Selling the dream

Let’s compare a couple of companies:

Company A made and sold about 1.3 million cars and 5.3 million motorcycles last quarter.?Company B?made and sold about 83,000 cars last quarter.

Company A has?$US 18 billion in cash in the bank.??Company B has $US 10 billion of debt.

Company A earned?over $US 9 billion last year.?Company B lost $2 billion last year.

Company A looks like a pretty good bet. Company B does not appear to?be a wise investment.

Here is the latest share price of company A, Honda:


Here is the latest share price of company B, Tesla:

Pretty close to a factor of 10 times more expensive.

Chicago-based hedge fund manager John Thompson of Vilas Capital Management has this to say: Quote.

. . . and people are STILL willing to pay more money for shares of a business that LOSES money and has little chance of survival? a company that produces fewer cars, is losing executives in droves, and is run by someone who is most politely described as erratic? rather than a stable, steady, profitable, well-managed business like Honda.

[Tesla] shares have been driven to ludicrous levels by management [Tweets] designed to create excitement and hope that the planet will survive for our descendants because of the company?s activities.

Living up to these massive expectations is really, really hard to do. When management teams realize that it is impossible, they start acting weird by pushing boundaries and stretching the truth. Seems to describe the current situation pretty well. E

nd of quote.

Because the “ethical” investors out there believe that EVs are going to save the planet, shares in a company that any sane person would see to be a failure are worth 9.5 times those of a successful company.

The world has gone mad.

Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.