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2012 Tesla Model S
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Those who've sold Tesla Motors (TSLA) shares for a million or more in gains belong to a new exclusive club, the "Teslanaires" club. If you've been following the stock price, you know this has been a great year to own those shares – since May of this year, after first quarter earnings were announced, the prices started shooting up. If you were fortunate to own a portfolio of Tesla stock, that value skyrocketed from around $40 a share in April to around $160 a share in September. The market cap has shot up to about $20 billion.

"My money manager thinks we should diversify, but I'm not going to do that."

There are a few investors living in Northern California who haven't quite yet become Teslanaires, but they have been thrilled with their earnings so far. Patrick Hop, a 22-year-old senior from Millbrae, CA, who's been studying applied math at UC Berkely, has made about $250,000 on paper. Rod Stelling, a 69-year-old retired microbiologist who lives above the Bay Area in Napa Valley, put down $40,000 to reserve a Model S three years before it was built. He'd been so impressed with the high-performance electric car and the Tesla executive team that he invested soon after Tesla's IPO when shares were selling for around $17 in June 2010. So far, he's made $250,000 off his investment and paid for his Model S. Like other amateur investors who've plunked down cash on Tesla stock, there's been concern over the share price dropping and investments going down the drain. "My brother-in-law is still convinced they are going to fold. My money manager thinks I am crazy. He says we should diversify, but I'm not going to do that," Stelling told the Contra Costa Times.

Some investors bought Tesla stock as a way to finance their purchase of the Model S or to build up reserves to cover the base price of $70,000. A few investors think of it like Apple or Google stock – the next big thing – and have invested their life savings against the advice of family, friends and financial advisers. It's been a thrilling rolling coaster ride for these investors, but there is a lot of risk for those who've put all their eggs in one basket. "A year ago Apple peaked at $705; now it's around $500. You should never put a disproportionate amount of your wealth into one stock," said Manny Schiffres, executive editor of Kiplinger's Personal Finance Magazine.


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  • 19 Comments
      icon149
      • 1 Year Ago
      Tesla and more importantly Elon are the most innovative and game changing company/visionary in the world right now. The Model S is disruptive and as other companies jump in to complete it only broadens the acceptance, infrastructure and therefore niche of the EV automobile. I think Tesla would welcome good competition in the EV space as it will only create demand for a broader EV infrastructure that makes Tesla cars even more accessible to the masses. People are paying illogical sums of money for Tesla because there just ins't another stock out there as interesting or as likely to redefine the industry they operate in.
      Grendal
      • 1 Year Ago
      Of course there are risks, it's gambling. What happens if there is an earthquake and the factory is shut down for a month? The stock would crash. Tesla is doing very well. They are very solidly beating expectations which is why the stock has gone through the roof. There is huge demand for their product and it doesn't seem to be slowing, but increasing daily. The stock market has little to do with reality, however. Tesla isn't going away anytime soon and their plans for the future are ambitious. If they pull it off, which they have done so far, then even at its current price it is a good buy.
        Dave
        • 1 Year Ago
        @Grendal
        "Tesla isn't going away anytime soon and their plans for the future are ambitious. If they pull it off, which they have done so far, then even at its current price it is a good buy." Currently, they own a niche. Their plans include moving into the mass market, where they will have to take on other companies with deeper pockets and greater economies of scale. We can wish them good luck, but its going to be a very different ballgame than Tesla is used to if GM (or any other big OEM) shows up with a $30,000, 200 mile BEV. http://www.usatoday.com/story/money/cars/2013/09/16/gm-general-motors-electric-car/2823601/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+UsatodaycomMoney-TopStories+%28USATODAY+-+Money+Top+Stories%29&utm_content=My+Yahoo
          Marco Polo
          • 1 Year Ago
          @Dave
          @ Grendal Let not get to carried away. Elon Musk is first and foremost a businessman, not a saint ! He's fiercely competitive, and would work very hard to ensure Tesla's market viability and leadership. The term "huge demand" is a bit of an exaggeration. Within a narrow niche market, demand may be strong, but of the 10.5 million cars sold in the US last year, 20,000 Tesla's represent only a tiny percentage. Elon Musk is an outstanding industrialist, with a proven ability to carefully plan every aspect of the business to achieve the best results. He has already proven himself to be the equal to Henry Ford as an innovator and engineer. But unlike Henry Ford, Musk has also proven himself to be an astute business strategist and industrialist. Elon Musk has displayed all the positive characteristic's of the three great American automobile pioneers. Henry Ford's innovative skill, Alfred Sloan's financial discipline, and Walter Chrysler's thorough knowledge of the whole business. ( hopefully he avoids the unpleasant personality faults of Henry Ford 1 and Alfred P Sloan) The great challenge ahead for Elon Musk, and his team at Tesla, is to make the transition from a niche manufacturer to volume sales ( 500,000 -I million units pa). A lot will depend on improvements in battery (ESD) technology. A new, cheaper, advanced ESD technology, allowing vast improvements in range, would be a mixed blessing for Tesla. Although such a development would dramatically improve EV sales, it would also attract massive investment and fierce competition from reinvigorated OEM's with vastly greater resources. We live in interesting, and exciting times !
