Ep14: Tesla Stock Hits Lowest in 10 months - Expert Bull Breaks It Down
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They don't understand that I'm not buying Tesla for next month's profit or next year's profit. I'm buying Tesla for my kids and my grandkids.

Amazon was a story of cash flow. Amazon's profits kept down, sometimes continued making losses, but its cash flow just kept rising and rising and rising. And the story on Tesla is the same. The problem is that people don't have the courage of my conviction. But Tesla could drop another 20%. For me, this is a phenomenal buying time. It's not one business, it's multiple businesses competing.

They have a very strong theme through those businesses, and the theme includes AI and includes manufacturing skills and capabilities, and it includes an attitude of constant improvement. Hello, and welcome back to another episode of Trending in Tesla. We have a special guest today with us. You might know him as Tesla Larry over on X.

He has over 30 years of experience on three different continents, starting at different businesses. You are an author, an angel investor, and a trusted advisor, as well as a big time Tesla bull. And this is a topic I've wanted to get into for a long time here, talking about investing in Tesla, how that works, but I've never felt like I was the one to really have that discussion.

So I wanted to have someone here that I could pick their brain a little bit about what is going on with Tesla right now. We met during the Cybertruck delivery event and we had such a great conversation. And that's one of the reasons why I wanted you. I'm like, if you're ever driving through Atlanta or we make it over to North Carolina, we have to get together and talk about it because I learned so much. And you kind of predicted what is going on with them. You said to me,

I think they're going to go through this dark period for a couple of years and the media is going to be very critical of Elon Musk. And that is exactly what we're seeing happening right now. I'm very hesitant to say you should do this or you should do that. But my view is that Tesla's product line

And by that, I mean it's energy business, the specific energy business that they're in, their vehicle line and the products that they have coming, humanoid robotics business that they have. And more importantly, the AI that crosses all of those barriers, all of those businesses, I think is an excellent investment. And the quality of that management team, amazing management team. By the way,

all of whom are there nine, ten years and more, because people say that, you know, the management turns over. It doesn't. It doesn't. It's actually amazing. But if you take all of that into account, I think that the next five years are going to be amazing for Tesla. Amazing for Tesla. And, you know, the stock market can do a lot of crazy things. And, you know, the government does put its thumb on the scales very heavily on both sides of those scales.

So I don't know what the economic situation in the country is going to be and what the market is going to be. But as a business, I think it's an outstanding company. Tesla right now, this year, has had a really bad run, or the last two years has had a really bad run, because as Elon says, they're between waves. And you can criticize them for not having introduced models earlier. Clearly,

They would have served themselves better to have introduced the Model 2 or whatever it's going to be called earlier. That would have had an impact, but they didn't. My valuation of Tesla is very different from the market valuation of Tesla. I would say that the issue for Tesla is that they have expanded the market for their Y and 3 very dramatically.

If you consider most other manufacturers at the upper end of the volume scales, they have a range of cars ranging from their lowest... I mean, even Mercedes have got a... In Europe, if you buy a Mercedes, you probably find it's a car that you wouldn't recognize in the United States. It's a tiny car. It's a four-seater. That's their volume car. Well...

Tesla doesn't have a volume car. The smallest car they have is the Model 3. That car in Europe and the rest of the world is a very big car. And so it's not a volume sales car. The fact that the Y is selling a volume in the Corolla category gives you a sense of the success of the Tesla vehicle. So if you look at Mercedes or BMW, both competitors to Tesla in terms of the upper value car,

their volumes by model are dramatically smaller than the volumes of Tesla by model. So if you just consider the model and the number of sales it's doing, it's incredibly high, incredibly high. So yeah, they're lacking a lower cost model. They're probably lacking some variations where they're not prepared to do those variations.

