tesla: it’s a story stock, but what the (your)...

TESLA:IT’SASTORYSTOCK,BUTWHATTHE(YOUR)STORY?

Thepowerofthestory

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TheResilientStock

Bad news 1: Delivery shortfalls

Bad news 2: Fatality of driver using Tesla Auto PilotBad news 3: Tesla buys Solar City

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Value:Story+Numbers

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AStoryStock

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TheStoryStockEffect

¨ Storychangesandinformation:itisshiftsinthestorythatcausepriceandvaluechanges.Anearningsreportthatbeatsexpectations(ineitherdirection)oranewsstoryofsignificance(goodorbad)maynothaveanyeffectoneither(valueorprice)ifitdoesnotchangethestory.

¨ Widerdisagreements:Whenacompany’svalueisdrivenprimarilybynumbers,thereislessroomfordisagreement.Incontrast,withastorystock,investorstoriescanspanamuchwiderspectrum,leadingtoamuchbiggerrangeinvalues,asillustratedwithUberinthispost.

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TheTeslaStory:TheChoices

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Tesla:Whatif?

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ElonMusk:TheXFactor

¨ ItisalmostimpossibletoseparateTesla,thecompany,fromElonMusk,itsfounder.Whatyoubelieveaboutonewilldrivewhatyoubelieveabouttheother.

¨ IfyoubelievethatMuskisavisionary,capableofseeingtheworldasitwillberatherthanasitis,andamanwhohasthebrillianceanddrivetodeliveronthatvision,youwillfindTeslatobeabuy.

¨ Ifyoubelieveinsteadthatheisashowmanwhopromisesfarmorethanhecandeliver,Teslaisasell.

¨ Thereisanintermediateposition,whereyoubelive thatMuskisaflawedvisionary,withtheflawsbeinglackoffocus,athinskinandadisinterestinthenittygrittyofoperations.Teslacanbeabuy,butonlyattherightprice,andifMuskcanfindanoperatingpartner.

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Tesla:InvestmentPlays

1. TheMomentumPlay:Youcansurfthestock,buyingitasthestorygetsbiggerandstrongerandgettingoutasthestorydevelopsweakness.

2. TheShortBet:IfyoubelievethatMusk’sflawswilloverwhelmhisstrengths,youcansellshortandwaitforthemarkettocomearoundtoyourpointofview.

3. TheLongBet:IfyoubelievethatMusk’sstrengthsaremuchgreaterthanhisweaknesses,youcanbuyandhold,ontheassumptionthathewilldeliveronhispromise.