Date: 11/09/2021
Author: Mr. X
Tesla [TSLA] is not just an electric car company. It is a solar energy company. It is an Artificial Intelligence company. It is a lithium company. It’s part of a network of other Elon Musk companies that are pioneering advances into autonomous vehicles, space exploration, and of course, in 2018, (“not”) flamethrowers.
Over the weekend, Elon Musk asked Twitter whether he should sell 10% of his stock to pay more taxes. Almost 58% of the 3.5 million who voted in the poll said he should. TSLA stock was down Monday by more than 3%. I wouldn’t call this a collapse. Those who have shorted TSLA over the last few years have paid for it.
Instead of shorting TSLA itself, let’s think about TSLA’s competitors. TSLA has actually enabled its competition in some ways by opening up its charging network. This is probably a smart move from a big picture point of view, as it creates a larger EV “pie” that will ultimately benefit the company. Yet it can’t be denied that this gives other EV companies an opening.
In this era of “top down” spending directed by massive federal government programs, Mr. Musk also seems to be a bit unpopular in Washington. Mary Louise “Missy” Cummings is reportedly a major TSLA critic – at least to Mr. Musk. He tweeted that she was “extremely biased” against Tesla. Nonetheless, she has been picked by the Biden Administration to be a senior safety advisor to the National Highway Traffic Safety Administration.
Moreover, just like Ethereum is facing possible challenges from smaller cryptocurrencies, TSLA will also face smaller EV companies that could confront the giant. Let’s examine a few here, as we seek to take a chunk of this rapidly expanding market.
Lordstown Motors [RIDE] once looked like one of the most prominent candidates. Not much more than a year ago, it was over $20 a share. Today, it is less than $6.00 a share. Difficulties in getting its Endurance truck to market has led to company to near collapse. Yet Taiwanese company Foxconn has created a partnership with RIDE that could potentially allow the company to stave off bankruptcy.
With production located in middle America, support for RIDE by the government seems like political common sense. There are serious doubts about whether RIDE can deliver. Yet if it can, its current low price makes it look extremely attractive as a growth stock that can take advantage of political trends.
Hunting Down Gains No Matter Who Has Power
Rivian Automotive’s IPO is expected in the next few days. The ticker will be RIVN. Initially, shares were set to cost between $57 to $62. They are now expected to go between $72-$74 a share. It’s trying to raise $8.4 billion, which would make it the largest EV IPO in history. It has backing from powerful companies including Amazon [AMZN] and Ford [F].
Amazon has reportedly purchased 100,000 of Rivian’s vans as part of an effort to cut carbon emissions. It also has a 20% stake in the company. Ford has its own electric vehicle line, notably the EV version of the F-150. There are now 160,000 reservations for the F-150 Lightning. However, Ford also reportedly holds a 12% stake in Rivian, as reported by CNBC.
The IPO for Rivian will probably be a bonanza for those who can get in early. Yet it may quickly retrench, as we’ve seen with some of these blockbuster IPOs.
Lucid Group [LCID] is part of the Rogue Investing Daily Model Portfolio. As of this writing, it is up more than 73% in the RID Model Portfolio. It surged last week after it reported delivering its first cars. Lucid also beat Tesla when it came to range, with Lucid’s Air Dream Edition Range vehicle receiving an EPA-rated range of 520 miles. That’s the highest rating an EV has ever received.
Lucid could be vulnerable because it doesn’t have its own charging stations – but of course, TSLA has removed that problem.
Nio [NIO] was once an investor favorite. It’s been surging over the last month, picking up more than 24%. However, it is a Chinese company, and given the economic tensions between the People’s Republic and the United States, trade barriers could disrupt any potential growth.
In terms of growth, LCID appears to be the best play at this point. Nonetheless, if you aren’t already an RID subscriber, LCID is “yesterday’s gain.” It’s still reasonable over the extreme long term, but if your investing timetable is about bringing in returns over the short term, look for something with more media buzz – and greater volatility.
This is RIVN. The initial IPO will probably take the stock to a vastly inflated price. However, some will take profits soon afterward. In the pullback, there may be an opportunity.
Beyond that, Ford [F], which is already tied to RIVN and has its own strong lineup, could be the best long-term bet. The stock is up 40% over the last three months. It is now over $20 a share for the first time in more than 20 years. It is repurchasing junk bonds to reduce its debt load. Perhaps most importantly, it has a solid ESG (Environmental, Social, Governance) plan. This is key for the company to be able to tap into the $40 trillion market revolution that is already underway.
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Look beyond TSLA when it comes to electric vehicles. That doesn’t mean ignoring Elon Musk’s creation – but it might be nerve-wracking when the stock price is dependent on whatever the “Tecnoking” feels like tweeting out any given day. (Incidentally, he was briefly “Lorde Edge” on Twitter.)
I still wouldn’t bet against Musk. I would at least consider some alternatives. Ford [F] and Lucid [LCID] are two to watch, despite recent gains. These companies are building for the long term, they have production already underway, and they will able to take advantage of TSLA opening up its charging network. RIVN is great if you can get in early, but if you can’t, consider waiting for the pullback.
As for the EV giant, never count Elon Musk or TSLA out… but don’t waste time and money chasing yesterday’s gains. If TSLA stock falls dramatically because of one of Musk’s stunts, that may be the time to consider moving in… but not before.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com three times a week to bring you news on what those with power are debating, planning, and doing.
