Tesla has gone crazy.
I have strong and conflicting opinions about it, which I’ve written about at various points over the last year, here most recently.
I laud the mission, despise the man and warn people about investing in such an upside-down company. The recent price action defies logic.
I understand the optimism. I wholeheartedly believe in the electric vehicle (EV) solution – just look at the UK government’s latest move to ban all internal combustion engine vehicles by 2035.
That’s 15 years away.
So in 15 years every car on the roads will be electric, powered by charging or hydrogen, or maybe a new system we haven’t yet invented or commercialised.
It’s a gold rush of epic proportions, and people are right to be piling into the sector.
But the problem is, for all the environmental, social and governance (ESG) garbage that is being spouted by companies and investment firms (most recently, BlackRock), Tesla remains one of the only mainstream, well-known, clean tech stocks.
So it’s basically taking in all the money that wants to go into that kind of thing.
To me, the Tesla share action screams out that people are desperate for these kinds of investments.
One issue is that no one has heard of most of the companies doing amazing things.
For example, have you heard of PowerCell Sweden AB, a leading manufacturer of hydrogen fuel cells? If not, that’s sad for you because its return dwarfs Tesla’s.
In the last 12 months alone, it’s up over 300%.
What about over a five-year time horizon, which is reasonable for many investors?
3,171%, as of the morning of 06/02/20. A five-year investment in Tesla, despite the recent craziness, would have netted you less than 250%.
Or what about Enphase Energy? Do you know that one? It’s an American company offering solar solutions of all kinds, along with some other smart and clean energy solutions for homes and businesses.
Its share price performance also blows Tesla out of the water, with a near 2,400% gain since the end of 2017.
Finally, Vestas Wind Systems A/S, the leading wind turbine manufacturer and installer, has gone up 2,740% since 2012.
The thing is – Tesla’s market cap passed $150 billion this week for the first time. But PowerCell’s is under £1 billion, Enphase’s is $5 billion, and Vestas’ is around £15 billion.
And those are the biggest players in their sectors. There is a plethora of even smaller companies with incredible technologies that are already up hundreds or thousands of per cent, with growing revenues, signing bigger and bigger contracts and disrupting more parts of the energy industry.
My impression is that if all the Tesla investors piling in at the top knew that they had so many alternatives, they wouldn’t even touch it with a remote-controlled mini cave submarine.
Tesla looks like the madness of the dotcom boom.
We all know that bubbles burst eventually, as Tesla’s will (or maybe it has already – down over 20% from its peak as I write this). But what came out of that bubble, phoenix-like, were the world’s first four-trillion-dollar companies.
That’s because the tech bubble was a mania – but each bubble starts with a core truth. Then, investors understood that the web, software and tech were going to be the next big thing. They got massively ahead of themselves and sucked a lot of people into an upward spiral, which eventually caused a lot of pain and suffering to late investors.
Here again, Tesla seems clearly to be in bubble territory, but that’s because at its heart, the Tesla mania contains a fundamental truth: green energy, electric vehicles, and sustainability are going to be the biggest trends of the next two decades.
Investors are getting way ahead of themselves again – even if Tesla achieves its wildest dreams, its current price would still be a bit of an overvaluation.
But the best emerging companies now will be the FAANG stocks in ten years’ time, and Tesla’s share price action tells me that investors are starting to realise this.
They just haven’t found the right companies quite yet.
If you don’t mind, I’d love to ask you a few questions. No need to answer but I am curious.
Here at Southbank Investment Research we’re very keen on renewables. I’ve spent a year working with our in-house renewable energy-investing expert James Allen and am very bullish in the short-, medium- and long-term investment horizons.
But I realise that I live in a bit of a renewable bubble here, and I was wondering how people outside that bubble felt about a couple of things. So if you don’t mind telling me quite simply:
- Do you own any clean tech stocks?
- Would you be interested in investing in renewable energy companies?
- What do you think of ESG investing?
I would appreciate learning about where a wider group of investors’ heads are at.
Please reply to [email protected].
That’s all from me today,
All the best,
Investment Research Analyst, Southbank Investment Research