It's a different philosophy. It's not a bad philosophy. I think it's a great philosophy, certainly from a cost point of view and from a marginal point of view, because they're still probably the most profitable manufacturer by vehicle in the world, other than Ferrari and the very high-end car producers. But they're a phenomenally profitable company.

by vehicle and by model, for whatever reason, they're late in terms of their lower end model. And that's affecting their valuation on the market today and their sales. Yeah. So do you think that

Tesla is going to be, we're kind of in this dark age with Tesla where the stock is going to go down maybe in 2026, 2027. This is, for me, this is a phenomenal buying time. And whether we're in the, whether we're at the point that the lowest point of the stock value or whether it's still to come in the next, within the next year, I don't know. But I regard Tesla as

My investment in Tesla as an investment in multiple different technologies, not just vehicles. Clearly the FSD, a robotaxi is a huge opportunity.

anybody who follows me know that I've been very excited about the energy component. The energy component is phenomenally profitable. People don't yet understand just how profitable it is. I think we'll start seeing the real margin on energy emerge this coming couple of quarters. We'll start to see it. I did a long paper on it and

It's a little complicated, but basically we're not seeing the full margin that Tesla are actually earning on energy because it takes a while for them to earn out from their investment.

installations based upon performance. And so we'll see that coming. And then, you know, robotics. I mean, the humanoid robot is going to be one of the largest products in the future. And Tesla is going to be a major player, if not the winner in that space. So if you take all of those businesses into account, never mind the supercharging and that,

all the other peripherals. This is a phenomenal company. I mean, I've just finished listening to the book on the biography of Edison and the echoes of an Edisonian-like life in

Elon Musk's life, you know, if you invested in an Edison company, when he first came out, his first discoveries was the phonograph or whether it was the telegraph multiplexer early in his life and stayed with him through the discovery of energy and stayed with him through the Portland cement. I mean, it's almost incredible.

incalculable the money you would have made. I think we're in the same state with Elon and his businesses. One of my questions is Elon has been very controversial. Yeah. And every time he comes out there's something else he says on X or how he responds to advertisers.

The stock definitely goes down. We see that happening. Do you think that the media is being extra hard on him or do you think that he is doing it to himself? I think you have components of both. I mean, we're in a very strange time sociologically. We're in this huge flux in terms of public perception of what is right and what is wrong. And, you know, I don't want to...

At my age, I've seen so many changes in these shifts in public mood that this too shall pass. Elon, however, is a unique person. I mean, again, echoes of Edison. Edison was also quite a strange bird. Press never really cozied up to him and never really understood him and really understood

had a love-hate relationship with him, much as they do with Elon. It's very difficult to be different. And Elon is different. Yeah. I think in order to be... A lot of times people that are geniuses, which I think Elon is, tend to be a little... I'm going to use the term neuro-spicy. They're a little bit... They think differently. Their brain works in a different way.

And Elon's even talked about that, I think himself has said that. And so for people to understand them, sometimes they get in trouble. I was born and raised in South Africa. I had a very similar childhood in many respects to Elon. I'm certainly not at his level, but I certainly experienced some of the things he experienced.

As a kid, I think at the age of 11 or 12, I also built a rocket and tried to launch it, but the government took it away from us. It was illegal to build rockets in South Africa. So I strongly identify with him, but seeing that rocket take off, which is...

I described it as almost a religious experience, to be honest. It was the most extraordinary, extraordinary creation, this rocket. And, you know, that he has engineered this, that he has envisaged it and then made it happen at a time where it was almost inconceivable. You get a sense of the measure of the man. So, yeah, I'm a lot more tolerant now.

of his idiosyncrasies than some people are. But my investment in whether it's Tesla or SpaceX or whichever company it is, is completely independent of that. And I do an assessment of those investments.

completely independent of an assessment of Elon and his capabilities because they have to stand on their own. And how do you go about, and again, this is not financial advice for anyone out there. We're just offering opinions. I have to have a little disclaimer in there. But how do you go about separating the two? Like the Elon versus the investment. Like what kind of is that process like? You know, you said I've been in business for 30 years. Actually, it's closer to 50 now, but

Over 30 years. I've learned that to be skeptical of any future projection, because I've learned that whatever can go wrong will. And whatever does go wrong, you never thought about. I mean, that's just the nature of these things. Did we think that Tesla would be between, quote, waves, unquote? No, we didn't. Did we know that

Tesla was going to go into humanoid robotics. No, we didn't. Just so many variables that can happen. It's impossible. So I make a judgment based upon the quality of management, the track record.

