A friend of mine in the US got lucky investing in Tesla when its share price was a lot lower than it is today. Because I’m a friend, she put the acid test on me and asked: “Should I sell?” And because I’m a friend, I’ll have a crack at what is a very tough question. As I thought about the challenge at hand, I also reflected on how so many people don’t seek expert answers to the big questions of their life.

Wondering why, I came up with answers such as:

• People are scabs.
• They’ve been burnt by so-called experts in the past.
• They don’t really care if they win or lose, if they are poorer than they need to be, which says they have A ‘don’t care’ attitude.
• Or the matter seems just too hard so they concentrate on, say, working hard, and hoping for success.

The irony of the last reason for people not seeking expert help is that my long history of talking to and writing about sensationally successful people, tells me that invariably their success is because they were unbelievably focused on their big goal. Next, they worked tirelessly and wisely to make their success happen. Finally, a part of their wisdom was to recruit people who know more than them or have some other skills that added to theirs that were going to give them their competitive advantage to win big time.

I recently listened to an interview of the Atlassian founders — Mike Cannon-Brookes and Scott Farquhar. Their complementary skills seemed to be really important for the success they have generated.

This chart of their share price on the Nasdaq shows how valuable their combined skills have been.

 Atlassian

The latest guess on how wealthy Mike is was put at, wait for it, $15.1 billion.

Business winners such as Tesla’s Elon Musk, Virgin’s Richard Branson and our own Gerry Harvey might question experts (especially those who’ve bagged their businesses) but they’re always smart enough to have smart people when it comes to key areas that could make or break their intended goal.

Their passion to win means they’d seldom let their pigheadedness get in the way of winning.

And Ray Dalio, a guy who runs one of the world’s largest hedge funds (Bridgewater Associates which manages about $150 billion in global investments) is a great listener to experts. In 2019, CNBC calculated that Ray was worth US $16.9 billion. In a story he contributed to, Ray admitted “that one of the most important strategies he used to go from having ‘hardly any money’ to rich and successful was taking into account the opinions of smart people who disagree with him.”

He says by listening to those who don’t agree with him, it increases his “probability of being right.” I love that kind of thinking.

So, let’s get to the task of working out whether Tesla is a buy, hold or sell?

Let’s start with the chart of its share price to see if it tells us anything.

Tesla 5 years

What you can see is that the stock has recently seen a sizeable pullback. It was a $US180 stock before the Coronavirus came to town and it dived to $US72 in March 2020. But after that it peaked at $US900!

But in case you missed it, the share price is now $621 and has fallen over 30% since late January! This fall has been linked to a rotation trade out of stocks that did well in 2020 — tech and stocks that served the stay at home phase because of the virus threat.

Tech stocks had been over-bought by new investors who’ve been enthused by the rebound of the stock market after the Coronavirus crash. And so professional fund managers have taken profits to buy into the stocks that will do well this year and next — the reopening trade stocks in sectors such as hospitality and tourism. And new age traders could also be taking profit after making some big gains.

Tech stocks are seen as growth stocks and these are thought to be challenged by rising interest rates, which the bond market recently has been predicting. But I think everyone is getting ahead of themselves worrying about interest rates choking off the expected economic boom over 2021 and 2022. And this could be creating a buying opportunity for a stock like Tesla.

This week, The Wall Street Journal told us that “Worries about inflation also have triggered bets that the Federal Reserve will start to boost interest rates in the next two years.” That’s possible and I think it’s a big chance but the Fed and our RBA are running the global central bank message that rates will be low for a long time.

The bond market will be right but it will take time. And in that time the expected economic boom has to be good for growth stocks like Tesla. Right now, the expert fund managers are chasing value stocks, as they often do after a recession. But once these have been overbought and the economy is booming, growth stocks will have another leg up.

So is Tesla worth a bet?

The big surge for the electric vehicle maker came in November when it leapt from $411 to $900 in late January.

This makes me think the share price could have more downside before I’d want to be a buyer. But I do want to be a buyer. Why? To answer that question, Forbes reported on Thursday the following: “According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for Tesla stock average close to 17% in the next month (21 trading days) period after experiencing a -17% decline over the last 21 trading days. The stock is also likely to outperform the S&P 500 over the next month, with an expected return that would be 13% higher compared to the S&P 500.”

