Whitney Tilson’s email to investors discussing TSLA options trade; Elon Musk’s new test: keep mouth in check at ‘Pedo Guy’ trial; Elon Musk reveals why Cybertruck window smashed; Tesla’s Truck is meant to shatterproof its stock.
1) Attached is a VIC pitch of an options trade based on the stock being range-bound. Excerpt:
Odey Discusses Howard Marks’ Astute Observation On Why Hedge Fund Alpha Is Increasingly Rare [January Letter]
According to a copy of the firm's January investor update which ValueWalk has been able to review, the Odey Asset Management Odey Special Situations Fund returned 7.7% in January, outperforming its benchmark, the MSCI World USD Index, by 8.7%. Q4 2020 hedge fund letters, conferences and more The $60 million fund, which Adrian Courtenay manages, Read More
I used to be short Tesla. Still hate Musk, but would like to present a completely different take…
The world has heard the Tesla bulls loud and clear, and the Tesla bears loud and clear. Today I am proposing a third way: be neutral: make money from all the noise by opportunistically selling expensive puts and calls. Over the past six years, this is the trade that has worked and I believe it will continue to work. It will be up to the reader to choose their desired expiries and strike prices. This write-up will focus on explaining why I believe this is the right way.
Tesla is a highly-followed story, crazier than any other. The things we see with this stock are simply unbelievable compared to what we’ve seen before; the company is led by a guy who should be sweeping the floors at best and he’s nutty, though smart PR-wise. I acknowledge that there are VIC members who like him and/or Tesla – these are members that have submitted good write-ups in the past so they’re not stupid. What this means is that this isn’t about intelligence. It’s religion/emotion. The bulls – in my view of course – fall for a narrative that is flawed in the same way that certain great investors fell, for instance, for Valeant. It happens.
But either way, investing successfully is not about loving/hating a CEO or company, it’s about making money, finding opportunities to outperform by doing something that is different and superior to what others are doing. The way I view Tesla is that there is actually a dual consensus trade. There is a large group of people that form a strong bullish consensus (including not only those who follow every move Musk/Tesla news item but also people in the general population who “support what Tesla is doing”, or are “long tech”, “long growth” etc’ etc’) and then there’s a second group that forms an equally large consensus (this time a bearish consensus) and includes many, many smart people in finance, autos, tech, fixed income and others from around the world who had what is known as their ‘realization’ moment, where they realized that Elon Musk is actually a con man. Now, while the two groups violently oppose each other’s viewpoint, there is a lot that they have in common:
- they are indistinguishable in that they are obsessed with Tesla/Musk
- they are indistinguishable in that for many of them, the TSLA position is among the largest in their portfolio.
- they are indistinguishable in that they are very sure that the stock will go in the direction they think and that it will do so soon enough to warrant the large position
- they are indistinguishable in that they believe TSLA should be front and center in the news and that government & powerful corporations are biased in favor of the other side.
- they are indistinguishable in that they get the other side angry, pouring more fuel on the fire. This has resulted in a large blog/YouTube following on the bull side and a large Twitter community on the bear side ($TSLAQ).
Together, they form the 2-part consensus belief of “Tesla will go very far in the direction I want it to.” The contrarian view is “Tesla will be range-bound”.
These two groups, together with Musk himself, have led the stock to trade in a way that is not comparable to anything else, not fully understandable by any diligent investor, and the company’s options therefore trade at generous premiums. The stock has fluctuated between $200-$350 over six years despite a ton of news that should move the stock sharply. I believe it will stay roughly in that range and even if it exits that range, it will find a new range to comfortably trade at for another long while. I will expand on why I think each side is wrong that a move toward their target price is just around the corner.
See the full report here.
2) Ah, what an entertaining spectacle this trial will be… Elon Musk’s New Test: Keep Mouth in Check at ‘Pedo Guy’ Trial (full article on Bloomberg)
3) Elon Musk reveals why Cybertruck window smashed. This guy is such a pathological liar!
4) Article on “Tesla’s Truck Is Meant to Shatterproof Its Stock”
The plusses for a folded stainless steel, origami truck are compelling: no paint shop and no expensive tooling. No Godzilla-scale stamping machines stomping it with multiple strikes. Without all that, the capital and environmental costs of using stainless steel body panels are small. And big attractions for a company that’s sensitive to both types of green—cash and environmentalism. Just groove the steel where it’s supposed to fold (avoiding cracks) and bend it on simple, cheap machines (like I was actually doing last week with my garage vise!)
When Raphael Zammit saw Tesla Inc.’s Cybertruck pull onto the stage late Thursday, his initial reaction was a mix of shock and horror.
Zammit, who is chair of the graduate program in transportation design at the College for Creative Studies in Detroit, said his smartphone started blowing up with texts from auto designer friends expressing similar sentiments. But after a few minutes, Zammit, who has worked as a senior designer for General Motors Co., Hyundai Motor Co., and Volkswagen AG, started to see the truck through a different lens.
“It appears at first glance to be so naïve,” Zammit said. “But it might be — and this is a big might — one of the most brilliant moves ever, and the market will tell us. It’s not designed for designers.”