Mister Electric and the Gasoline Brothers

If there's one company that triggers heated discussions, it's Tesla. This newsletter is explicitly not a recommendation to buy or sell Tesla or other car manufacturers. Tesla fans wouldn’t appreciate this sentence. Tesla is not a car manufacturer! So the outcry. Hmmm, looks like a car, drives like a car, honks like a car. Anyway, Tesla drivers say the software makes the difference and no other is comparable to Tesla. For lack of knowledge, I'll gladly accept that.

In 2019, 75 million cars were sold worldwide. Tesla sold 367,500 units. The growth was rapid. Thanks to the popular "Model 3", sales were higher than in the previous two years combined. No profit was made. Today, Tesla is the most valuable car company on the planet. Its market value today (July 15, 2020) is 280 billion US dollars. These are the facts.

A customer recently asked if we were annoyed at not having invested. I looked deep into my soul and I couldn't see any anger. Like I don't get annoyed every Sunday evening about the lottery numbers I didn't bet. I don't even play the lottery.

The giant from Redmond

In 1999, an investor once asked me what could go wrong with Microsoft. No, that’s not right. The exact question was more suggestive: "Nothing can go wrong, dominant as they are. The stock must go up. Right?" The last word made it a question. It was clear which answer wanted to be heard.

In fact, nothing went wrong. Microsoft dominates the software world more than ever. And in contrast to 1999, the company does not have to send floppy disks, CDs or similar data carriers from long forgotten times. It's all in the cloud.

Whoever bought then needed a lot of patience afterwards. Shareholders had to endure a major setback and 15 long years. Only then the losses were overcome and the fruits of their conviction could be reaped in the following years. Looking back, it was a cinch. But living through time? The news that the PC was dead, that operating systems were not needed and that Office was obsolete, unsettled investors. In addition, the giant from Redmond had to fight off several cartel proceedings. There was no trace of the cloud business back then. To top it off, Stephen Ballmer (then CEO), took over the former market-dominating mobile phone manufacturer Nokia in 2014. The unsuccessful trip ultimately cost Microsoft 8 billion US dollars.

Oscillating between the extremes

The stock market fluctuates between euphoria and depression. It only remains in the realm of reason for seconds, only to quickly swing to one extreme or the other. Tesla's market capitalization is now larger than BMW, Daimler, Fiat Chrysler, Ford, General Motors, Peugeot, Renault and Volkswagen. Not bigger than any of them. Bigger than all of them together! Euphoria and depression in one sector. You don't see that every day.

On the stock exchange, not only the quality of a company counts, but also the price you pay for it. Where this price is reasonable - i.e. corresponds to a fair value - each investor decides differently. Varied expectations of growth and profitability flow into the decision-making models. As a result, markets are created and prices are formed. The future will show us which assumptions have stood up to reality.

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