Gary Black: Taking Profits on Tesla's 150% Surge

Gary Black, managing partner of The Future Fund, recently defended his decision to trim Tesla's position at $351, following a 150% surge since April. His rationale, "no one ever went broke by taking profits," highlights a disciplined approach to investment management, focusing on risk management and long-term growth.

Tesla's stock price has been volatile since its 2010 IPO, with a 65% decline in 2022. However, it has since rebounded, with an average annual return of 49.76% in 2021 and a 101.72% increase in 2023. The Future Fund's average purchase price of $162 and average selling price of $252 demonstrate a strategic focus on buying low and selling high, a core investment value of the author.

Earnings estimates and gross margins are crucial indicators of Tesla's valuation and stock price. Analysts are starting to increase Tesla's EPS estimates, which should positively impact its valuation and stock price. This trend aligns with the author's optimism about under-owned sectors like energy stocks and strategic acquisitions for organic growth.

Tesla's market share, competition, and innovation are key factors in its long-term investment potential. With a 70% market share in battery-powered electric car sales in the US and innovative products like the Cybertruck and compact EV under $30k, Tesla is well-positioned for growth. Despite competition, Tesla's enduring market dominance and growth potential make it an attractive long-term investment.

Tesla's valuation metrics, such as P/E ratio, EV/EBITDA, and Price-to-Book, indicate a high-growth company with a premium valuation. Its P/E ratio of 95.5 reflects high growth expectations, while EV/EBITDA of 13.4 and Price-to-Book of 14.6 suggest that Tesla is relatively expensive compared to its peers. However, its strong brand and market position justify its premium valuation.

In conclusion, Gary Black's decision to take profits on Tesla's 150% surge demonstrates a disciplined, risk-managed approach to investment. Tesla's earnings estimates, gross margins, market share, competition, and innovation are critical factors in its long-term investment potential. Despite high volatility and a premium valuation, Tesla's enduring market dominance and growth potential make it an attractive investment for long-term investors.