Tesla's unusual request... Our favorite whipping boy is getting desperate... A can't-miss episode of Stansberry Investor Hour... Last call for Dave Lashmet's next 'double in
Is electric-car maker Tesla (TSLA) growing desperate?
That certainly appears to be the case following news that the company recently made an unusual "request" to its suppliers. As the Wall Street Journal reported on Sunday...
The Silicon Valley electric-car company said it is asking its suppliers for cash back to help it become profitable, according to a memo reviewed by the Wall Street Journal that was sent to a supplier last week. Tesla requested the supplier return what it calls a meaningful amount of money of its payments since 2016, according to the memo.
The auto maker's memo, sent by a global supply manager, described the request as essential to Tesla's continued operation and characterized it as an investment in the car company to continue the long-term growth between both players...
Tesla declined to comment on the specific memo. But it confirmed it is seeking price reductions from suppliers for projects, some of which date back to 2016, and some of which haven't been completed.
Tesla called the move 'a standard part of procurement negotiations to improve its competitive advantage'...
But the Journal noted that the request was anything but "standard." While automakers will sometimes attempt to renegotiate current contracts, it's virtually unheard of for a company to request a refund of previous work.
The real reason likely has far more to do with the company's dwindling cash reserves.
As regular Digest readers know, the company has been hemorrhaging cash at an astonishing rate of nearly $1 billion per quarter. Meanwhile, as of the end of the first quarter, Tesla had just $2.7 billion in cash on hand. At that rate, the company was on pace to run out of money before year-end. Today's news suggests the situation has not improved since then.
We suspect this request may be less successful than hoped...
After all, as Bloomberg columnist Matt Levine pointed out this morning, helping a $50 billion company run by an eccentric billionaire become profitable probably isn't a top priority for most auto-parts suppliers.
However, even if Tesla does win some concessions from suppliers, it won't make a material difference to the company's serious
Despite CEO Elon Musk's repeated promises to the contrary, it's likely just a matter of time before the company is forced to borrow more money or issue additional stock to "keep the lights on" awhile longer.
But Tesla's problems don't end there...
You see, even if the company is somehow able to survive long enough to ramp up production of its mass-market Model 3 sedan, today's investors are likely to be disappointed.
The reality is the auto industry is a highly competitive, low-margin business... And the more "successful" Tesla becomes at making cars, the more obvious this will become. As Porter explained on our Stansberry Investor Hour podcast earlier this month...
What happens when that reality sets in... when Tesla is all of the sudden manufacturing 5,000 cars a day, 10,000 cars a day, like a real car manufacturer... but they're still not making any money, because there's no profit margin in the global automobile business?
When the reality of that dawns on the market – that even at scale, Tesla is a lousy business – that is when the stock will sell off, and that is when it'll start being valued as an auto manufacturer and not as a pipe dream.
In other words, Tesla finds itself in a something of a catch-22... Its only hope of survival is to become a legitimate automaker, and soon. Yet if it becomes a real automaker, shares are certain to plunge as the market's lofty expectations come back down to Earth.
Speaking of Stansberry Investor Hour...
Since we relaunched our weekly radio show last year, Porter and co-host Buck Sexton have spoken with an incredible list of guests, including Wikileaks founder Julian Assange... legendary investor Jim Rogers... financial-media giant Steve Forbes... and renowned newsletter publishers Jim Grant, Richard Maybury, and Dennis Gartman, to name a few.
But last week's episode may have been their best yet. (In fact, Porter tells us he ranks it second only to his conversation with Rogers as his personal favorite to date.)
It featured Roddy Boyd, the founder
Boyd has exposed some of the biggest abuses on Wall Street since 2012, and has been credited by New York Magazine for exposing "perhaps the worst Ponzi scheme ever." Most recently, he was among the few analysts to warn of trouble at Valeant Pharmaceuticals... before the company's stock crashed more than 90%. And he's done it all on a "shoestring" budget, with no sponsors and no paying subscribers.
Today, Boyd has a new warning... and he joined the show for a frank and explosive conversation about the company he believes could be the "next Valeant."
If you missed it, we urge you to catch up now. Listen to episode 60 of Stansberry Investor Hour for free right here.
One last thing...
Last week, we noted that our colleague Dave Lashmet – editor of Stansberry Venture Technology – says he's found what he believes will be his next triple-digit winner.
This tiny biotech firm is set to announce trial data for an experimental new treatment for the No. 1 cause of death in the U.S. today. If Dave is correct, the news could cause this stock to double or better, practically overnight.
Given that nearly one out of every three stocks Dave has recommended in Stansberry Venture Technology has soared by 100% or more, we wouldn't bet against him.
But Dave is so sure of this opportunity, he's even willing to guarantee it: If this tiny stock doesn't double (or more) in the next 18 months, he'll give you full credit for every single penny of your subscription cost.
Click here for the details on this time-sensitive opportunity. But please note, this special offer is only available until midnight Eastern time tonight.
New 52-week highs (as of 7/20/18): Fidelity Select Medical Tech and Devices Fund (FSMEX), Microsoft (MSFT), and VF Corporation (VFC).
In today's Digest, several subscribers share their personal investment journeys. We'd love to hear from you, too. Send your story to feedback@stansberryresearch.com.
