I’ve never met legendary investors George Soros or Steve Cohen nor am I privy to how their firms make their investment determinations, but this much is obvious: The don’t have any regard for the collective wisdom of the U.S. business media.
It’s been reported the Soros and Cohen in the fourth quarter made big bets on Tesla. Soros increased his Tesla holdings 211 percent to 132,046 shares. For good measure, Soros placed a call option on 200,000 additional Tesla shares, allowing him to buy more Tesla stock at a guaranteed price within a certain period.
Meanwhile, Steve Cohen’s Point 72 amassed 878,000 Tesla shares in the fourth quarter, as well as 60,500 bullish call options.
Tesla’s stock was in the toilet in last year’s fourth quarter and lost 65 percent of its value in 2022. The U.S. business media was quick to administer Tesla’s last rites, saying the brand was dead because of Elon Musk’s Twitter antics and his conservative political leanings. To reinforce the message, failing publications like the far-left wing Los Angeles Times published commentaries like this one by former magazine editor and Santa Monica resident John Blumenthal who said he was “embarrassed” to be seen driving his Tesla in the company’s second biggest market.
Abetting the media’s attempted takedown of Musk was dial-a-quote Tesla analyst Dan Ives, who declared the company’s stock a “train wreck” and notified CNBC viewers that he removed it from his “best ideas” list.
I’d love to get my hands on Ives’ “worst ideas” list.
As reported today by IBD’s Matt Krantz, the only markets reporter to earn the coveted Starkman Approved designation, the top 10 largest holders of Tesla stock, including top ETF and mutual fund providers like Vanguard and BlackRock and Musk himself, are collectively up $117 billion since the stock doubled from its 52-week (intraday) low on Jan. 6. According to Krantz’s deft number crunching, 10 investors made more on Tesla stock in roughly five weeks than all investors made on 496 individual S&P 500 stocks during the same time.
Said Krantz: “That’s crazy money.”
For all the feigned concern about “misinformation,” it’s clear that news of Tesla’s death was just wishful thinking on the part of an entrenched media with an exaggerated sense of their importance. The media might want to rethink Ives as one of their go-to Tesla “experts,” as well as Ross Gerber, the money manager who declared three days after Tesla’s stock hit its 52-week (intraday) low that Musk’s bad media coverage “broke the stock.”
Gerber strikes me as lacking the humility of the business media that courts him. Despite declaring Tesla’s stock broken when it was on the cusp of a spectacular run-up, Gerber announced last week he will notify the electric carmaker that he plans to run for a seat on the company’s board, citing problems with its public relations, customer service and succession planning.
Reuters reported Gerber saying that he is so frequently quoted by journalists he has become the de facto voice for the company that has no PR department and thinks so little of the media that it rarely responds to journalist inquiries.
“Instead of me spending a day doing 14 interviews with reporters around the world, Tesla should have someone doing that,” Gerber said. “And if I’m going to do that, I should be a representative of the company.”
One wonders if Gerber believes that if Tesla employed some media spinmeisters that perhaps the stock would have tripled or quadrupled since he declared it broken.
Gerber’s firm held around 440,000 Tesla shares, or 0.01% of the company, as of Dec. 31, according to Bloomberg.
Charlie Bilello, chief market strategist at CPI Wealth, has a more insightful understanding of Tesla’s business and competitive advantages. As reported by Benzinga, Bilello noted in a recent report that Tesla increased its sales from a mere $0.4 billion 10 years ago to $81 billion in 2022.
By comparison, the 2022 revenues of GM and Ford, America’s C-team led automakers, respectively were $157 billion and $158 billion. According to Bilello, GM and Ford’s revenues a decade ago respectively were $152 billion and $134 billion.
Tesla’s revenues grew by 20,150% over the past decade, while GM and Ford saw revenue growth of 3.3% and 17.9%, respectively. Tesla has increased its net profit from a negative $0.4 billion to $13 billion. It now makes more money than GM and Ford combined. Wall Street values Tesla at $671 billion, while GM and Ford are respectively valued at $60 billion and $52 billion.
GM’s poor leadership is reflected in the company’s stock price. When GM CEO Mary Barra assumed command of the company in 2014, its stock was traded at nearly $40 a share. Even with a recent run-up, GM’s stock at this writing is only trading at $43 a share. Ford CEO Jim Farley only assumed the top spot in October 2020, and he inherited many of Ford’s chronic problems, including its shoddy manufacturing that resulted in nearly 70 recalls last year.