          Grendal
          • 1 Year Ago
          @Dave
          @Marco Elon is no saint but he has motivations other than making money. He has risked his fortune on numerous occasions to prove that point. Money is important, but for him it seems to be a tool to achieve his goals. He states his goals plainly on a regular basis and when it comes to cars he wants to get everyone into an electric car as fast as possible. His car or another manufacturers is perfectly fine according to him. He hopes that if he makes a compelling EV that the mass manufacturers will follow along quickly. This is what he has been saying for the many years I have been listening to what he has to say. There have been minor adjustments to his statements but the overall goal has remained largely the same. Elon Musk will have Tesla building compelling EV's until every automobile manufacturer is shamed into making something better or until he and his company are ashes from trying to do it. That's my take on the guy. He is not a saint but he has an agenda and he's going to see it through.
          raktmn
          • 1 Year Ago
          @Dave
          Dave, I think you undervalue market niche ownership. Talk to Ford about the value of dominating the full-size truck niche with their F150 sales. Or Porsche about the mid-price sports car niche. Or BMW with sports-luxury niche. Tesla's branding and market position is so strong now, that a challenger like GM would have to not just match Tesla to be successful, but they would have to hands down beat Tesla to even make a dent in Tesla's market position. Think about it. You are standing on a street corner. On one side is a sleek trendy new Tesla store with a $35,000 dollar Tesla 200 mile car that can charge on the Tesla Supercharger network. It has entry-level luxury features and a guaranteed resale value at 36 months. It has great looks where folks might confuse it for the much more expensive Model S. You sell your old car for a reasonable price to CarMax or on Craigs list. Your monthly payment is $485 before including taxes. On the other side of the street is that old crappy Chevy stealership who is known for their dirty sales tricks. They have a $30-35K (read the whole GM story...) 200 mile car. It has no Supercharger access, no guaranteed resale value. It has the same corporate grill and chassis as their $15-20K entry level Chevy products that it looks like. The dealer has pin-striped it ($249), VIN etched the windows ($399), and added a paint protectorate that they promise will last forever ($449). They have a $3,000 dollar dealer markup on top of MSRP because it is a new car to the market with limited initial sales numbers. They disappeared with your trade-in two hours ago, and are now saying the best they can do is Black book trade-in value, since they say they would have to wholesale your trade-in. They advertise the monthly payment as $415 before including taxes, but somehow by the time you get through the finance guy, that has somehow gotten much bigger (pending bank approval). Five days later they call you back and tell you the bank didn't approve, and you will have to either pay more, or return the car and pay for the days and miles you drove it, as if it were a rental car. Who will sell more? Gas car companies have two huge problems holding them back. The first is their stealerships, and the second is that they all seem to be keeping their best aesthetic designs for their gas cars. Tesla has neither problem.
          Val
          • 1 Year Ago
          @Dave
          Thing is, they can't just show up with a 200 mile 30,000 model out of nowhere. And even if they do, which they won't, tesla's expertise in EVs matches and surpasses that of GM or any other OEM, so the playing field will be much more level than say tesla introducing a gas burning 3-series competitor. Tesla relies on the economies of scale of the Panasonic 18650 cells, the largest battery manufacturer and most commonly used form factor in the world, which cannot possibly be matched by LG Chem (GM) or Nissan batteries for automotive purposes. Tesla makes their own motor and controller and uses the same suppliers as any other automotive company, so tesla is very well positioned to profit from a surge in demand for EVs.
          Letstakeawalk
          • 1 Year Ago
          @Dave
          Hmmm, I'm reminded of when Ford tried to buy Ferrari, and was turned down. Then, out of nowhere, Ford out-Ferrari'd them.
          Grendal
          • 1 Year Ago
          @Dave
          http://www.digitaltrends.com/cars/5-ways-the-bmw-i8-is-better-than-the-tesla-model-s/ Is it possible for GM or someone else to try really hard to beat Tesla and manage to do it? It's possible. Not likely though. The article I posted is a good example of why that won't happen. The large manufacturers just don't get it. Tesla is playing a completely different game than they are. Elon Musk isn't trying to beat the major manufacturers. He isn't trying to take money away from them. He is trying to make the best car in the world so people will change from buying cars that run on gasoline or diesel to a car powered by electricity. He is going to make that car as compelling as possible in both safety and dynamics to get you to buy it. The motivations are completely different. If GM manages to make an equally compelling EV then Elon will be happy. So far, no one is even playing in the same ballpark as Tesla. BMW i8 has nothing on the Model S except for looks. I'm sure that Elon wishes BMW the best of luck with the i8 but it isn't a competitor.