"Our story: My husband and I worked for 30+ years at the telephone company and we each saved the max into a 401k plan. We retired with $1.7M in stocks, mostly in our company. We hired a person to manage our money and to make a long story short, the company stock lost 75% in value and this guy did nothing. We were devastated and we both went back to work.
"I learned about Florida real estate, and we changed to a self-directed IRA, hired a builder and built duplexes to double our money. We then hired another company to manage our money, this time Fisher Investments, which we thought could do better. Unfortunately, we lost 20% right away and became really disillusioned. I then took classes in trading and investing and did pretty well on my own trading. However, I knew I needed more experience or I could make serious errors. We couldn't lose that kind of money again since were older by this time, and still working.
"My uncle is an Alliance member, and so with his
"Hi Porter, you asked your subscribers to report on their experience with capital efficient stocks. Back in 2012, I bought Intel and Microsoft for my son's IRA account and reinvested the dividends. Today his Intel is up 136.28% and the Microsoft is up 246.52%. The current annual dividends from Intel are paying 6.6% on his original investment. The current annual dividends from Microsoft are paying 6.8%. We recently added Disney to the account. You taught this horse to drink a little bit." – Paid-up subscriber Tom D.
"Porter, I started investing in the market back in 1983 at the age of 31. I started slowly with the 'Templeton Growth Fund' and held several more mutual funds before graduating to investing in stocks starting in 1993 with [the] following investments:
"10/20/1993 – 400 sh of Apple at $28.50/share, still have 5000 shares today! Sold 800 shares before the 7 to 1 split to buy my home in Florida in 2012!!
10/20/1993 – 138 sh of Bristol Myers Squibb at $55.50/share have 584 shares today, have always reinvested the dividends!!
10/20/1993 – 200 sh of Wal-Mart at $26.75/share have 567 shares today, have always reinvested the dividends!!
04/04/1994 – 337 sh of Merck at $30.00/share have 2,107 shares today, have always reinvested the dividends!!
01/04/1999 – 350 sh of Disney at $30.625/share have 435 shares today, have always reinvested the dividends!!
05/30/2000 – 103 sh of Microsoft at $63.00/share have 206 shares today.
"As you can see I consider myself a TRUE buy & hold type of investor. I have always taken the dividends from my stock in Apple & Microsoft use it to supplement my Social Security. I retired in 2007 at age 55 and have enjoyed every minute of retirement, especially after getting an excellent deal on my FL home! Did it before Steve even told me to as I wasn't a subscriber to Stansberry Research yet. Today I subscribe to several of Stansberry's publications and have dabbled in some of the stocks recommended, but I am pretty sure I will never hit an APPLE type of investment again! But
Porter comment: Bravo! What a great story!
"Hi, Porter, I first subscribed to your newsletter when it was Pirate Investor. Then I signed on for True Wealth.
"Over the years, I also subscribed to other letters – John Dessauer, a Canadian letter focused on high yield REITs, Mark Skousen, Oxford Club, Martin Weiss, Utility Forecaster, the Palm Beach Letter – maybe a couple of others. All of them have fallen by the wayside as I have gravitated toward Stansberry's publications.
"Frankly, if it hadn't have been for you there are several things I would never have accomplished. I would never have understood capital efficiency. One of my biggest investing regrets is that I didn't 'get it' the first time you recommended Hershey. I recently corrected that and also bought Disney. I wouldn't understand that (some) insurance is the greatest business in the world. I would never have bought a bond, but some of the largest percentage gains I've had have come from distressed bonds in [Stansberry's Credit Opportunities]. Understanding these three things alone is probably worth whatever I've paid you over the years.
"So what has helped me, other than your work and that of your colleagues? Well, TradeStops. I realized the value of trailing stops based on reading True Wealth, and TradeStops seemed a reasonable way to manage stops without having to do a lot of work myself. In addition, TradeStops has been a big help in
"Outside of the Agora family and Stansberry in particular, the thing that has most influenced me has been my recent reading of Nassim Taleb's book, Antifragile. I had no idea that he would mention Fannie and Freddie, but what he has to say about them is completely consistent with your work while putting a risk management spin on it. What really caught my attention, however, is that Taleb's notion of asymmetric bets is the theoretical model for what Steve has been doing for decades with his 'cheap, hated, and in an uptrend' approach. Steve looks at the macro picture and makes asymmetric bets where the downside has pretty much already happened, and the upside is huge. I'm convinced now that this is why he's so hard to beat over the long term. The practical utility of Steve's approach is undeniable. But the additional insight that Taleb's book layered onto it has given me confidence that I can recognize these situations for what they are – asymmetric bets that leverage the upside while protecting against catastrophic loss.
"So what are my high conviction asymmetric bets right now? China A-shares. Cannabis, as it goes from
"I had a terrific math teacher in high school. I'm not particularly talented in math, but I wanted to be in his advanced class my senior year. He took a chance on me. Everything I ever understood about math is due to that man. In one way or another, everything I understand about investing leads back to you. In the end, I think I value the learning as much as the money. I know that there are thousands of people in your subscriber base that feel the way I do.
"Someone once asked Ross Perot how he became a billionaire. He replied: 'I helped a thousand people become millionaires.' Thanks for all you do." – Paid-up Stansberry Alliance member Joe B.
Porter comment: Wow! What a wonderful letter. Thank you so much.
Regards,
Justin Brill
Baltimore, Maryland
July 23, 2018