Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Fact Checking]

Not exactly TSLA related, but just an example what happens to a big company losing steam.

Included in the results was a $15.4 billion non-cash impairment charge related to the Kraft and Oscar Mayer trademarks and other assets.

For comparison- JLR did $4 billion write-down, while they are minions compared to the German giants. When they start writing off/down it will be a s*** show.

Btw- KHC is down ~20% as a result.

Indeed, much larger numbers. Here's VW's balance sheet:

Stock Ticker Symbol Lookup - MarketWatch​

Just Property, Plant & Equipment is around $100b, plus another ~$100b in intangibles and other assets.

As a comparison, Jaguar Land Rover had PP&E of about $14b in 2018 and had to write off $4b of it, or about 30%. Similar levels of write-offs would remove VW's profits for the last 10 quarters or so?

 

[KarenRei]

Indeed, much larger numbers. Here's VW's balance sheet:

Stock Ticker Symbol Lookup - MarketWatch​

Just Property, Plant & Equipment is around $100b, plus another ~$100b in intangibles and other assets.

As a comparison, Jaguar Land Rover had PP&E of about $14b in 2018 and had to write off $4b of it, or about 30%. Similar levels of write-offs would remove VW's profits for the last 10 quarters or so?

Wow. Talk about potentially catastrophic.

If I were in their shoes, I'd be trying to fund as many projects as possible with equity rather than cash

 

[pnungesser]

The more I think about, the more insincere CR is. The Model 3 broke their scoring system with a score of 103/100. No car they ever reviewed scored that high. Fit and finish shouldn't be in the category of "reliability", but should be judged in the "customer satisfaction" section. If customers are satisfied with the panel gaps and are happy with their cars, then the gaps are not really a fit and finish issue is it? There's a fine line between "design cue" and "fit and finish". Who to say customers doesn't like panel gaps if they are happy with the look of the car? Now if the gaps are causing leaks, then that's another issue and should be under reliability.

Their rating even admit that the power train is fine...so not recommending the Model 3 right now due to panel gaps is like not recommending the Prius due to ugliness..and its ugliness cause the Prius to be unreliable.

Mostly agree, but it was an early Model S, not 3, that scored 103. The news of that score was a real coup for Tesla and really helped put the brand in front of the greater public. Say what you want about CR, but CR deserves a lot of credit for the early success of the MS.

 

[shlokavica22]

The idea being that they will dump EV as soon as they can. (A fool's bet in my opinion. Still it's been over one hundred years since horse and buggy vehicles went out of fashion, and they still use wood trim, often from areas where we should be conserving, in cars because "it's how a proper car should look".)

They are not that stupid. Even if something happens with TSLA, China alone will still be able to push the EV transition. It's naive to think otherwise.

They simply make a calculated decision, choosing the lesser evil for the short term. They know the demand for EVs can't be satisfied and they will try to sell the next best option- PHEVs. Thus, extending the life of their production facilities.

The problem with that is demand. The number of people deciding to wait for EVs instead of buying PHEVs is a great unknown. By delaying the inevitable they might be shooting themselves in the other foot as well.

 

[lklundin]

Why would anyone subscribe to any magazine?

I think some CR "patrons" view a CR subscription as donating to a charitable good cause. CR doesn't take advertisements.

I have had a paid subscription to the Guardian because of their work with Edward Snowden and with the Panama Papers.

Compared to that, their bashing of Elon Musk because Tesla have no unions is small potatoes.

 

[KarenRei]

HT @tesla_truth

(Note: I wish it was possible to shrink the images that we post, without having to choose between an illegibly-small thumbnail and something that takes up two pages worth of screen real-estate. :Þ)

 

[j6Lpi429@3j]

HT @tesla_truth

(Note: I wish it was possible to shrink the images that we post, without having to choose between an illegibly-small thumbnail and something that takes up two pages worth of screen real-estate. I could always load them up in an image editor and manually shrink them, but that's a hassle :Þ)

well the twitter username checks out

 

[shlokavica22]

HT @tesla_truth

(Note: I wish it was possible to shrink the images that we post, without having to choose between an illegibly-small thumbnail and something that takes up two pages worth of screen real-estate. I could always load them up in an image editor and manually shrink them, but that's a hassle :Þ)

Don't worry, you fully compensated the size of the picture with the font size you choose for the note bellow. Were you thinking of fly4dat avatar when you wrote that?

 

[Leo9]

TSLA is up 19% in 5 years. There has been an obscene amount of drama in that timeframe.

