Fund manager Gary Black has advised Tesla investors to approach their investment decisions with a clear and level head, untainted by emotional attachment to the company’s products.
What Happened
Black cautioned against letting personal feelings for a company’s products cloud judgment, using his own experience with Starbucks as an example. “I love Starbucks but I wouldn’t own Starbucks stock,” he stated, emphasizing the need for a “strong dose of discipline” when evaluating Tesla’s stock.
Key Mistakes to Avoid
According to Black, two major pitfalls investors often fall into are:
- Falling in love with a product: Allowing affection for a company’s offerings to influence investment decisions can lead to biased judgment.
- Relying on production forecasts: Investors should focus on demand rather than management’s production forecasts and consider potential competitive responses.
Black’s Outlook on Tesla
Despite these warnings, Black remains optimistic about Tesla’s future. He believes the company needs to demonstrate growth in delivery volumes and showcase the capabilities of its full self-driving (FSD) driver assistance software to maintain a strong profit-earnings ratio.
Expansion Strategies
Black suggests that the introduction of a new, cheaper Tesla vehicle with a unique form factor could expand the company’s market. He proposes that this vehicle should be a hatchback priced between $25,000 to $30,000. Without a distinct design, the new vehicle may cannibalize existing sales and harm earnings.
Conclusion
Investors are advised to maintain a disciplined approach when evaluating Tesla’s stock, focusing on analytical data rather than emotional connections to the company’s products. By doing so, they can make more informed decisions and navigate the complexities of the market with confidence.