Tesla Road Trip
The Stock Market
Tesla Motors (TSLA)
Some people here in the Cabot office like to joke that whenever I go on vacation, as I did recently, the market falls apart.
Under close examination however, such beliefs prove to be no more than the result of selective remembering.
In other words, while I have been on vacation recently, what's happened in the market over the past few weeks isn't my fault.
You can read my current thoughts on the market below, but first, here's my vacation report, with the stats first.
It was a road trip in my Tesla with my wife, from Salem, Massachusetts to Savannah, Georgia and back, over 12 days and covering 2,471 miles, using 803 kWh of electricity and no gasoline. The Tesla Model S is all-electric, all the time.
On a daily basis, the car is fantastic. Every night I plug it in in my garage-just as I plug in my phone. And every morning, it's fully charged.
But a long road trip takes some planning, because while electricity is available pretty much everywhere (it's more ubiquitous than gasoline stations), most electrical outlets don't deliver it quickly enough to charge a car effectively.
For example, while the 240-volt charger in my garage will take about eight hours to charge my car if the battery is very low, a standard 110-volt outlet might take about three days!
In industry-speak, the 110-volt outlet is a Level 1 charger, while the 240-volt is Level 2.
Level 2 is great for overnight charging or even getting a partial charge during lunch. More and more hotels are installing Level 2 chargers to attract guests-and on our trip, two of the hotels that provided free charging also provided free valet parking to hybrid and electric cars.
Level 2 chargers are also often found in public parking garages, Walgreens, Whole Foods and other commercial establishments that want to attract customers. And sometimes they're occupied!
Here's a photo of a note I found under my windshield in Savannah, where I was charging at the city's Visitor Center.
Since I was leaving, I texted Liam right away and he got the charger for the night.
But what you really want on an extended trip is Level 3, in our case, Tesla Superchargers.
Superchargers tend to be installed in groups (just like pumps at a gas station), and the electricity in them is distributed, so it can be variable, depending on how many other Teslas are drawing power. But there's frequently 480 volts available at over 200 amps, which can give my car an additional 150 miles of range in about 20 minutes, or 200 miles of range in about 30 minutes.
(Total rated range of the Tesla Model S is 265 miles, according to the EPA, which works out to a gasoline equivalent of 89 miles per gallon. For more exuberant drivers, like me, 220 miles is a more realistic range.)
So Superchargers are great. And they're free for all Tesla owners. Plus, they're amazingly simple to use.
When you pull up to a typical gasoline pump, you've got to go through the credit card or cash routine, and then stand there while it fills, regardless of the weather.
At a supercharger, you just pull up, plug in, and in seconds, the electrons start flowing.
And then you go find a bathroom, have a snack, maybe take a refreshing walk around the parking lot-or talk to other Tesla owners! In Delaware, we met a couple from Minnesota heading to a wedding in Virginia, and in Virginia, we met a dentist who'd had his car for just two hours! He was heading home, and didn't need a charge, but stopped in just for the experience!
There are now 200 superchargers across the globe: 66 in Europe, 20 in Asia and 114 in the U.S. and Canada.
You can see their locations here.
And the network is growing fast. By the end of next year, 98% of the U.S. population will be within reach of the Supercharger network, meaning they'll be able to drive anywhere in the U.S. in a Tesla, powered by Superchargers, for free.
Now, there are some circumstances where you might choose to pay to charge while on a trip. For me, that was Manhattan, where we stopped on both the southbound and homeward-bound legs. Because I like starting out in the morning with a full battery, I paid to charge in commercial garages in the city both times. But the total cost of electricity was less than the cost of parking!
On the trip, I drove, my wife rode, and the Tesla did most of the navigation. With Google Maps on the 17-inch touchscreen, voice-activated control and real-time traffic updates, it's a marvelous system, and a far cry from the days when my wife would struggle with a paper map.
Also, during the trip, my car had its one-year birthday. It's now traveled more than 13,000 miles, which is not bad for a car with a one-mile daily work commute.
So what did we see on the trip?
I'm going to save the details for another day, but I can say I'm planning two particular columns: one on the differences between Cary, North Carolina and Wilmington, Delaware-with a focus on the DuPont legacy, and one on the role of dueling in U.S. culture. Yes, dueling.
