I am going to come clean now, so you can all go ahead an shoot me. Against the express (non-)advice of several TMC posters, I have become an automotive short-seller. Last week I put together an anti-portfolio of a dozen publicly traded, traditional car makers, short sold them all in more or less equal amounts and bought Tesla shares for all the proceeds. This explains how I could post that I had increased by number of TSLA shares by 10%, in spite of TSLA having gone up so much in recent months.
Why did I adopt this strategy?
First, with all the recent bullish Tesla news (Model Y deliveries about to start, ground-breaking at GF4, GF3 ramping production & extending capacity, massive roll-out of v3 chargers, FSD improvements, solar roof installs increasing), I felt compelled to get more long exposure. So my decision to short-sell traditional auto was compared with buying on cash margin:
1) TSLA is and likely will remain for some time a very volatile stock, so buying on cash margin could bring disconcerting swings to my leverage,
2) A COVID-pandemic could wreck havoc on the stock markets, in which case cash is king - so in that scenario (with its possible investment opportunities) I would like to not be sitting with a large, negative cash balance,
3) By leveraging via traditional auto, I basically hedge against a general down-turn in the auto-industry: If Tesla and every other car maker fares badly, then my leverage changes less - this is in fact what I have seen during this week,
4) The short borrow interest on my chosen stocks is comparable to the cash margin interest - so with dividend payments a possible wild-card, the cost is comparable,
5) I am unsure for how long I will maintain this short position, but a large fraction of the posts on this forum have been bullish on Tesla by describing the poor outlook for the competition. So I feel there is a distinct possibility that my anti-auto-portfolio can outperform the margin interest rate even on a longer time-scale,
6) By short selling a large number of auto makers, I spread the risk of my short exposure, so even if a couple should do very well, I should not end up with catastrophic returns,
7) Most importantly, I have been able to convince myself that I am not investing against traditional auto because of a general sentiment against them (a typical TSLA short-seller mistake), rather I am simply convinced that they will perform rather badly in the coming months and years and that there is a low risk that they will perform well in the same time frame.
Of my one dozen stocks, I already decided this week to cut my profits in the case of Mazda, I simply could not stomach the 20% borrow fee on the stock. So I am down to 11 stocks. I never considered shorting any Chinese auto maker, not only do they seem further wrt. BEVs but I also I don't understand the market there, especially how their government may intervene in case a company has trouble. I also did not short Porsche, given the obscene price of their Taycan it should have a healthy gross margin, and VW seems to prioritize cells for it over etron and ID.3 (also the borrow fee is quite high). Lastly, no shares could be located for Hyundai, so I didn't have to wonder how their Kona will work out for them.
The first couple of days I guess my unusual step brought about some anxiety - also because I am now betting on the poor performance of the employers of several of my neighbors. But to be honest, a bet on Tesla is already a bet against traditional auto. Now I feel very much at ease - I realize now that before I made this investment, I had a nagging feeling that by _not_ directly investing against traditional auto, I was leaving money on the table. Time will tell if this is true. I am not going to ask anyone to wish me luck.
PS. I am short these stocks: VOW3, DAI, BMW, RNO, UG, FCAU, GM, F, TM, HMC, NSANY.