Meanwhile, chartist say: “While Tesla stock is hovering just below its year-to-date breakeven level, its recent pullback has it trading near a trendline with historically bullish implications.” (Forbes)

According to the analysts surveyed by CNN Money, the median forecast from the experts is for the share price to move to $US727, which would be a 20% gain. If the guy who thinks it will be a $US1,200 is right, that would be a 100% gain, but this expert is an outlier.

Tesla forecasts

That’s all well and good, and remember, these are 12-month views. If I buy Tesla, I want to buy it for a longer time. So what is the industry future for EVs and then Tesla itself?

For the industry, the future is huge! A J.P. Morgan report in November 2020 won me over.

“The road to a fully electric future was paved in 2020 with potential new partnerships between automakers and Electric Vehicle (EV) start-ups, advancements in battery range and heightened government efforts to reduce CO2 emissions,” the report said. 

This chart shows how EVs are taking off in Europe.

In September, EVs had a combined market share of 27.4% in these five countries above, up from 21% in July 2020 and 17.9% for the full second quarter!

This comes as the UK has signed up for a very EV future. In November, the SMH reported that “Britain's Boris Johnson will ban the sale of petrol and diesel cars by 2030, pledging to be the first G7 country to switch to electric vehicles and fully decarbonise road transport.”

Furthermore, the report revealed that “the government said it would spend £1.3 billion ($2.36 billion) installing electric chargers across England as well £582 million in grants for those buying zero or ultra-low emissions vehicles.”

That’s huge!

And what about Tesla and its future?

An industry expert who’s a huge Tesla fan put the companies bone fides on the line in the following summary:

• Tesla has the most expansive charging network but it’s only for Tesla cars.
• Tesla has a giant lead of 10 plus years in electric drivetrain experience.
• Tesla has a ground-up electric design; they’re not retrofitting electric parts on to a chassis designed for internal combustion engines.
• Tesla has a giant lead in battery technology, at the cell, pack and module level. This experience is hard won and constantly evolving.
• Tesla has millions of miles of telemetry of battery behaviour.
• Tesla has tightly, vertically integrated systems, such as the integrated cooling system. Traditional car companies treat all of their cooling systems independently, and they may even be manufactured by other companies.
• Tesla has super tightly integrated electronics and entertainment systems, while most major car companies assemble a mishmash of parts from other vendors. This is why the map and trip planning software is tightly integrated with finding Tesla charging stations with open spaces along routes. This is not a car - it’s an integrated transportation experience.
• Tesla’s self-driving systems are worlds ahead of anything on the market, bolstered by millions of miles of fleet learning from their cars in the field.
• Tesla shares material technology with SpaceX, giving them a profound advantage in manufacturing materials that traditional vendors can’t match. This is why the Cybertruck is both revolutionary and reasonably priced.
• Tesla’s gigafactories will provide the advantages of vertical integration needed for quick evolution based on what they learn in the field, compared to the traditional long supply chains and complex vendor ecosystem that legacy manufacturers have fostered.
• Tesla has opportunities to bundle their solar and powerwall offers with vehicles.

OK, the company has got me. So when do I buy? Not now. But if I see $US500, I’d be a good chance to become a shareholder. This is a risky investment, unlike my usual style where I buy proven quality companies that the market falls out of love with. For example, I think CSL at $249 is a great buy for a long-term investor, but Tesla is more for the thrill-seeker.

I don’t have to buy Tesla, but when the world becomes totally committed to EVs and the use of battery technology is everywhere I suspect Tesla will be a market leader.

And history tends to favour the market leader in the tech space. Just look at Amazon, Google (Alphabet), Apple and Facebook. And you could throw in Microsoft for good measure.

The one worry I have always had about Tesla is it’s leader Elon Musk, who to me has always been a loose cannon. I don’t like investing in smart Alec hotshots but he is very smart and seems to be growing wiser with age. Well, I hope he is.

This is not financial advice but hopefully brilliant financial education.