TSLA vastly underperformed SPX / QQQ while carrying much higher risk. It has been a poor investment, but it's undoubtedly a phenomenal trading stock. Looking to add below 300 again...
One day the trading range will be broken, but apparently not anytime soon.
Tesla the company has never been in a better position of course, but the stock is what it is.

 

[Huskyf]

HT @tesla_truth

(Note: I wish it was possible to shrink the images that we post, without having to choose between an illegibly-small thumbnail and something that takes up two pages worth of screen real-estate. :Þ)

Don't see the same result check this vidéo of Bjorg

 

[Fact Checking]

If I were in their shoes, I'd be trying to fund as many projects as possible with equity rather than cash

VW's and BMW's free cash flow was already atrocious for the last 5 years:

Volkswagen AG Free Cash Flow (Quarterly) (VWAGY)
Bayerische Motoren Werke AG Free Cash Flow (Quarterly) (BAMXF)​

Haven't dug much into it, but aren't they financing their high capex by borrowing against their existing assets? I'm wondering how VW was able to post high profits with such bad cash flow - or is their low FCF an accounting artifact I missed?

And that was all during the golden years of 'peak ICE', before the forced EV transition gets underway:

 

[KarenRei]

TSLA vastly underperformed SPX / QQQ while carrying much higher risk. It has been a poor investment, but it's undoubtedly a phenomenal trading stock. Looking to add below 300 again...
One day the trading range will be broken, but apparently not anytime soon.

Open: $19,00
End of 2010: $30,14 (+59%)
End of 2011: $29,50 (-2%)
End of 2012: $97,76 (+231%)
End of 2013: $207,77 (+113%)
End of 2014: $250,80 (+25%)
End of 2015: $223,23 (-11%)
End of 2016: $341,01 (+53%)
End of 2017: $284,73 (-17%)
End of 2018: $298,23 (+5%)

Tesla is an incredibly noisy stock, and always has been. The noise has led to poor average returns in the past few years, but if you sit it out, you miss the big jumps whenever what the company is doing becomes too big to ignore.

BTW, if you think Tesla's first 8 years as a company were noisy, check out Amazon's

If you think TSLA investors are frustrated, imagine yourself in the shoes of a 1998 AMZN investor, trying to show some patience and hoping to some day, some day earn their investment back. (AMZN didn't close a year higher than 1998 until 11 years later)

 

[KarenRei]

Don't see the same result check this vidéo of Bjorg

Did you read the responses to the original post? That's kind of the whole point

 

[Reciprocity]

I agree that Tesla's brand value is huge. My frustration, however, is that Musk does not believe in brand marketing and so is not so keen to monetize the value of a brand. The irony here is that Musk is really good at creating brand value in spite of thinking so little of branding.

Tesla can't sell more cars than it can make and it can't make them fast enough. Trust me, Elon would be way into brand marketing if that is what was required for the mission. The fact is that the master plan is fundamentally a Marketing plan. Build a super sexy, super fast car.. why? To elicit lust for the brand. Then build an even sexier and not powerful sedan? Pure branding. Elon may not want to admit but he is marketer. Look at SpaceX. Every rocket launch is broadcast, every rocket is white and freshly painted after being burned on reentry. It's all brand marketing whether Elon wants to admit it or not.

The Tesla stretch is 100% because of this brand marketing. They could have made a very cheap, small compact EV that was mission focused but the mission would have failed. The key component of the mission is not selling everyone an EV, it's forcing every competors to make compelling EVs. The mission fails without that cause and effect. It's as clear as day to anyone with two eyes. Tesla's top down assault on margins only happens with super sexy, fast and lust worthy cars. That's brand marketing 101 right there.

Don't confuse marketing and advertising. Strong brands don't have to advertise as much. It's more strategic around specific product launches then the brand as a whole. Tesla's are it's advertising and they more demand than supply. A temporary squeeze if demand into 2 QTRs will but change that and the demand rubber band will snap back with a vengeance in the US as all those new Tesla's dominate the roads.

 

[shlokavica22]

VW's and BMW's free cash flow was already atrocious for the last 5 years:

Volkswagen AG Free Cash Flow (Quarterly) (VWAGY)
Bayerische Motoren Werke AG Free Cash Flow (Quarterly) (BAMXF)​

Haven't dug much into it, but aren't they financing their high capex by borrowing against their existing assets? I'm wondering how VW was able to post high profits with such bad cash flow - or is their low FCF an accounting artifact I missed?

And that was all during the golden years of 'peak ICE', before the forced EV transition gets underway:

Interesting. Based on FCF comparison (for the last 5 years), F is doing much better than VW/BMW. Even FCAU fairs much better.

 

[Right_Said_Fred]

TSLA is up 19% in 5 years. There has been an obscene amount of drama in that timeframe.