The likelihood of a continuation of that track record, and that depends upon the quality of management, and then the product. But these are judgments made from experience, and you can't write them all down. You sometimes get a feeling, and you get a sense, and you make a judgment. You know, I was an early investor in Amazon, and I followed Amazon through years of difficulty. I mean...

You probably don't remember this, but at one point it was called Amazon.Toast. You know, this was when the whole dot-com bust happened in 2000. Yeah, I remember it as a bookstore. That's kind of like my earliest memories of being able to sell old college books. And it was very different than what it is now. Yes, yes. But...

You know, we went through years and years where Amazon was up and then it went down, never made profits. I mean, that was the story of Amazon. All the writers said, well, they've never made a profit. They can't make profit.

Amazon was a story of cash flow. Amazon's profits kept down, sometimes continued making losses, but its cash flow just kept rising and rising and rising. Because basically, they paid their suppliers in 60 days and 90 days, but they got cash up front when they actually sold the product. And so the higher their sales went, the greater their cash flow came in.

with or without profits. And that cash flow just, it just supplied that management with so much money, so much cash to invest. And they kept investing it and investing it in better and better businesses. And out of all of that came AWS. So that was the story on Amazon. If you understood that story, you could live through all the rest. And the story on Tesla is the same. They are just, it's not one business, it's multiple businesses.

They have a very strong theme through those businesses, and the theme includes AI and includes manufacturing skills and capabilities, and it includes an attitude of constant improvement. You take all of that and put it together. Yeah, there are a lot of negative things there.

Their service department is not that great. Customer service is not that great. And they have some problems with the vehicles.

All of that you have to take into account and you have to weigh these things very carefully. And some of it is instinct and some of it is you can put down on paper. I don't know if that answers your question. No, it does. It does. I think, though, and you were saying you separate out Elon from the company. So you're kind of not necessarily willing to excuse Elon, but at the same time, you're like, he is only a person.

Whereas he started these companies and so you can't expect, just because he acts a certain way, to reflect his companies completely. He's not. Right. You know, if you think about some of the great companies that entrepreneurs created, you can think about Ford. Ford, you know, Ford himself was not a very nice person. He was an anti-Semite, a

He was actually quite a fan of Hitler's. He was really quite a terrible person. But would you have invested in Ford in those early years? It was a spectacular investment. Spectacular investment.

You have to separate, you know, the two. But I will tell you, as far as Tesla is concerned, you know, did you, were you at Investor Day? I was not at Investor Day. So, but I mean, I watch everything. You watch it, right. Did you see those 20 people? And did you measure the quality of those 20 managers, senior people that run Tesla? I mean, each one of them, I would...

I teeth the higher people of that caliber. Outstanding people. And they're not people that Elon just can walk over. They're very strong individuals. So Elon has got an ability to hire extremely well.

He doesn't have the ability to keep people for a long time, but those people who do stay with him for a long time are extraordinary. One of my questions for you was Rivian this week. I was just actually out there for the R3 reveal, which ended up being the R2, R2X as well. So they are coming out with everything all at once, sort of. Do you think that Tesla should have done that as well? This next-gen vehicle...

come out sooner? Do you think that they should have done that with, we'll call it the Model 2 for now? Yeah. Well, yeah, I think the Model 2, if you want to call it that, for sure, it's two years too late. There's no doubt in my mind, but you have to imagine, you have to put yourself back two years. And if you wanted the Model 2 to come out, say last year, they would have had to start engineering that three years before that. Well,

Last year, you know, 2023, three years before this, 2020. I don't know if you recall. So that really did impact Tesla very, very seriously. One of the things about Elon that is remarkable is how cautious he is with money. He's extraordinarily cautious with cash. Extraordinarily cautious.

