There are a lot of investors out there who like Tesla. We understand why. The company has numerous promising technologies, it has a cult of personality centered around Elon Musk, and it has the vibe of a new great American consumer company (just like Apple felt circa 2007). However, the company appears to have a major Achilles heel that could prevent it from reaching the heights stock investors hope—a lack of cobalt. Cobalt is a critical ingredient in batteries for electric vehicles, and prices have tripled since last summer as demand has grown and supply looks weak. Cobalt is principally mined in the Democratic Republic of Congo, a highly unstable country, and is refined in China.
FINSUM: These “rare earth” minerals aren’t quite as rare as many people think, and with prices as high as they are, more supply will materialize, so we do not think this is a significant risk to Tesla.
Tesla has had a great run, but it might be time to get out of the stock, says Barron’s. The stock has surged 66% this year, but it looks set for a significant loss next year. As a comparison, Ford has only risen ~2% this year, and its stock looks like it has a lot more room to run. One analyst says Tesla’s valuation is about 3-5 years ahead of its sales compared to the valuations of other automotive companies.
FINSUM: Our biggest worry about Tesla is not valuation, it is that its market is no longer niche and unique to the company. All the big players are set to launch comparable offerings, which will erode the novelty on which Tesla has built itself.
In what comes as very good news for the autonomous vehicle sector, President Trump’s White House has announced that they will tread lightly on self-driving car regulations. Tesla has recently been blamed for a death in a self-driving car accident, which has led to speculation that tough rules may be imposed. The administration said, counter to expectations, that it would maintain a hands off approach to regulating the sector.
FINSUM: Well there may be some safety concerns, especially in the testing phase, but this is undoubtedly good news for automotive stocks and self-driving parts suppliers.
There has been a lot of hype surrounding self-driving cars for the last year or two, including in stock markets. However, one of the big question marks has been the legal status of self-driving cars. Some states have legalized them or their testing, but the federal government had not issued much guidance, until now. Yesterday, the House of Representatives passed a bipartisan bill laying out rules for the use and testing of autonomous vehicles. It is yet to be passed by the Senate, but if it goes through, it would supersede the conflicting set of rules between states, and help companies to test vehicles.
FINSUM: This is great news for autonomous car makers and consumers. It could also prove to be an inflection point for the industry (and electric vehicle makers’ stocks).
There have been plenty of articles on value stock investing lately, especially because it has been out of favor so long that some think it is destined for a comeback. However, growth stock strategies have been the winner over the last decade and Morgan Stanley has made some picks for what it sees as future winners. The picks come from Morgan Stanley’s institutional growth fund, which focuses on low turnover and lots of long-term strategic focus. Their picks are companies which they think have a unique position and very competitive management. Their choices for stocks that will dominate the future are Amazon, Alphabet, Tesla, and Facebook.
FINSUM: These are hardly novel names to choose, but the way the fund approaches the picks seems to be unique. We cannot disagree with any of the choices.