As the stock market’s most recent darling, we need to ask – is this parabolic move based on fundamentals or just irrational exuberance? We looked under the hood to check out the facts.
Table created by Matco Financial. Data source: Bloomberg
*Based on FYI 2019 unit sales – no 2020 guidance
Although Tesla builds great environmentally-friendly vehicles, is it really worth more today than one of the major auto manufacturers which are more profitable? We do not believe so. In fact, Tesla has a market capitalization of US$160 billion versus a combined value of US$158 billion for Ford, GM, Chrysler and Daimler. Clearly investors are in love with Tesla’s green vehicles, the hope of ever-growing profits and world auto dominance. Today, we believe Tesla is a pure growth stock where investors are paying a high valuation for potential profits many years into the future.
As investment managers focused on income and capital growth, Tesla would not pass our strict investment factor criteria which is focused on real earnings and income today and not based on future hope. As discussed at our recent Outlook event, our investment factors are focused on Return on Equity, Dividend Yield, Earnings, Stock Volatility, and Value. These factors have shown over time to produce better risk adjusted returns over the long term while avoiding speculative companies.
ANIL TAHILIANI, MBA, CFA
Vice President, Portfolio Manager
Founded in 2006 to manage and service seven family offices, today Matco offers the benefits of our extensive investment management experience to individual investors, foundations, endowments, condominium corporations, trusts, corporations and not-for-profit organizations.
Our mission is to simplify the investment world for our clients by understanding their needs and providing exceptional investment solutions that preserve and grow capital.
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