The financial media is mostly cautious on Tesla (TSLA) shares, as per the Philly.com article below, because the stock recently rallied over 600%, and then promptly fell by 40%. However, it is somewhat impossible to “value” an extraordinary hyper-growth company like Tesla, and we saw similar volatility in Apple (AAPL) this past decade.
History proves that extreme volatility should be expected at times, and can be justified by a stock’s long-term reward potential. ETF PM has passive long-term positions in Tesla, and we are currently trading the company shares in our active stock rotation.
Tesla Motors stock, like the car, not for the faint of heart
By Erin E. Arvedlund, Inquirer Columnist 12/3/13
The $70,000 Tesla Model S automobile might be the ultimate holiday gift, but is its parent a good addition to your portfolio?
Growth managers say, yes, Tesla Motors Inc. (TSLA) represents not only the vanguard of electric cars, but also a healthy growth stock. Growth portfolios differ from value portfolios. The former seeks to invest in companies expanding at a rapid pace; value holdings often trade at a discount and might also throw off some dividend income.
“If you haven’t driven the new Tesla, head up to the dealership at King of Prussia and get on the waiting list,” says James Cox, financial adviser with Devon Financial Partners in Wayne. By the way, the waiting list is a month long, he adds. Cox owns the stock in his growth portfolios.
Growth as an investing style has outstripped value this year, and growth phases in the markets help small- and mid-size companies during those periods.
Even money managers who ordinarily allocate only to exchange-traded funds, such as David Kreinces, founder and portfolio manager of ETF Portfolio Management in Newbury Park, Calif., is high on Tesla.
“We rarely recommend individual stocks unless there is strong potential for extraordinary growth,” he said. “This Tesla recommendation was the only individual stock recommendation we sent to all of our clients since we launched the firm in late 2007.”
Kreinces began buying Tesla stock in May for clients, and since then, the stock has climbed from $53 a share to a high above $193 in September.
However, Tesla stock has corrected sharply since U.S. safety regulators opened a probe into car fires caused by undercarriage punctures of the battery. Currently, the stock trades at around $129 a share. A drop from $193 to $129 represents a loss of more than 30 percent.
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