If you're only interesting in reading articles from large and very experienced investors, I want to save you a bit of time: I am an amateur and my portfolio just recently broke five thousand dollars.
Within the storm of such seemingly professional investors commenting on Tesla (NASDAQ:TSLA), it's difficult to come to an informed position about whether to fear to appreciate the stock. Because I am investing on the basis of the reasons I can understand, because I am invested in TSLA and do not intend to sell any time soon, and because I sure there is at least one other person in a situation similar to my own, I want to share my reasons for why I'm long TSLA.
I will be upfront with the fact that I do not have a sophisticated grasp on the "fundamentals" and the traditional analysis of these numbers. Moreover, I do not know the long, intricate history of automotive companies in the United States, and I do not know the particularities of the technology sector that make TSLA more tech than GM but less tech than Apple. I do understand that these factors are potentially important.
I am a philosopher, and so I hope that gives me some strength and clarity here. I think about causality, in particular, so I want to start with a few points on what might be gained from such fundamentals, were I to understand them.
1. The causal relationship between fundamentals and future success is not established.
Generally speaking, it is difficult to distinguish legitimate causal relationships from 'mere' correlation relationships. That being said, any position than an analysts maintains on the basis of the fundamentals has to been seen as an extrapolation of previous, similar circumstances. At the most, all that can be said in these cases is something of the form, "last time we saw this doing that, this happened." These relationships are valuable, and they allow us to learn from our past.
That being said, the analysts have to establish that TSLA is sufficiently similar to the companies involved in their models in order for their extrapolations to be defensible. I hear commentators go back and forth on whether TSLA can be compared to other auto companies, Apple, or anything else.
My advice here, if you think the evidence supports a comparison, listen to the suggestions of the analysts; if you think TSLA is sufficiently dissimilar, do not place too much clout in these suggestions. I am on the fence about this, because I do not have a conclusive historical perspective. My understanding, however, is that TSLA is sufficiently different from most auto companies to justify a more nuanced approach than a simple numerical analysis to another auto company.
This brings me to my next point:
2. TSLA is different from other auto companies
If I'm not mistaken, Tesla's stated mission seems to be to inject the auto market with feasible alternatives to gasoline powered vehicles. I believe there is a three or four step process that Musk has in mind, which begins with a vehicle that only the very wealthy can afford, and ends with a vehicle that appeals to the masses. More interestingly, TSLA seems to be more invested in the success of electronic vehicles than itself as a purveyor of such vehicles. TSLA "wins" if automakers, in competition with TSLA, pump their resources into developing a feasible alternative. To be sure, TSLA is a company, and a company needs to make a profit; I do not mean to argue that TSLA or Musk are humanitarian volunteers. Rather, they do not seem to be out for maximizing profits at all costs.
I think this makes TSLA different.
But there are other reasons that TSLA is different. TSLA has something that the other auto companies do not. I cannot say conclusively what it is, but the very fact that one can reasonably consider this nascent company as one day competing with Ford, for instance, suggests that TSLA has something serious powering its progress. Something about the way these other companies have handled themselves, has allowed, a niche interest large enough to make TSLA, at the very least, a popular concept.
I will not argue that TSLA has more concrete resources than other, more prominent auto companies. But resources are not the only factor at play at this point. There is a difference between what one logically can accomplish and what one actually intends to accomplish. While there is no particular reason that Ford or GM could not throw the resources behind R&D such as to outperform TSLA, moreover, there is no particular reason that these companies could not have excluded the possibility of another, smaller company from becoming a tenable option. Be that as it may, something about the actual facts in play have resulted in these companies not doing what it takes to prevent the emergence of TSLA. This suggests to me that TSLA and these other companies are indeed committed to different outcomes.
My second advice is to invest in the company that has committed to the outcomes constitutive of the desired future. TSLA does this for me.
3. I want to own a Model S
This is a shorter point. Something that I have tried to internalize from W. Buffett's suggestions is to invest in companies that I understand and use. I do not use TSLA's products, but I deeply want to. I want my first car to be one of their products, and I am willing to wait upwards of vie years to be able to afford one.
Not only am I investing in a company that has a vision of the future that I appreciate, I am investing in a company that produces a product that I hope to use. My advice is to do the same.
4. TSLA has emotional appeal
As is perhaps evident from my article, TSLA is able to appeal to the emotion, rather than the 'reason' of investors. This is a bit of a straw-man. Nonetheless, some speculate that the sentiment behind TSLA is predominately cultish, and perhaps this article places me in the bowl of cool-aid, as a little TSLA cool-aid, sipping guppy. That's fine, and maybe preferable.
I like companies like Google, Apple, Starbucks, and Amazon because something about them draws consumers to them despite the existence of other feasible alternatives. These companies have created a sort of fanaticism that bolsters their success. These companies are cultural icons; memes as well as products. Another point that W. Buffet made, if I'm not mistaken, is to invest in companies that have strong consumer loyalty.
TSLA drivers are loyal. Drivers crash their cars into walls, escape fires unharmed, and then ask for an new car. They stand my the clarity with which the systems led them out of the crash, and they stand by the vehicle.
Investors are loyal. The stock has rallied and continues to remain overvalued from a fundamentals driven perspective.
My advice here is to invest in a company that is robust enough for its consumers to stick by it despite its operational fluctuations. This will not protect any company indefinitely, but is gives them a chance to respond to loyal customers and improve. Point in case, TSLA warranty now covers fire.
5. I want to invest in companies that 'belong' to my generation
I'm in my early 20s. Ford and GM, and Apple for that matter, have been around longer that I have been alive. That suggests that these companies are rather stable, but also rather stable. This suggests two things for me, I should invest in them to protect my investments from risk, and I should avoid them if I want to inject myself into companies that will grow along side me.
There's not much more for me to say here; there are enough official analysts suggesting that the investments of individuals should follow their goals and priorities in life. These folks, as far as I can tell, recommend that older investors invest in more stable companies, and that younger investors take the chance to grow with risky endeavors.
I have more reasons, but this is more text than my experience, perhaps, justifies at this point. I'd appreciate your comments, and I hope mine are helpful.
Disclosure: I am long TSLA, GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.