The managing partner of The Future Fund LLC, Gary Black, is urging investors to do their own research instead of relying solely on comments from company management. This warning comes as a reminder that CEOs are often paid to be optimistic, which can be misleading to investors.
The Risk of Misinterpretation
Black, a former Fortune 1000 CEO and public company board member, warns that CEOs are paid to be optimistic, which many investors misinterpret as bullishness. He notes that he has made the mistake of listening to company management on guidance and timelines before, only to find that the information was incorrect.
The Importance of Independent Research
To make informed investment decisions, Black recommends that investors talk to customers, competitors, and suppliers, in addition to the management. He also emphasizes the importance of doing one’s own research, rather than simply relying on numbers in spreadsheets.
A Case in Point: Tesla
Black, a Tesla bull himself, notes that The Future Fund is not making Tesla a bigger bet due to the risks involved. These risks include the potential scrapping or reduction of the $7,500 tax credit for electric vehicles, as well as the risk that Tesla may not launch a cheaper, more compact electric vehicle model next year.
The Need for a Compact, Cheaper EV
According to Black, Tesla needs to launch a compact, cheaper EV offering to expand its total addressable market in 2025. A lower-priced Model 3, he notes, will not aid delivery volume growth or earnings growth next year.
Key Takeaways
- Investors should verify facts independently before making investment decisions
- CEOs are often paid to be optimistic, which can be misleading to investors
- Independent research is crucial for making informed investment decisions
- Tesla faces risks, including the potential scrapping or reduction of the $7,500 tax credit and the need to launch a compact, cheaper EV offering
Conclusion
In conclusion, investors should be cautious when relying solely on CEO optimism and should instead do their own research to verify facts independently. This is especially important in the case of Tesla, which faces significant risks in the coming year. By doing their own research and verifying facts, investors can make more informed decisions and avoid potential pitfalls.