The question is whether the risk/reward ratio favors the buyer or the seller.
February 6, 2020
The question is whether the risk/reward ratio favors the buyer or the seller.
As I write this, Tesla (TSLA) has a market cap of $170 billion. That’s an eye-popping number. I’d examine the P/E ratio, but the company still has trailing 12 month losses. When I see a company that’s losing money hit those sort of market caps, I automatically start considering the alternatives.
If you were to forego buying Tesla with your $170 billion, you could buy General Motors (GM; $50 billion), Ford (F; $36 billion) and, if you would like to add helicopters and hogs to your garage, Raytheon (RTN; $62.37 billion) and Harley-Davidson (HOG; $5.31 billion) and still have $16 billion or so to buy some aggressive small cap stocks.
Does Tesla have growth? Sure. And it has Elon Musk, too. He’s someone scary to bet against. But Ford has a compelling electric car coming in its Mustang Mach-E. There’s EV competition from large, well-funded companies and fresh-thinking startups. Is Tesla an innovator? Definitely. Would you even call it an industry disruptor? Possibly.
