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Apple Car Vs. Tesla

How will the electric utilities—and the solar energy-producing homeowners—evolve to serve this fleet of electric cars? And ultimately—when will I be able to summon an autonomous car with my smartphone, tell it to take me to my destination, and exit the vehicle upon arrival, all without dealing with a human? The answers to these questions are still unknown, which means there’s a lot of opportunity in this market, and that’s one reason the readers of my Cabot Stock of the Month are still holding onto Tesla, with profits exceeding 750%.

50 Years Ago

The Next 50 Years

Apple Car Vs. Tesla

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50 Years Ago

If you’re like most of my readers (the average age is a bit over 60), you can remember what the world was like 50 years ago.

Lyndon Baines Johnson was president.

The space program that John Fitzgerald Kennedy had kicked off was gaining momentum.

The first U.S. combat troops arrived in Vietnam.

Martin Luther King Jr. led the march from Selma to Montgomery, Alabama.

The Beatles performed the first stadium concert in history, playing at Shea Stadium in New York City.

A gallon of gas cost 31 cents.

The minimum wage was $1.25/hour.

3-month T-Bills paid 4%.

The S&P 500 was at 90.

There was no NASDAQ.

This was one of the hottest American cars:

car

And this was one of the coolest new consumer technologies:

How have we progressed since then?

We’ve put men on the moon (though not a woman).

We continue to send troops to fight in troubled foreign countries, where happily, we’ve tended to experience great reductions in casualties.

We’ve made progress on civil rights—we now have our first black President—though problems persist.

While stadium shows have become routine, the real action in music is in online streaming, something that was unimaginable 50 years ago.

The price of gasoline is up 638%—though it was up 979% just a year ago.

The minimum wage is up 480%.

The yield on 3-month T-bills has dropped by an amazing 99.5%.

The S&P 500 is up 2,030%.

The hottest American car might be this:

And the coolest new consumer technology might be this:

That Apple Watch, of course, is really an extension of the company’s iPhone, which has been arguably the most important consumer technology product of the decade—incorporating, of course, that pervasive revolution known as the Internet, which was unimaginable 50 years ago.

Also unimagined 50 years ago were the products and services provided by companies like Netflix, Amazon, eBay, Google, Facebook, Twitter, Uber, Starbucks, Pandora, Celgene, Gilead, Illumina, Regeneron, Charles Schwab, eTrade, Chipotle, Activision Blizzard, Electronic Arts, Open Table, Yelp, Zillow, Expedia, First Solar, Solar City, Sun Power, GoPro, Fitbit, Palo Alto Networks, Salesforce, Monster, Splunk, Tableau and more.

Successful investors in those companies have made a lot of money!

The Next 50 Years

So here’s the question.

Where will we be 50 years from now?

We will probably put a person on Mars.

We will probably still have global conflicts, but I believe they will continue to abate.

We will probably continue to make progress on civil rights.

And we will certainly continue to enjoy music, both live and otherwise.

But where will the investment opportunities be?

Most people answering this question tend to extrapolate from the present, imagining greater advances in the realms of recent advances, and that’s not difficult. Smarter phones, faster Internet, improved biometric-based identification, more efficient medical diagnosis and administration, more renewable energy and a more globally integrated world.

More difficult is making the leap to things that seem impossible—even unimaginable—today, just as the Internet was unimaginable 50 years ago, and a pink phone was unimaginable 50 years before that.

If futurists like Ray Kurzweil are correct, the next 50 years will bring the Singularity, the point where machine intelligence exceeds human intelligence, and begins a self-replicating and accelerating path that leaves poor human brains (which have only evolved slowly over millennia) unable to comprehend the processes of the machines.

At best that means machines will do all the work, while we kick back and enjoy ourselves.

At worst, it means we will be slaves to the machines.

Realistically, I’m guessing the reality will be somewhere in between.

And I’m hoping the reality includes space travel, anti-gravity, cancer cures, telepathic communication, cryonics, designer babies, world peace, the end of poverty and more.

But I don’t have enough confidence to invest in those areas today. Today I’m far more confident about investing in an area where great progress is already being made, though most people fail to appreciate the enormity of the changes right around the corner.

I’m talking about the big move away from an automotive industry dominated by the internal combustion engine to one where the electric motor is king. Over the past few years, Tesla Motors has become the world leader in this disruptive technology, and now Apple—a competitor whose entrance into an industry would set most companies trembling—is now rumored to be joining the party.

Apple Car Vs. Tesla

Rumor has it that Apple started its car project last year. It has at least 600 employees working on the project and is looking for 1,200 more.

And what might such a car be like?

It will almost certainly be fully electric. It will almost certainly synchronize seamlessly with the user’s existing Apple devices. And it will almost certainly be designed to be autonomous (self-driving), if not at the start, then in later iterations.

What it might look like, however, is anyone’s guess. Knowing Apple’s design skills, it will be beautiful.

And who will build it?

Apple is famous for outsourcing manufacturing, but will its cars be made in China (like so many of its other products), or will they be American, made in Michigan, Tennessee, Georgia or Alabama or even California (by robots as Teslas are)?

In any event, deliveries of the Apple Car still look at least four years away. By then, Tesla will be producing its $35,000 sedan (I call it the BMW 3 Series fighter).

Whoever makes the Apple Car, I’m not worried about Apple cutting into Tesla’s market. In fact, Tesla CEO Elon Musk has said many times that the more competition there is in the electric car industry, the better for everyone.

The faster electric cars grow from marginal players in the industry to major competitors, the faster Musk will achieve his main goal, which is to end the dominance of the internal combustion engine in the industry.

And as far as achieving that goal goes, we can now “thank” Volkswagen for making diesel cars that cheat on their emissions tests. The revelation of the mega-industrial cheat is one more factor that will nudge consumers away from noisy and complicated internal combustion engines and toward quieter, simpler and far more fuel-efficient electric cars in the future.

Furthermore, if we have players like Apple (and maybe Google) pushing electric cars, those companies will be a great asset in Tesla’s fight to enable customers to buy cars straight from the manufacturer, a fight it’s been conducting state by state across the U.S.

One of the big challenges, however, as electric car use proliferates, will be the charging infrastructure. Charging overnight in your own garage is fine for people who have garages. But what about people who park on the street? And charging at Tesla’s superchargers (there are now 2,935 superchargers at 520 stations) is great for long-distance travel in a Tesla. But what if you’re driving a Nissan Leaf or an Apple car?

The answers to these questions will eventually be found, as well as the answers to these:

Will Apple target the urban and commuter markets and leave the long-distance market to Tesla?

How will regulators deal with self-driving cars?

How will Uber fit into the picture?

How will the electric utilities—and the solar energy-producing homeowners—evolve to serve this fleet of electric cars?

And ultimately—when will I be able to summon an autonomous car with my smartphone, tell it to take me to my destination, and exit the vehicle upon arrival, all without dealing with a human?

The answers to these questions are still unknown, which means there’s a lot of opportunity in this market, and that’s one reason the readers of my Cabot Stock of the Month are still holding onto Tesla, with profits exceeding 750%.

Yours in pursuit of wisdom and wealth,

Tim Lutts,

Cabot President and Chief Analyst, Cabot Stock of the Month

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Timothy Lutts is Chairman and Chief Investment Strategist of Cabot Wealth Network, leading a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems.