A good friend of mine who’s just a few years older than me served in Vietnam. Like most ex-soldiers, he never talks about what he did over there, but it clearly had a major impact on his life. His favorite books and movies are often about war—about how a good soldier behaves and about the lessons war teaches: war is hell, and sometimes you can’t win, but nevertheless, you should do your best to respect your country, follow orders, and never let down your teammates.
Me, I was given a high draft number just as the war was winding down, so I never worried much about being sent to Vietnam. And—for better or worse—I never became much of a team player. Instead, I spent most of my formative years under the tutelage of my father, absorbing the lessons of being an independent investor in a capitalist system.
These lessons include:
Growth is good.
Profits are good.
Competition is good.
Small companies can grow faster than big companies.
And, as pertains specifically to the stock market:
The market is always right.
Cut your losses short.
Let your profits run.
Trends tend to last longer and go further than people originally expect.
The trend is your friend.
Bull markets climb a wall of worry.
A rising tide lifts all boats.
Trouble tends to come from where it’s least expected.
Doom and gloom sells; optimism pays.
It pays to be contrary.
The market is always looking ahead.
Trust the chart.
As a result of learning these lessons, today, while our news media continue to obsess over (and worry about) the minutiae of presidential actions, party politics, immigration policy, tax policy, healthcare policy, employment policy, North Korea, China, Russia, NAFTA, NATO, OPEC and more, I remain pretty Zen about it all.
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What I see today is a strong bull market that blasted off following the U.S. election and is still going strong. And what I see is a ton of stocks hitting new highs!
One of these stocks is Tesla (TSLA), which I’ve written about previously, and today I’m going to review it once more, beginning with a quotation from Thomas W. Phelps, whose book, 100 to 1 in the Stock Market, was published in 1972.
“Perhaps the greatest advantage of all in buying top quality stocks without visible ceilings on their growth is that when we do so we give ourselves the chance to profit by the unforeseeable and the incalculable.”
Phelps’ book made the case that to turn $1 into $100 in a stock, you don’t need great timing or great stock-picking ability; above all you need patience.
Phelps’ research showed that from 1932 until 1967, there were at least 365 common stocks that you could have bought that would have turned $1 into $100 if you held them. Furthermore, the majority of those stocks weren’t bought at market bottoms. Every year you could have bought at least one stock that would have accomplished the feat. And, the majority were not penny stocks!
In my book, Tesla is well on the way to becoming one of these stocks that turn $1 into $100, and what I particularly like about the company is that CEO Elon Musk is always looking far beyond everyone else in the industry.
• Elon Musk has built the safest and most positively reviewed production sedan ever (the Model S), with terrific performance and a fuel economy rating of close to 100 MPG (equivalent)—and followed it up with a revolutionary SUV (the Model X).
• Elon Musk is manufacturing these cars in California, of all places!
• Elon Musk has built the world’s largest fleet of self-driving cars—which use fleet learning to continually improve—in the process taking a giant step toward slashing the number of automotive deaths in this country—more than 38,000 last year.
• Elon Musk has built the world’s largest network of rapid charging stations.
• Elon Musk has freed customers from the much-despised automotive dealer experience by selling directly to the consumer.
• Elon Musk has built a gigafactory in the Nevada desert that will manufacture more batteries, and at lower cost, than anywhere else on earth.
• Elon Musk has received reservations from more than 400,000 people for the Model 3 sedan, due later this year.
Furthermore, branching out from the automotive industry into the energy industry:
• Elon Musk has introduced energy storage systems for homes and business that integrate with solar panels to save energy for when it’s needed.
• Elon Musk has installed utility-scale energy storage systems for electric utilities.
• And he’ll soon begin manufacturing solar roof tiles that are indistinguishable from regular roof tiles.
Meanwhile, his major competitors, steered by well-entrenched corporate boards, remain far behind, intent on selling gas-guzzling pickup trucks and SUVs to Americans.
If General Motors (GM) and Ford Motor Co. (F) were really serious about competing with Tesla, they would spin off a separate division devoted to revolutionary vehicles and other technologies. But they won’t, because any new truly revolutionary division (assuming it succeeded) would run the risk of cannibalizing the parent company’s bread-and-butter SUVs and pickup trucks—and that’s a thought that GM and Ford can’t bear.
In the meantime, Elon Musk continues to forge ahead, with a coherent vision of the future and the engineering smarts and management skill to actually achieve it.
Later this year, he will unveil a fully electric semi truck.
In a couple more years, he expects to unveil a pickup truck.
After that, your guess is as good as mine, but I have no doubt that Elon Musk is way ahead of us all.
Up above, in my lessons about the stock market, was this one: “Management matters.” In the case of Tesla, Elon Musk matters.
American history is full of visionary automakers who floundered, from Preston Tucker to Malcolm Bricklin to John DeLorean to Gerald Wiegert (Vector) to Henrik Fisker. But where these men (and more) failed, Elon Musk succeeded. As a result, Tesla is the first successful new American carmaker in the last hundred years!
So, when I think about Tesla, I don’t think about the stock’s valuation today. I don’t think about earnings. And I don’t think about the projections of bean-counters—whether they’re at brokerage firms or automakers. Bean-counters don’t have imagination, and bean-counters don’t make history.
When I think about Tesla, I think about the unforeseeable and the incalculable, and as long as Elon Musk is in charge, and as long as there’s so much room for improvement in the industry, I like what I see (or technically, what I can’t see).
Readers who heeded my initial advice to invest in Tesla back in late 2011 are now looking at profits of more than 900%, and holding patiently for more.
As I write, my recommended portfolio holds 20 stocks, 18 of which are showing profits.
Granted, a lot of the credit goes to the bull market, but I don’t mind sharing credit. And I think this bull market can do a lot for your portfolio too, if you’ll just join me. The sooner you start, the better.
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More