Our Biggest Gainers & Losers of the Day in the $100,000 Build Portfolio

For the 30th August 2024:

Tesla’s back in the spotlight as my biggest gainer today. They’ve been selling off since July, dropping as much as 30% since then but up just shy of 4% today.

Does this mean the come back is on? Why have they been on a slump & is this just a bull trap?

Let me start with a positive.

Tesla just got a thumbs-up from William Blair (an investment bank, not a person) who’ve officially stamped Tesla with a “Buy” rating. And it’s not just the fact they’ve given them a buy rating, it’s what they had to say about it too.

Tesla could be the new Apple

So what do they mean by that?

Think about Apple for a second. It’s not just about iPhones, right? There’s a whole ecosystem. MacBooks, Apple Watches, AirPods, iCloud. I could go on.

The key part is they all work together seamlessly. It creates a sticky environment that keeps people coming back & quite frankly, difficult to leave.

Now, imagine Tesla doing something similar with electric cars, home energy solutions, robotaxis, & AI-driven tech. And that’s what the analyst at William Blair is getting at. Tesla isn’t just about cars in the same way Apple isn’t just about phones.

This is where it gets tough to value because there’s lots of if, buts & maybes. If they can pull the whole ecosystem thing off, buying now is a no-brainer. But can they? Maybe. Are we getting signs that now is the time to buy? Meh.

1/ Earnings Miss: Tesla’s Q2 2024 earnings report, released in July wasn’t great. Revenue was up but it missed analysts expectations. Earnings per share also came in short. The report highlighted that price cuts (needed to stay competitive) hurt margins, & vehicle deliveries, particularly in Europe, were lower than expected.

2/ Growing Pains in Europe and China: Tesla’s facing tough competition in Europe and China—two super important markets. In Europe, BMW beat out Tesla in EV deliveries, & the locals in China are giving Tesla a run for their money. (On a side note, a few Chinese EV companies are seeing insane growth & might be worth buying. I’ve written about one of them here). The competition has forced Tesla to lower prices, which is great for me & you as consumers. Not so great if you’re an investor worried about the company’s bottom line.

3/ Leadership Churn: There’s been some churn at the top. Key executives like the Vice President of Finance, have left the company which raises eyebrows on leadership stability. It’s tough to execute grand plans if there’s always new faces.

That all sounds less than ideal. If that’s all going on how have Tesla managed to maintain “buy” ratings with analysts & see price target upgrades? Well, there’s a few reasons why this slump could turn out to be a discount sale.

1/ Visionary Leadership: I’ve said it before & I’ll say it again. You can’t count out Elon Musk. Even if there’s some turbulence at the top, as long as we have this man, I’m happy to park some of my cash with him. Electric cars, AI, space exploration, Musk always seems to find a way to win.

2/ Market Expansion: Yes, delivery numbers weren’t great last quarter. But Tesla is looking to speed up the release of more affordable EVs. The theory is it’ll open up a whole new customer base, driving more revenue and, ultimately, higher stock prices. More cars on the road = more brand exposure = more charging station usage = more sales across Tesla’s ecosystem. You see where this is going?

3/ Ecosystem Play: And we’ve come full circle. Just like how people who buy an iPhone end up buying a MacBook, AirPods, etc. Tesla’s products could start to reinforce each other. You buy a Tesla car, then maybe you get the Tesla Solar Roof, & before you know it, your entire home runs on Tesla tech. That kind of moat would make Tesla a 1 of 1 & that’s how you end up with an insane market cap, just like Apple….

Where do I stand with it all?

My average buy price on Tesla is quite high. I’d like it to be a lot closer to $200 so I’m happy to buy in to average down. The stock price drop has taken Tesla from my 10th largest holding to around 15th. I’d like to keep it somewhere closer to 10th because of the upside potential.

Technically, Tesla tends to find a support between $175 - $200 which we’ve just broken above. It also usually sees some resistance around $275 - $300. Analysts have also been upping their price targets to $300 which is about a 40% upside from where we are right now.

What about you….

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My biggest loser today is a company that does a little bit of everything.

It’d be quicker to tell you the industries they’re not in but so you’re in the know, they’re an Indian company that cover * deep breath in * energy, petrochemicals, natural gas, retail, entertainment, telecomms, textile, mass media…

So how does something so diversified take a near 3% hit in a single day?

They’ve been making big deals, is the answer.

Reliance bought out Paramount Global’s stake in Viacom18. They’re also getting into bed with Disney by merging Disney’s India operations with their own. These deals are HUGE (like, potentially game-changing huge).

But huge deals need huge amounts of cash. The Disney merger is valued at $8.5 billion. The Viacom18 stake purchase, somewhere around $1.4billion.

For context, Relaicne did around $118 billion in revenue last year.

When big companies spend big bucks, it can sometimes rattle investors worried it might not pay off.

On top of that, the broader market hasn’t been super friendly lately. Crude oil prices dipped a bit, which isn’t great news for a company that runs one of the world’s largest refineries.

And being so diversified is a double edged sword. Yes, you’’ll have areas that’ll excel but you’ll inevitably have areas that feel the pinch as the economy slows down.

In a sentence, the stock’s down because people are a little worried. The company is doing a lot all at once. It could lead to big pay off down the road but it also introduces some risks. And when there’s risk, some investors decide to take a little off the table to protect themselves.

Do I plan on protecting myself from the added perceived risk?

Reliance makes up a very small part of my portfolio, just over 0.5%. The sell off today, if you want to call it that, doesn’t make me feel the need to either add more to my position or cut it from my portfolio.

So on that, I’m happy to continue to hold a giant company with it’s fingers in lots of pies!

That’s all! See you same time tomorrow 👋

P.S Hit reply & let me know what you thought of today’s newsletter. All feedback is welcomed ❤️