Tesla Inc (TSLA) Buys Bitcoin

Tesla Inc (TSLA) Buys Bitcoin
Image source: <a href="https://www.youtube.com/watch?v=ggYC7Pjm4Vc&feature=emb_title">YouTube Video Screenshot</a>

During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Tesla Inc (NASDAQ:TSLA) Buys Bitcoin. Here’s an excerpt from the episode:

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Tesla Inc (TSLA) Buys Bitcoin

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Tobias: Yeah, I’m going to do more of the no structure, no topic, although I did see Tesla bought bitcoin. I know that everybody’s sick and tired of hearing me rant on Tesla. What it will do is it will complicate their accounts further because they won’t be able to recognize any upside in bitcoin. They’ll have to write down any downside in bitcoin.

Any reasonable security analyst is going to have to back that out of their accounts, which should make them further indecipherable. I’ve just got a quick question for you guys. The ostensible reason that they’re doing this because they’re accepting payments in bitcoin. If you’re going to be hedging something like that, how would you go about hedging incoming bitcoin position?

Bill: Well, just taking a step back. If you’re going to accept bitcoin, I’m not sure why you need a bunch of bitcoin on your balance sheet.

Tobias: That’s my question. That’s the Texas hedge, where you just get longer the thing that you’re going to hit?

Bill: Yeah, so you just come out and say, we think bitcoin is going up, so we’re going to buy bitcoin.

Tobias: Yeah, that’s how I saw it too.

Jake: I can’t believe that bitcoin is a better use of funds than a takeover of Fiat [crosstalk] balance sheet.

Bill: Well, let’s just assume it is.

Tobias: They’re going after Fiat just in a different– [crosstalk]

Bill: This goes to the old like, “Well, why wouldn’t GameStop just buy shares in Amazon?” The thing I don’t understand is, if I’m a Tesla investor, and I like bitcoin, just go buy bitcoin. What the hell does Elon Musk buying bitcoin have to do for me? I think the answer really is that if he is the trendsetter on bitcoin, then other companies will start to flow funds to bitcoin because he’s deemed some visionary and therefore you get this perpetual sort of cycle going, which if you’re a bitcoin bull, I understand getting excited about that. But I only understand getting excited about it if you’re long bitcoin. If you’re long Tesla, I don’t understand why you would want this or care about this move.

Jake: I would say the best hedge if you wanted to try to hedge this for Tesla would be Elon’s Twitter account and you pump before the end of a quarter, you pump– whenever there’s going to be an accounting, you start pumping.

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The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of acquirersmultiple.com. The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at acquirersmultiple.com, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”

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