Thoughts on recent moves- in depth
I'm going to try my hand at a semi-mega post. Work and school have been kicking my butt, but I want to address a few things that occurred recently. Apologies for those who know the stuff I am about to say already. Just want to give a nice run down for those who don't want to scroll through thousands of pages at the very least.
Tesla's Meeting in Germany
For those who are saying that Germany is a favorite market and how it was a misstep to say this. I think I understand the business rationale on multiple fronts as to why Germany is a key focus. Naturally the questions that arise are, why not Norway? They sell the most Tesla's per capita in Europe so far. Their "best customer" is there. I think it's safe to say that in Norway Tesla is well established and the plant will be there and they've already cleared government permissions and obstacles. So the next question becomes why Germany?
Financially, Germany is the best play in Europe. If you've been keeping up with the news, we all know that Germany is the strongest of the EU nations, so it makes sense that you go to the region that can afford your car (which is probably why Elon kept mentioning per capita).
Taking the battle to the homefront Tesla is bringing the battle straight to where Mercedes, BMW, and other German automakers have a foot hold (not to mention their Corporate headquarters). This matters hugely because it will put more pressure on these companies to speed up their EV lines (if they wake up).
Customers are engineering oriented in the speech at Munich, Elon mentioned that the German's are notorious for their engineering. Tesla is, at its heart, a hardcore engineering firm. Why not give Germany the most advanced engineered car in the world today. The customers will appreciate it on a whole other level and perhaps find ways to improve it through Tesla's feedback loop with customers. I think this presents possibilities of idea incubation.
Analyst Downgrades and Merrill Lynch's "downgrade"
Many of the Google Finance/Yahoo Finance/Finance news aggregation sites picked up a few articles from no-name firms and the bulge bracket banks. I typically see the no-names as noise mainly for one reason-- it's simply one person sitting behind his desk just spewing hot air, I know people like this who create LLC's and slap a fancy name on their paperwork and start writing things. It's the equivalent of blogging and typically blogging without credentials (Aswath Damodaran's blog was a different story-- I took that to heart, because it served as a reminder of valuation and reminded me to reflect/assess risk). Even worse, many of these downgrades happened after the fact TSLA started seeing some red. Unfortunately human's are sheep and following trends can't be controlled, until a deep breathe is taken and the heart separates from the head. To exacerbate the situation, news outlets serve as multipliers which make retail investors scared to buy and short term traders salivate to short/buy puts, etc.
This brings me to my final point about
Merrill Lynch. If you do some digging on the "Johns" that published their report it really does seem absurd. What made me start to think was the fact that two people were needed to publish the report. This typically isn't the case. Then I saw the theatrical style title which made me seriously question the credentials and business acumen of these guys. John Lovallo, after looking at his pick history and little background available, really is a non-issue (Yes, I know past performance doesn't indicate future), but it matters. Since his last note on TSLA, he is -343.3% on this one equity. You have to imagine... nobody is listening to him, which is why the second person was necessary (and he doesn't seem to be a big deal to me either-- doesn't have the cred). John Murphy's strength is that he has extensive experience (been with ML since 99) in the automotive industry that is relevant to what Tesla is going through today. He focuses heavily on the manufacturing and supply side of the auto industry. He put up a decently written piece
here. The only problem is... his strength is also his Achilles heel, he seems entrenched in the existing auto industry and the dinosaur companies that have failed to be nimble and forward thinking in recent times. He cites there being 300,000 reasons things can go wrong with Tesla in his report. I found this ludicrous. For the supply side of things, aside from having a genius CEO and management team so many people forget about Gilbert Pasin, who he is... and what he actually did. More importantly, people forget about the partnership with Toyota in the past. It's really simple... you take a company like Tesla with one model, less moving parts, and a high tech factory then blend it with Toyota best practices and you have a VERY serious threat to incumbent automakers. So many people have not picked up on this. I also think that many investors get so focused on the car and invest, but the real secret for TSLA investments is this formula that they have on the back end and the product side. It's this that will drive this stock and its future outlook. Think about Apple's iPod, CEO, and fantastic supply chain management which took time to work out. Tesla is getting there.
Institutional Funds
This is another important point many people have been posting about. We just came off of Q3. Money managers will want to lock in their gains, which is what I think we were seeing. Mainly because word on the street was TSLA was going up too fast in too little time. This sentiment I agreed with, but I think what is going to happen with this ER is that people will get a clearer picture of the trends and outlook for next year will be more accurate and then another round of buying will occur (in a less frenzied manner).
So to conclude, I'll echo what Citizen-T says. Tune out the bloody noise. I'll admit, I'm pretty deep in the water with my "house money" options and was stressing today, but then I took a step back and thought about a few things that make this sell-off the opportunity so many have been waiting for since the last "regenerative braking" run. For those on the sidelines, stop trying to time the market. Take it for what it is, before the big money steps in again so you don't whine and say... I should've gotten back in at $xxx.xx.