Before he invests money, he weighs it very carefully. And that's the scars of what he went through in 2008, you know, when the great global financial crisis hit. So when you're in the middle of the pandemic and you are trying to keep your factories, your two major factories open, and you are, you know, struggling with,

All of China closing down. The politicians in California really trying to close him down. You're not going to start a multi-billion dollar investment in a whole new model. You're just not. And so...

I think that was the primary problem behind the lateness of the Model 2. But it is late. That's the answer you use. And then at the same time, we're seeing companies globally like BYD that are out there being able to make these lower cost vehicles and get them out to the world. Not the U.S., but the world faster than Tesla is. So it's kind of interesting. What are your thoughts on BYD?

So in order to understand BYD, you have to understand China. And in order to understand China, you pretty much have to be Chinese. It's very difficult to compare any company to a Chinese company that is anointed by the Chinese government as their champion. Because in China, you know, the state...

implements its policies through state-owned enterprises and their champions. And their champions change from time to time. So some of the high-tech champions of, you know, 10 years ago were suddenly no longer champions. BYD is a phenomenal company, but it's not very profitable. Their gross margins may be not too bad, but their net margins are very, very low.

They have a huge overhead, huge overhead. And I'm not entirely sure why. I don't understand it. You know, whether BYD is going to be successful internationally is that, that...

train has not yet left the station. They're not doing great in Europe right now. They've done very, very well in Israel. Is Europe going to allow BYD to become another Japan? I don't think so. And it's certainly not going to happen in the US. So are there other, one of my questions for you is, are there other car companies or other companies out there that you think that people should take a look at? Car companies are great things not to invest in.

So what are you looking at nowadays? Who are you eyeing? Is there another Tesla that's up and coming? No, I would be very loathe to invest in another auto manufacturer. Very, very loathe. I think it's a tough, tough business. Not many auto manufacturers survive. New ones survive. Most go out of business. Most new companies go out of business except for national champions.

because that's the size of business. And in the United States, we have national champions. I mean, the United States government has revived, you know, General Motors. Now, robotics, humanoid robotics, that I'm very interested in. Unfortunately, there are not many public companies that are in the humanoid robotics business. There's Tesla. All the rest are startups. And the problem about startups is most of them die. And very often they die not because they're

not successful, they die because it's incredibly difficult to scale at the rate at which you have to scale when these businesses start up. So, you know, you don't get a million Googles, you don't get a million Amazons. And so you're not going to get a million, you know, successful humanoid robotic companies, but there'll be many, many, many startups that are humanoid robotics. I like a company called Aptronic.

They're a private company out of Austin. They're in that whole Austin melange and some ex-Tesla people there and some of their people have gone to Tesla. That's a pretty exciting little company. It's almost impossible to pick a winner here. I mean, I know Tesla is going to be a winner because they really do have the potential.

They have all that it takes to be successful. So are you still right now buying Tesla, even with it down so low? I'm particularly buying Tesla now. So I've been a buyer for the last year and I continue. But I'm accumulating on a very strategic basis. I will be buying. Right now I'm busy buying. And this is not advice. Not advice, but I'm super curious on...

like what your strategies are. Look, it's very difficult to give advice, not because I'm scared of saying what I like. The problem is that people don't have the courage of my conviction. So it's easy for me to say I'm buying Tesla now, but Tesla could drop another 20%. Yeah. And so people who count, you asked me, you know, am I losing money on Tesla? You asked me, yeah,

People who buy Tesla at today's price, whatever it is, and the stock goes down by $20, they think that they've just had bad advice because they're, quote, losing X number of dollars. They don't understand that I'm not buying Tesla for next month's profit or next year's profit. I'm buying Tesla for my kids and my grandkids.

I'm going to go a little bit controversial here. Okay. We are going into presidential year here, lots going on. Do you think there's certain candidates that would be better for Tesla? Our current president has been not very supportive of Tesla. That would be as nicely as I could put it. I'm not sure that...

