -- hope is a timeless virtue, but it's a horrible investment strategy.

    Finally, I am always anxious to learn more about options -- a reservoir of puts provides the basis for a variety of entering into a variety trading strategies ... different strategies will make sense in different market environments ... those environments have changed FAST in Tesla in the past; that will probably continue in the future .. butterfly spreads, different put spreads, calendar spreads, synthetic call positions -- of course, it is OBVIOUS that it is cheaper to purchase a call than to manufacture a synthetic call -- but having the put allows the trader to "flip the switch" or "change stance" with a long position, e.g. stock acquired in extended hours trading.
    Feb 24, 2012. 10:02 AM | 2 Likes Like |Link to Comment
  • Outlook And Price Targets On Automotive Stocks (Part 2) [View article]
    Good analysis, but your data on Tesla is dated and a bit rosy ... I hate to use the word "inaccurate" but I think you may draw different conclusions from the correct data [as reported by Tesla to the SEC] ... for example, GAAP loss for 2011 is $2.53; additionally, the actual margins look much worse than what you are showing. Tesla can't afford to produce the volumes of cars that you expect -- since producing an a production automobile is about 50X tougher than anything the company has done so far, it's not likely that its margins will improve.

    The value of Tesla stock does not yet reflect the risk premium that investors must "bake into" the stock price of real automotive companies like Honda, Tata, Toyota. Real automotive manufacturers simply cannot get along with blaming their customers for design flaws and then carrying out an aggressive PR campaign to punish the whistleblowers -- that works when in teeny production volumes of special collector cars; it will work with hundreds of thousands of customer.

    http://jalo.ps/AjhjMx
    Feb 23, 2012. 04:16 PM | Likes Like |Link to Comment
  • Betting On Electric Cars? Invest In Lithium [View article]
    Excellent article!

    I would caution investors against searching too diligently for a pure-play in lithium ... exposure to other materials is not entirely bad and may actually offer higher returns than lithium. The materials that are in higher demand in the future will not be the ones that everyone is betting on today.

    The premium for a more pure-play may already be built into the price. In some ways, the "green" premium on many alternative green and cleantech materials still seems a bit "bubbly."
    Feb 22, 2012. 11:40 AM | 1 Like Like |Link to Comment
  • 5 Stocks That Could Collapse In 2012 [View article]
    I don't think that Sprint (S) can collapse because Sprint (S) is already valued below its liquidation value. Sprint controls spectrum assets and there is at least one company, Apple (AAPL) that needs Sprint to remain viable in order to increase the "spectrum-share" of iOS devices. That does not mean that things look bright for Sprint; but then again, if the Sprint Sentiment Meter moved up off its current "Incredibly Dismal" rating, the stock would double in value.

    As Sprint (S) stands right now, it's quite capable of drifting sideways to slightly downward for a long time ... Sprint (S) is effectively a long-term "call option" now [with steadily or not-so-steadily declining time premium]. As a call option, it's bit of a speculative arbitrage play -- the current management will either turn things around OR somebody else will.

    I don't believe a collapse of Sprint (S) is especially likely ... but the collapse of any stock is certainly possible.
    Feb 21, 2012. 07:04 PM | 1 Like Like |Link to Comment
  • Stocks To Watch In The Coming Week [View article]
    Either irrational exuberance or complete doubts about the $TSLA venture are unwarranted ... right now the company is still ahead of itself ... basically, you are NOT investing an earnings and cash story such as Toyota Motors $TM ... you essentially betting or speculating on the chance that the company might turn into something like Toyota.

    As with any automotive company, you are speculating that people will want to spend much of their money on cars and NOT drive less, live more of their lives telecommuting and consuming content rather than driving to work or to the movies ... owners of automotive stocks have to believe that people will continue using cars as they do now for the next 50 years or more ... that may not be a great assumption, but the Tesla idea is tied to personal transportation.

