Summary

Nathan on Tesla moved the stock from a buy to a neutral this week, citing that S&P 500 index exclusion could not be predicted, and would likely move the share price 10-15% one way or the other. He is positive over the next three or four months regardless of sales levels since they have the luxury of being able to scrape and pull out emission credit revenue to stay on the positive side of gap earnings.With the introduction of a new model Tesla’s operating expenses go down meaningfully, as was the case with the introduction of the Model X. It usually takes 3 or 4 quarters to get meaningful volumes of delivery on new models, and therefore during this period there is robust sales growth. Thus, Tesla’s performance in 2021 will depend a lot on how deliveries for Model Y progress, and particularly how Chinese production and delivery progresses - factors which Nathan predicts will lead to a positive profit cycle in Q1 and Q2. However, whilst Nathan believes delivery numbers are the biggest driver for Tesla at the moment, he also adds a note of caution in that the biggest risk to this volume growth thesis is that new models keep coming out, and their technology is outright replicated by China, as is often the case. In the long-term, Nathan highlighted the potential for competitors like Porsche to catch up with Tesla in terms of having an electrified fleet that could produce hundreds of thousands of cars a year, whilst conceding that this will not be the case for at least the next two to three years. When paired with Nathan’s view that Tesla’s technological advantage is often overstated in the media and in public perception, he that in the long-term, Tesla is a doomed company. Nathan first initiated buying shares in online retailer Overstock.com in March of 2019, at $20 per share, and on August 12th downgraded it to neutral, at a staggering $88! The implementation of new and much more professional management put the company in very good position when COVID hit, helping the retailer to fully capitalise on the recent growing trend of online shopping. However, even as high streets have re-opened and COVID worries have begun to fade away in many states, Overstock have still managed to retain their internet traffic, which has been a very good predictor of revenues in recent quarters. Nathan believes that, should the company maintain earnings at anywhere near the current level of a $4-6 annual pace, and should shares continue to correct, there could be another very attractive opportunity to own Overstock, whom have the potential to make themselves a major retailer.

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