And it's now clear that now Trump has already won the nomination. It's unclear to me that he's going to be any friendlier. He seems to have a competitive nature and he seems to feel that somehow Elon is competing. And he does because Trump has got an investment in a social media company that competes against X.

So, yeah, none of the above. I think both of these candidates for president are not going to be friendly towards Ted. So that was how I was feeling. Personally, I'm like, I don't really like anybody. What do you do with that situation? Do you still vote? This is going to be an election that I am going to have to stand. I just, I'm not going to vote. I do feel...

that President Biden should retire. Look, I'm younger than he is, and I retired. My son took over the management of my previous company, which I'd already sold but was remaining in the company. And I wasn't leading the company. I was in a kind of... But you are so with it. You definitely could, I feel like.

You know, you may think so, but I know, I know for certain that I don't have anything like the judgment and skills that I had 10 years ago when I felt quite comfortable running a company like that. Okay. Okay. All right. So I kind of want to move over to talking a little bit about X or the platform formerly known as Twitter. Okay.

On there, there's some people saying that the environment has become a little bit toxic towards Tesla because so many fans are investors in Tesla that any criticism towards Tesla is very biased. How do you feel about that?

I think everybody should say what they feel. Opposed to Tesla, let them say it. If they're supportive of Tesla, let them say it. You know, people call it a toxic environment. I think it's a very exciting environment. I think people can say and do say what they wish. This whole idea that, you know, somebody's got to control everything.

What can be said or what? I mean, I am 100% with Elon in this regard. I regard it as old school. I mean, I remember when Nazis were marching in Skokie, Illinois. I mean, I'm talking about 40 years ago.

And American Defense League said we will stand by their right to do that. We hate them, but they must have freedom of speech. A lot of people hate Tesla because they hate Elon because of their social values are different from his. That's a crazy measure. If your social values are different from the manager of the company you buy from,

Why should you worry about it? I mean, who examines the politics of the companies that they buy their goods from? Mm-hmm.

It's crazy. Well, some do. But on that note, to kind of play the devil's advocate, we're seeing Elon had an interview with Don Lemon. I'm not sure if you were paying attention to what's going on recently because I know you were at the rocket launch last week. And then they canceled the interview. He wasn't very happy with some of the questions that Don Lemon was asking. So at the same time, X is supposed to be all about freedom of speech, everyone putting it out there. But then he goes and

cancels the interview that was supposed to be on X with Don Lemon. Do you think that at times it's a little bit hypocritical? Yeah, I think that, you know, every everybody is hypocritical because it's a lot easier to say than do.

So I don't know anything about the Don Lemon. I don't even know who Don Lemon is, to be honest. He interviewed Elon. He asked a lot of controversial questions about some of...

Elon's most controversial moments. He talked about, you know, the whole, is Elon an anti-Semite? And I think he brought all that stuff up again. Elon didn't want to discuss it, refused to talk about it. And so Don Lemon now is going to air the interview on YouTube as opposed to X, where it was initially planned because Elon is not too happy with him. Yeah.

For those of you watching, if you don't know, now you do. Sometimes I do disagree with certain things Elon does as well. And I wish that he would just go ahead and say, you know what? I made a mistake. Let's move on. You know, I don't think that he is an anti-Semite. I think that he just...

got caught up and wasn't well researched. Do you have any thoughts on that? Yeah, I mean, Elon is not anti-Semite. That I'm pretty damn certain. But on the other hand, yes, he does find it very difficult to say, oh, I was wrong, made a mistake. It's a very difficult thing to do. Very difficult thing to do because...

He is a public persona and, you know, he tries to protect that. He's definitely no anti-Semite, though, that I'm pretty certain of. Look, I don't agree with everything he says. I have very strong disagreements with him on several issues.

But I have very strong disagreements with, you know, people in my family. It's very important to me, his philosophy relating to product, his philosophy relating to his financial responsibilities, the way he chooses people, his management, his choice of management, which I think is one of his strongest and least talked about abilities.

And finally, of course, his approach to first principles thinking, which is quite unique. So those are the things I support.