      • 1 Year Ago
      What is going on now with Tesla the stock is different than Tesla the company TSLA the stock is in a classic squeeze about 12 % of tesla shares are short . That percentage was much much higher when they first announced their surprise profit. If a stock goes up then anyone short has to purchase the stock to cover their trade. If there is a large short percentage in the stock then all those traders need to chase a limited amount of stock . The stock starts to go up which puts more pressure on the short sellers who need to chase the stock at an ever higher price. This has caused Tesla stock to rise so much. Only when the shorts throw in the towel and some negative news event for the stock (like a secondary offering ) will the stock start to pull back. But eventually every stock in short squeeze returns to earth and TSLA will be no different
        NL
        • 1 Year Ago
        Indeed.
        raktmn
        • 1 Year Ago
        That depends upon what your definition of what "returns to earth" means. Shorts definitely started the fire, but Tesla's current stock price is not just due to the short squeeze in a vacuum. The price isn't going to return to 20 bucks just because the shorts play out, if that is what you mean by "returning to earth". The earth has moved majorly since a year ago. First off, you have to realize that the weight of the extraordinary number of shorts themselves had distorted TSLA downward. So without those shorts, TSLA would have never gone so low, and without those shorts, it won't return to that level. Second off. actual major events actually impacted the long term value of TSLA. Including but not limited to: : 1) Increased institutional ownership (typically longer term investors). Many of these investors are betting on TSLA being the next Apple with TSLA's future announcements of future products, and are holding on to all those shares they bought low, and are willing to wait out the long production roll outs in order to make sure they are in on TSLA if/when future models prove as successful as the Model S. 2) The successful release of the Model S at full production volume 3) Showing quarterly profits for the first time (in two quarters if you personally choose to invest based upon non-GAAP numbers instead of GAAP) 4) TSLA being added to the NASDAQ 100 Index, which basically guarantees investors who put their money into a NASDAQ 100 index fund will continue to hold and accumulate TSLA stocks as part of the NASDAQ 100 for as long as TSLA is listed on that Index. (This is huge, because in puts TSLA shares into the portfolios of people, and retirement funds, and institutional holdings that don't even know who Tesla is!!) Anyone who thinks that the only thing that has happened since last year is the short squeeze, has a fatally shallow understanding of what is supporting TSLA prices. Invest at your own peril if anyone believes the short squeeze is the only reason for the price rise, and price will behave exactly like VW/Audi stocks did during their short squeeze. With all that said, sure there is plenty of chance for huge volatility in TSLA prices. That is the nature of any recently IPO'ed stock in any industry. Short term stock volatility is par for the course, and is not predictive of long term success of any recently IPO'ed company.
        CoolWaters
        • 1 Year Ago
        The shorts were squeezed to buy at higher prices, meaning they won't soon be dumping their stock. Ironic, now they are into TESLA for the Long Term.
          raktmn
          • 1 Year Ago
          @CoolWaters
          I'm assuming you are referring to the very common (and smart) way that investors who suddenly get caught on shorts hedge their investment -- by purchasing even more of the exact same stock as it skyrockets. This hedges their losses on the shorts, by profiting on the rise of the same stock as the prices go through the roof. If so, I don't know why you are being downvoted. You are exactly correct.
      Bart
      • 1 Year Ago
      I did the same thing with the new American plug-in car company but I put in $200,000 initially and I got in before IPO in the initial A round of funding!!! Oh yeah, not Tesla btw..........Fisker! wtf, does anyone really know what happened with that deal?
      bluepongo1
      • 1 Year Ago
      Great risk = great reward OR great loss. Not an earth shattering revelation. :-P
      CoolWaters
      • 1 Year Ago
      Apple's innovator isn't there. Apple has some doubt it can be managed as successfully going forward, which causes doubt. Apple also has had meetings with wall street sharks, and doubt about how the company is managed is there. Will Apple manage for the Stock Price? or Product? As long as the Product is the focus of the company, then it will command a price premium. If it's managed for the short term greed of Wall Street, then it's a SELL Now. TESLA is still managed by the same CEO, an Innovator.
      NL
      • 1 Year Ago
      Listen to your f. advisor. Tesla is not Google.
        Matt Brown
        • 1 Year Ago
        @NL
        Here, I found this comment from 2006: "Listen to your f. advisor. Google is not Microsoft."
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