The U.S. business media also has egg on its face given the myriad puff pieces it published about Barra and Farley and how GM and Ford supposedly were well poised to become formidable EV competitors to Tesla.
Ford announced yesterday that it was forced to halt production and shipments of its electric F-150 Lightning because of a potential battery issue. Ford CEO Jim Farley recently admitted that Ford left $2 billion on the table because the company hadn’t quite yet figured out the fine points of EV manufacturing, including that the wiring harness for its electric “made-in-Mexico” Mustang was 70 pounds heavier than it needed to be, costing Ford an extra $300 a battery. (For this sort of leadership, Farley last year received $23 million in compensation.)
GM last year was forced to spend $1 billion to recall its electric Chevy Bolts because of a battery issue. GM has only sold 40,000 electric vehicles, and two of the company’s EV models have been trashed by reviewers from Bloomberg and the Verge.
Pardon the breast beating, but while the auto press was crowing about Barra and Farley, in August of last year I voiced my doubts about their leadership and EV capabilities in a column for Deadline Detroit. My doubts were fueled by two factors: Common sense and my extensive media and PR experience.
Tesla was founded in 2003 and Musk became CEO in 2008. The company’s singular focus was electric vehicle manufacturing and it swung for the fences. Musk chose to develop Tesla’s proprietary software rather than cut corners and rely on third-party technology vendors. Ford relies heavily on Google for its software; I’m not sure about GM but this video makes clear the company’s EVs aren’t ready for prime time.
It takes a giant leap of faith that GM and Ford could turn on a dime and profitably manufacture reliable EVs, particularly given they can’t manufacture quality gas combustion vehicles despite more than a century of experience.
I’ve also learned that CEOs who actively court the media and relish over-the-top gushing profiles before achieving ambitiously stated goals and objectives invariably prove unworthy of the speculative praise.
I’ve made other prescient market calls, including declaring that Bed Bath & Beyond was doomed as early as May 2019. Again, my certainty about the company’s demise wasn’t because of my superior business acumen or ability to analyze a balance sheet. BB&B had fallen prey to hedge fund investors, and the historical record of what happens to a retailer when hedge funds and private equity firms gain control is very definitive.
Unfortunately, investing based on common sense is foolish because the market is rigged in favor of ruthless “activist” investors who can bend company managements to their wills and can sometimes profit even when they harm their corporate targets.
Once such activist investor is billionaire Dan Loeb, who retail investors, often referred to as “dumb money” by Wall Street pros, should be aware of.
In 2011, Loeb acquired a 5 percent stake in Yahoo and demanded three people chosen by him be given board seats. The company acquiesced to Loeb’s demands, after he orchestrated the firing of then CEO Scott Thompson.
Loeb was responsible for installing Marissa Mayer as CEO, but he fast learned that the former Google executive was way over her head. As reported by Bethany McClean in this December 2013 Vanity Fair article, Loeb was prepared to fire Mayer. Instead, Mayer bought out most of Loeb’s shares at a premium that he possibly couldn’t get in the open market, allowing his fund to net a profit of about $1 billion in less than two years.
Mayer is widely regarded as one of the worst CEOs of all time, but Loeb made a killing on his disastrous appointment. I’d liken the situation to a chef who served restaurant patrons tainted food and then went to a five-star restaurant to enjoy a steak and lobster dinner.
Loeb is back in the news again, having set his sights on Salesforce. In a recent column, William Cohan described Loeb as a “friend” of Salesforce CEO Marc Benioff and said that during a recent meeting it was clear that Loeb “knows and likes Marc and has been serving as some sort of informal advisor to the embattled CEO.”
Seems to me that Loeb has an unfair investment advantage serving as an advisor to a CEO of a company that he holds stock in.
In addition to Loeb, other activist investors have set their sights on Salesforce. To keep them at bay, Benioff last month announced plans to fire 7,000 employees, or ten percent of his workforce.
Salesforce’s fired employees I’m sure will take comfort knowing that Cohan said he met Loeb at the ultra-exclusive Aman Club in midtown Manhattan, where Loeb has a membership. The two enjoyed sparkling water and crudités.
The Aman Club was described by the New York Post as a place for the “have-some-mores,” where for a $100,000 initiation fee and $15,000 a year, members have access to a 24/7 “private office,” which will take care of all travel planning “from facilitating private charters by land, sea, and air, to pre-planning unique experiences across Aman resorts,” as well as upgrades, lax check-in and check-out times, on-demand spa treatments, and access to a private club space.
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