Some of these political views I do support. Some of these political views I very strongly disagree with. Kind of talking about vehicles right now, obviously Tesla's been a huge disruptor in that space. We're seeing a lot of the OEMs kind of pull back with their electrification right now.

Is that because Tesla did so well, because the Model Y was so successful? The cars that are failing to sell on the market are really poor vehicles. The lesson of Tesla is you cannot go on doing the things that you used to do with these gas vehicles and compete with Tesla. But that's what they're doing now. They're basically like going back into that as opposed to trying to push forward.

Well, some of them are pushing forward. So I think Hyundai, Kia are really doing outstanding work. You know, you spoke about BYD. I mean, all Chinese manufacturers are all in. So they're not going backwards. Who are going backwards are the traditional automakers in the US and Europe. Yeah.

And they're going backwards because they never went forward in the first place. They tried to do it on the cheap. They tried to do it, you know, without going back to first principles thinking. They just didn't compete. All right. So who's going bankrupt and who's moving forward? Well, you know, I think that the U.S. manufacturers are having a hard time. I think Ford will succeed. And I think Ford's success will simply be because it's family-owned cars.

Family controlled, I should say. I think General Motors is toast. I think Chrysler. Chrysler right now, very profitable for a traditional auto company, but I think their philosophy... And then BMW and Daimler are... I think they're on the knife edge, but Volkswagen is toast. I mean, Volkswagen needs to honestly...

If they were not government-controlled or government-owned or government-minority-owned, they would be out of business already. And why they keep going, I don't understand. I just don't understand. And we're seeing a lot of companies to kind of partner up. I think there was news this week that Honda and Nissan might come together. I think Nissan's even talked about, I think it was buying Lucid.

we're going to see a lot of changes coming up. Do you see that as like the future? I see it like fish out of water. I see it just flapping around like in the shallows, you know, as the water recedes, they're fish out of water. I mean, Toyota, I can't even express the disappointment I have in that company. It's just amazing.

Look, the problem is that Tesla really, really revolutionized the situation. You know, this is classic. And they've so revolutionized it that these other companies have to either...

re-innovate or innovate beyond them or die. It's just one. And BYD is doing an outstanding job in doing that. I mean, they really are. Who else? Well, I've talked about Hyundai Kia because their models are really terrific. They've done an incredible job. But, you know, who knows? You know, I've talked about that before because growing up, it was like Honda and Toyota were like the leaders of being able to make these affordable vehicles. Yeah.

And it's flipping now. And I remember when Hyundai first came out, I was like, what are they? Are they a knockoff Honda? Who is this company? And now I would rather buy a Hyundai than a Honda. And I grew up when American cars were absolutely the top of the line. I mean, my father bought a 1949 Ford. We were so proud of that car. It was like a miracle. You know, it was the post-war. It was the first great post-war car. It was...

amazing american cars were like dominant and then we watched i remember my wife bought a toyota corolla that was the first toyota i'd ever seen and you know it just i watched these waves there was the you know the japanese cars and then the korean cars and now we're seeing the chinese cars but what we're seeing now is completely different and

Everybody's down on FSD and, you know, FSD this and FSD that. Let me tell you, FSD is going to take over the world. I mean, I've just driven from South Texas, from Boca Chica. I don't think I spent five minutes controlling my car. That's amazing. The car drove itself all the way. And at my age, to take these road trips, I've been on five road trips. I was impressed that you drove all the way to Texas and you're driving back. I was very impressed.

You know, driving is no longer a chore. Yeah, but you were by yourself too. Yeah. That's a long road trip for anyone. Yeah, some of these road trips my wife's accompanied me. At least she flies out to California and then drives back some of the way with me. Okay. Yeah.

But I wanted to thank you for coming on here today, answering all these tough questions. And I'm curious your guys' thoughts on some of them. Let us know in the comments below and thank you guys so much for watching. And if you have questions for me or for Larry, put them in the comments down below. We'll try to get on there and answer those questions for you guys. And thanks for watching.