Tesla investors who have stayed the course with its SA-born founder Elon Musk have been rewarded, with the stock hitting a record high on the first day of 2021 trade. To give an idea of how the stock has performed, portfolio manager Sean Peche of Ranmore Fund Management says of December’s S&P500 debut: “23% of its shares changed hands in one day, a staggering $150bn worth of trade as passive fund managers & benchmark-hugging active funds acquired positions.”
Peche’s number-crunching shows that Tesla’s entry market cap of $659bn was 21 times forecast sales, meaning, he explains, that if it bore no costs, no salaries, no R&D and paid no tax, it would still be on 21 times earnings. “Of course, that’s all fantasy but even if they earned Microsoft’s 32% net margins instead of their own 2.7%, it would still take 66 years of 2020 earnings, all paid out as dividends, to get your money back,” he says.
“No sensible business person would buy the stock at these prices which is why Elon Musk has sold $10bn of fresh shares in the past few months taking advantage of the crazy price to build a war chest. A very smart move with competition intensifying and the likes of Apple entering the market,” Peche tells his LinkedIn followers.
Also read: Alec Hogg: All the very best for 2021
When asked why they held the stock, which has had a bumpy ride since listing in 2010, self-proclaimed Teslanaires – millionaires as a result of building up Tesla shares – cited environmental concerns among the main reasons (read more, here on BizNews). This rationale resonates with research by the CFA and other bodies that the global appetite for sustainable investing is growing.
If, like me, you missed the ride with Musk and are wondering where the next Tesla is, take a look at this in-depth article from BizNews partner The Wall Street Journal. It provides granular detail on which trends are likely to develop as the world shakes off the Covid-19 crisis – with some clear pointers on stocks that could benefit.
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