But if you want to read about the kind of serendipitous experience you can find on a road trip, you can read about our unplanned visit to the Savannah Theremin Summit here.
Moving on to the market today, I don't like it, and the main reason is that I see a classic top unfolding.
Classic signs include:
* Decreasing breadth of participation in the market advance
* Increased focus on a dwindling group of leaders
* Good economic news
* Improved consumer sentiment
* Decreased investor fear
Admittedly, I've been saying this for months, off and on, while at the same time I've continued to recommend attractive stocks.
The reason is summed up a three-word phrase that you should remember:
Tops Take Time
In other words, you can still make money as market tops form, because some stocks still do well. (In contrast, market bottoms are short and sharp, and as market bottoms approach, the numbers of stocks doing well is typically very, very small.)
But as tops evolve, making money gets increasingly difficult, as the smart money distributes stocks to late arrivals (dumb money).
So, sensing that we might be in such a phase, back on September 1, before I went on vacation, I wrote here about the value of contrary opinion in investing, reminding you that the best investors bought when everyone else was selling and sold when everyone else was buying.
And I wrote this:
"I do want you to think about doing what's uncomfortable, because that's a great way to invest. You don't want to join the crowd; you want to be in front of the crowd.
So today, what's the crowd been doing here in the U.S.?
The crowd's been buying, enjoying good economic news and sending market indexes to record highs.
So here's what I recommend doing.
Sell something. Take some partial profits, especially if you have a stock that's had a good run and is well regarded.
Suggestions include Apple, BitAuto, China Mobile, Chipotle Mexican Grill, Home Depot, Keurig Green Mountain, Health Net, Skechers, SkyWorks, Tesla Motors, Triquint Semiconductor, Under Armour and WhiteWave Foods.
Yes, I've recommended buying some of these stocks in the past and I expect to do so again in the future. But today, I think it's a great day to act contrary and pay yourself."
Since September 1, eight of those 13 stocks are down substantially, four (the more conservative Home Depot, Health Net, Under Armour and WhiteWave Foods) are roughly where they were then, and only one is up. That's SkyWorks, thanks to its role in supplying chips to the new Apple iPhone.
If you held SkyWorks and none of the other stocks, congratulations. You don't need me. And maybe I have a job for you. Otherwise, I hope you listened.
So what comes next?
Well, loath as I am to predict, I am happy to say that if this market continues to act like a typical top, downside momentum will slowly accelerate, until a sharp bottom provides a great short-term buying opportunity for traders.
I can't see beyond that.
But I do want to mention that the September-October season frequently brings bottoms, and I do remain long-term bullish, so when the market's health improves-ideally after a sharp shakeout-I'll be happy to jump back in.
Lastly, a few words on Tesla Motors (TSLA), which was one of the market's top glamour stocks earlier this year.
The company continues to make great progress on all fronts.
It will build its Gigafactory on a huge site east of Reno, Nevada, with major support from Panasonic and assistance from others, including the state of Nevada.
It will roll out the Model X SUV next year, probably in the second quarter.
And it will continue to make progress toward its major goal, which is to accelerate the demise of the internal combustion vehicle industry.
But it's important not to confuse the company with the stock.
The stock fell to its 50-day moving average on heavy volume a week ago, and now it needs a rest. If you're holding a good profit in the stock (and maybe you sold some a month ago when I recommended it), I think you can sit comfortably, with your eye on the long-term prize.
But if you're not on board, there's no rush. Wait for a better entry point in a more constructive market.
And if you've actually got a loss in the stock-meaning you were rather late to the party-I suggest you sell and move on. TSLA may build a bottom here, but it's also possible that it falls to its 200-day moving average, which is now down near 215. And you wouldn't like that.
Remember, the goal of investing is not to make money in any one particular stock; the goal is to identify the best opportunities, with the best risk-reward ratios, and then work on those opportunities. Today, the opportunities are rather sparse, and I believe you'll find much better risk-reward ratios when the news is worse and investors are more afraid.
And how do you identify that point?
One way is to keep reading these Cabot Wealth Advisories, but even better is to become a regular reader of Mike Cintolo's Cabot Market Letter, which for 44 years had been practicing market timing with great success.
Yours in pursuit of wisdom and wealth,
Chief Analyst, Cabot Stock of the Month
And Publisher, Cabot Wealth Advisory