And it is up 73% in 3 years. There are "lies, damned lies and statistics"

But you're absolutely right about the obscene amount of drama in that timeframe.

 

[Fact Checking]

They are not that stupid. Even if something happens with TSLA, China alone will still be able to push the EV transition. It's naive to think otherwise.

They simply make a calculated decision, choosing the lesser evil for the short term. They know the demand for EVs can't be satisfied and they will try to sell the next best option- PHEVs. Thus, extending the life of their production facilities.

The problem with that is demand. The number of people deciding to wait for EVs instead of buying PHEVs is a great unknown. By delaying the inevitable they might be shooting themselves in the other foot as well.

Another big factor working against Plug-in-Hybrids is manufacturing cost.

Having the complexity of both a BEV and an ICE is increasing the parts count by a couple of thousand moving parts, which Ruby Goldberg machine is only economical to mass produce if there's a shared supply chain used by all the ICE car makers to produce tens of millions of units per year. Not to mention future liabilities, driving bans and fundamentally higher service and warranty costs.

As EVs scale up, not only will battery cells become cheaper, so will ICE manufacturing scale down, and it won't be pretty to ICE margins.

Nor can a PHEV keep up with the driving qualities, acceleration and volumetric utility of a Tesla, which means ICE makers inevitably lose dominance of the luxury/premium market. Which market is the bread and butter of half of the ICE OEMs.

Which problem German OEMs were already confronted with this problem when they tore down the Model 3. That the Model 3 is out-competing them at a fraction of the manufacturing volume already must have been a rude awakening to them.

 

[KarenRei]

Another big factor working against Plug-in-Hybrids is manufacturing cost.

Having the complexity of both a BEV and an ICE is increasing the parts count by a couple of thousand moving parts, which Ruby Goldberg machine is only economical to mass produce if there's a shared supply chain used by all the ICE car makers to produce tens of millions of units per year. Not to mention future liabilities, driving bans and fundamentally higher service and warranty costs.

As EVs scale up, not only will battery cells become cheaper, so will ICE manufacturing scale down, and it won't be pretty to ICE margins.

Nor can a PHEV keep up with the driving qualities, acceleration and volumetric utility of a Tesla, which means ICE makers inevitably lose dominance of the luxury/premium market. Which market is the bread and butter of half of the ICE OEMs.

Which problem German OEMs were already confronted with this problem when they tore down the Model 3. That the Model 3 is out-competing them at a fraction of the manufacturing volume already must have been a rude awakening to them.

PHEVs also throw away the inherent safety advantage of EVs by making you stick a large, heavy, effectively incompressible engine block in your vehicle - a significant passenger safety cell intrusion risk as well as something that raises your centre of gravity.

 

[SO16]

Not directly about TSLA, but Chanos gets a spotlight. You could read this as a TSLA-short fantasy.

The Economist | Shooting the messenger

There needs to be a scorecard online that shows all the Chanos short thesis “sky is falling” narratives over the years and how they played out.

 

[bhtooefr]

Thoughts on the whole CR thing:

• Tying recommendation to a minimum of average reliability, regardless of owner satisfaction, is a fair methodology, IMO. Consumer Reports has an audience that looks at a car like they do a washing machine - a pure appliance. So, below average reliability means it's a poor appliance and shouldn't be recommended to their audience, even if it is fun to drive. I mean, look at Ferrari - their cars are known for hideous unreliability and extreme maintenance costs, yet many of their owners are completely satisfied, because it becomes "worth it" to the owner when it is running.
• The lack of authentication of ownership, OTOH, is concerning. I wonder if CR will start seeing an uptick in "whompy wheels" on the Model 3, or something equally asinine.
• Sampling bias, as others have pointed out, is a potential issue as well, even if there isn't ballot box stuffing.
  
• The methodology of determining reliability is broken. Paint defects that don't go down to the metal (and therefore do not cause corrosion issues), and panel gaps that don't admit water, are not reliability issues - they're quality issues, but they do not affect the utility of the vehicle, and should be very heavily deweighted (in addition to the powertrain weighting that's done). Touchscreen crashing and glass cracking, however, do count as reliability issues in my mind.
• I don't blame CR for not taking Tesla at their word that the issues are fixed, however. Wait until the data reflects otherwise.
• The timing and especially the methodology and presentation of the release is, however, rather suspicious. I don't think they're misrepresenting data - for the time period that they have data for, the problems they bring up were actual problems. And, that'll clear up soon. But, how they presented the story, and how they seeded it with other outlets? That's clickbait at best, and as others have pointed out, almost certainly tipped off stock manipulators.