Stanphyl Capital’s Mark Spiegel presentation on Tesla Motors Inc (NASDAQ:TSLA) excerpted from the hedge fund’s December 2016 letter:
Mark Spiegel’s Stanphyl Capital had a killer year up close to 31% NET YTD – see below for an excerpt on Tesla Motors Inc (NASDAQ:TSLA) from their November shareholder letter. But first… although he is known as Elon Musk’s number one enemy, Mr. Spiegel makes most of his money from killer small cap picks. His under the radar small caps which could pop just based on this piece (if we discussed it publicly) were profiled in ValueWalk’s 2nd edition of our quarterly premium newsletter. See some details followed by the Stanphyl section on Tesla Motors.
For December 2016 the fund was down approximately 2.9% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 2.0% while the Russell 2000 was up approximately 2.8%. For the full year 2016 the fund was up approximately 30.8% net while the S&P 500 was up approximately 11.9% and the Russell 2000 was up approximately 21.3%. Since inception on June 1, 2011 the fund is up approximately 126.9% net while the S&P 500 is up approximately 87.7% and the Russell 2000 is up approximately 73.2%. (The S&P and Russell performances are based on their “Total Returns” indices which include reinvested dividends.) As always, investors will receive the fund’s exact performance figures from its outside administrator within a week or two.
Despite December’s increase in Tesla’s stock price, it sure wasn’t a propitious month for subsidy queen Elon Musk as President-elect Trump appointed a short seller’s dream team to various key cabinet posts, naming friends of plants Scott Pruitt to head the EPA, Ryan Zinke as Interior Secretary, Rick Perry as Energy Secretary and the CEO of ExxonMobil (!!!) as Secretary of State. Although I’m sure if the government subsidy were big enough Musk would happily modify the Model S to run on a 392 hemi four-barrel, we remain short shares of Tesla Motors Inc. (ticker: TSLA; short basis: $225.51; December close: $213.69) as
I continue to believe that it’s the market’s biggest single-company stock bubble.
Rarely does a month go by without a blatant new deception from Elon Musk, and December was no exception. Have a look at these Tweets…
Now, remember when Tesla’s Autopilot killed a guy and Musk berated Fortune’s fine reporter Carol
Loomis’ questioning of its safety by telling her to “do the bloody math”? Putting aside the fact that Musk’s math in that incident was bloody bogus, let’s do some math ourselves regarding the claim in the above Tweets about solar-powered 350kw charging stations…
In sunny areas a highly efficient solar array generates an average of around 5 watts per square foot net over eight hours a day (assuming 9 watts peak and considerably less non-peak). This means that to run just one 350kw charger using a combination of “live” solar generation and battery storage for eight hours a day would take 350,000/5= 70,000 square feet of solar cells and to store enough power to run it the other 16 hours a day you’d need to triple that, to 210,000 square feet. Thus, if this mythical Musk
Supercharger station had just four chargers it would require approximately 840,000 square feet = 19 acres (!) of solar cells! How about THAT bloody math, Elon?
I recently asked a smart, well known hedge fund manager how so many TSLA shareholders can justify investing in a company run by a guy as deceptive as Musk (in addition to the above, see slides 136-152 from my November Robin Hood conference presentation and the long list of links on page 8 of this letter) and he provided a fascinating answer: they think Musk is the next Steve Jobs and that Jobs “acted the same way.” I think that’s a very credible theory about a belief grounded in sheer stupidity, as while even Jobs’ admirers say he could be a real jerk behind the scenes, unlike Musk I don’t recall him misleading
Apple investors by publicly spouting easily fact-checked lies about his company! (As an aside, do Tesla longs think Musk is more honest about the things they can’t fact check? That’s right, Mr. Fidelity Portfolio Manager—no one will have possibly been able to have “seen it coming.”) Also unlike Musk, Jobs strived to create massive profits while Musk could figure out how to lose money running a whorehouse in a sex- addiction clinic. Good luck investing in someone who prioritizes his phony version of “saving the world” from the window of a Gulfstream G650 over creating a business that’s actually profitable.
Another fun Tesla tidbit in December came from fanboy blog InsideEVs, which proudly reported without irony that Tesla’s Fremont factory now contains 6200 employees, which is nearly as many as the 6800 who worked there back when GM ran the factory. But here’s the thing: GM built over 400,000 cars a year with those employees while Tesla is building approximately 80,000! Perhaps now all those duped journalists reporting their own version of “fake news” regarding Tesla’s factory being unusually
automated will publish their corrections (I won’t hold my breath!) or at the very least run a quick YouTube search to learn how un-unique Tesla’s robots are.
There wasn’t much other Tesla-specific news in December (just Panasonic installing some solar cell equipment in Tesla’s Buffalo factory in exchange for a guaranteed purchase commitment), but the CES show in January should be interesting and not particularly good for Tesla. In addition to the expected introduction of several new electric cars there, Delphi and Mobileye will demonstrate an autonomous driving system available “off the shelf” within three years to any car maker (most of whom will soon have their own autonomous systems anyway), thereby further turning this capability into a commodity and rendering meaningless (except for potential liability lawsuits) whatever “head start” Tesla’s current reckless system might provide. Speaking of liability lawsuits, in October Musk held a press conference introducing a new hardware suite for Tesla cars that he claimed would eventually provide fully autonomous coast-to-coast driving (something the aforementioned Delphi demonstrated in early 2015). However, according to industry experts it’s unsafe to even attempt to provide full autonomy without LIDAR (laser scanners) and Tesla’s new hardware doesn’t have it. Of course, this isn’t stopping Tesla from trying to charge $3000 up front for “potential future capability” or from showing a strategically cut (and hence potentially highly misleading) video of those alleged “capabilities.” I have no doubt the lawyers are salivating!
Meanwhile, happily for us back in November Tesla shareholders approved the merger with the financial boat anchor known as SolarCity, accompanied by its nearly $3.5 billion of debt and $2 billion a