    Shorting the stock does not make sense to me -- it appears to be a well-capitalized organization with investors who understand the long-term risk/reward strategy. The question is what is the value ... Musk and his investment bankers probably got it about right when they priced the venture, i.e. the price at which Musk exited is good indication of what the upper bound was ... there has been little news since then to indicate a dramatic change ... there have been positive developments [as with other organizations] so it would appropriate for the $TSLA to keep pace with the NASDAQ index until the development indicate that the company is profitable, with significant market share, growing at good clip, gaining broader acceptance ... in other words, as long as this company needs a ginormous government subsidy to motivate buyers, it is a speculative company and future earnings should be steeply discounted.
    Feb 13, 2012. 05:31 PM | 1 Like Like |Link to Comment
  • Stocks To Watch In The Coming Week [View article]
    If you are trying to discern what the real price should be for $TSLA should be, the recent insider sales at TSLA are sort of telling ... it is as if insiders are giving a broker orders to "Start taking some money off the table for me if the stock gets into the $27.30 to $30.00 region."


    This doesn't indicate that these people believe the price is too high at $29 or so [just short of $30] ... it indicates that $30 is the place where they are starting to get nervous about the price relative to the companies prospects ... if you think this stock is a buy when it's worth more than $31.50 or so ... well, good luck with that view ... just remember that there have been no insider purchases of $TSLA since June of last year -- but that purchase does indicate that Elon Musk believed then that the stock was a Buy at $28.76.


    The following list is a list of recent insider SALES [triggered by price] -- they are not "Planned sales" [triggered by calendar] or options that were exercised [and immediately sold] in order to collect compensation.


    2/2/12
    Ahuja Deepak
    Chief Financial Officer Sale 10,000 shares 30.00 – 30.00

    Musk Kimbal
    Director Sale 3,333 30.00 – 30.00

    Straubel Jeffrey B
    Chief Technology Officer Sale 5,000 30.03 – 30.03


    1/25/12
    Straubel Jeffrey B
    Chief Technology Officer Sale 12,000 27.35 – 27.35

    1/3/12
    Ahuja Deepak
    Chief Financial Officer Sale 5,000 28.84 – 28.84


    12/27/11
    Straubel Jeffrey B
    Chief Technology Officer Sale 12,000 28.31 – 28.31
    Feb 13, 2012. 08:56 AM | Likes Like |Link to Comment
  • Use Tesla's Weakness To Buy-Write Profits [View article]
    Bear put spreads and bear call spreads make sense for TSLA ... the company is overvalued at these levels (30+/share), the company still needs to prove itself ... ordinary socially-responsible and environmentally-respon... investors should avoid this company [and let the Google and Facebook billionaires support this boondoggle]. The company is not generating any profits, it loses even more money as it increases revenue, its balance sheet requires steady inflow of capital from believers, it's bleeding red in its cashflow ... a billionaire's PR project does not justify a 3B capitalization in the stock market.

    From a resource and cost perspective, these EV vehicles are still a disaster ... that might change in the future, but it's not likely. People should not be duped by these things just because they are different. Initial cost of 6,831 cell lithium-ion ESS is roughly $36K; Tesla offers to replace / recycle, cost these if the $12K recycling fee is paid 7 years in-advance ... those costs are in ADDITION to the cost of [subsidized] charging. This means that it costs more AND requires more in terms of consumption of scarce resources to own a Tesla roadster than a gas engine Porsche or BMW or Audi or any other luxury roadster.

    Toyota, GM, Ford, Chrysler, BMW and all of the other major automotive companies have at least two decades of experience with EV prototypes. The reason that the major companies are not on the road in-force with these vehicles is that after a LONG time of looking at this alternative NOBODY has found a way to make money on these things yet except as PR projects. There are only so many suckers -- there just isn't a large enough population of holier-than-thou fools who can be parted with their cash to purchase vehicles such as the Toyota Pious or the Tesla Rooster. The ONLY reason to buy one of these vehicles is advertise one's GREEN-liness ... and, except for impressing idiots who don't want to evaluate these on an engineering, thermodynamics and resource basis, there's a limit to how much of that really works.
    Feb 9, 2012. 05:37 AM | Likes Like |Link to Comment
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