Saturday, April 9, 2016

Is Elon Musk the Steve Jobs of Cars?

I recently purchased additional shares of Tesla $TSLA on 2/9/16 for $142.25 per share and I am shocked and amazed at the more than 75% return that these shares have generated over the past several weeks.  I like Tesla mainly as a growth story but there is something different about this company from other growth companies that I own in my portfolio.

Last Friday during the Model 3 release I saw so many people standing in huge lines all over the country and it reminded me of only one thing...the release of the iPhone.  Never have so many people been so excited about the release of a car and I am starting to think that Musk has discovered something about cars that Jobs had discovered about electronics...what people really want.  When Jobs wanted to put the real internet, not some stripped down version, onto a mobile phone there were many naysayers including the now defunct BlackBerry.  Companies that grow and take market share are companies like Apple that can deliver what people actually want.  I think that Musk and Tesla have stumbled upon this idea as well and are going to start delivering cars that people actually want.

Surprisingly, other auto manufacturers will probably act like BlackBerry did and watch in disbelief as their businesses are taken from them right before their very own eyes.  They will refuse to change their models until it is far too late.  Let's take a look at the potential market share that is up for grabs.

Based on this data, Tesla could double if it can steal as little as 5% of the total outstanding $719B market capitalization of auto manufacturers.  Given the premise that Tesla could push the entire industry to grow and that it could potentially become a strong leader of this newly redesigned industry, 5% could actually be at the lower end of the range.

Musk is similar to Jobs in that they both share a passion for trying different things and fearlessly pushing on boundaries.  It is most likely too early to tell whether or not Musk can use this passion to bring to Telsa the same kind of success that Jobs and Apple have experienced.  That being said, I think Tesla is a great addition to any growth oriented portfolio.  Before getting too excited about the prospects of Tesla you should be aware of the following risks which are surprisingly similar to my favorite ride at Six Flags:

"WARNING: This is a high speed investment that includes sudden and dramatic acceleration, climbing, tilting and dropping.  Failure to follow these guidelines may result in serious loss of capital or bankruptcy.  Investors with the following conditions should not invest: Heart conditions or abnormal blood pressure, back, neck or similar physical conditions, motion sickness or dizziness, recent surgery or other conditions that may be aggravated by this investment."

Remember as always...don't over do it, stay diversified and think long term.