I’m hiring an analyst; my Stock Idea of the Day: Thor Industries; Tesla; KIPP Casino Night
1. A final reminder that I'm looking to hire an analyst, based in Baltimore, for my new investment newsletter business, Empire Financial Research. The ideal candidate will have a passion for investing, a nose for cheap stocks and great writing skills. One of the analyst's jobs will be helping me put together daily emails like this one, which, as I hope you can tell, is lots of fun! Click here for the job description and information on how to apply.
2. I got some good feedback on yesterday's Stock Idea of the Day, Activision Blizzard (ATVI) – thank you to those who wrote in!
One of my readers thought that having a stock idea every day sounded like way too many, to which I replied: 1. I'm not committing to coming up with a new idea every day; 2. I'm only looking to come up with an actionable idea once a month at most; and 3. I'm not finding it hard to come up with at least one interesting stock each day to spend an hour or two learning more about. While it's not a particularly attractive market right now for value investors, there are plenty of good companies with long track records of value creation whose stocks have been cut in half for one reason or another – which is just the kind of situation I like to look at.
3. Today's Stock Idea of the Day is RV-maker Thor Industries (THO). My initial assumptions were that it was a commodity, fragmented, cyclical industry, but it's not. Thor is the dominant market leader with 50% market share (mostly towables, meaning they're attached to other vehicles rather than having their own motors). It's worth noting that Berkshire Hathaway-owned Forest River is No. 2 with a 35% market share.
As you can see in this chart, over the past 30 years, Thor has never even come close to losing money, even in 2009:
The industry overheated in 2017-18 and is now in the midst of a big unwind, which has resulted in Thor's stock getting cut in half. Who knows where the bottom is, but the company has plenty of cash and no debt, and the stock, which pays a 2.2% dividend, trades at 0.5x revenues, 5.7x trailing EBITDA and 11.6x trailing EPS.
4. As I've written many times before, Tesla (TSLA) is an amazing company and founder Elon Musk is an extraordinary entrepreneur, which is why I've long warned my friends not to short the stock. (To learn more, I highly recommend the book, Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future.)
But it's also a terribly risky long in my opinion, as the warning flags just keep piling up. Today's is more noteworthy than usual: the WSJ reports that Tesla's general counsel (i.e. top lawyer) is leaving after only 50 days on the job! (Also known as 5 mooches – no disrespect to my friend The Mooch – LOL!) This is not normal, to say the least...
It's of even greater concern given the insane level of senior management turnover at the company, especially in the legal and accounting areas. For example, the Chief Accounting Officer suddenly departed last September after only two mooches!
Here's an excerpt from today's WSJ article:
More than 50 senior executives have left the Palo Alto, Calif., company in the past two years, including heads of sales, engineering, human resources and communications. Last month, Tesla announced it was replacing its retiring CFO, Deepak Ahuja, with 34-year-old Zach Kirkhorn.
These are the folks who would be most likely to detect fraud and would be the most exposed – along with Musk himself, of course – should it occur on their watches.
Another possible explanation for the general counsel's departure is frustration with Musk, who rivals you-know-who in being a pathological liar and using Twitter in reckless ways – the most infamous example being his "funding secured" tweet, which got him in trouble with the SEC (though he only received a slap on the wrist).
He apparently hasn't learned anything, as just last night, he tweeted "Tesla made 0 cars in 2011, but will make around 500k in 2019." This caused the stock to spike in after-hours trading, since the company's current guidance is to only produce 400,000 cars this year.
It took Musk four hours to tweet a correction around midnight: "Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k."
A minor issue some would no doubt argue, but it shows that no adults are monitoring him, notwithstanding the promises to the SEC. If I were his lawyer, I would quit, too...
5. I hope you'll join me at the 13th annual Casino Night to benefit KIPP charter schools in NYC, hosted by Larry Robbins of Glenview Capital. It's Thursday, April 11th at Gotham Hall (Broadway and 36th Street).
I've been on KIPP's board for nearly two decades and it's an amazing organization, with 13 schools in NYC serving more than 5,000 almost entirely low-income, minority students. It's part of a national network of 224 KIPP schools nationwide.
The Casino Night is always a lot of fun, with great prizes for the final table winners of the poker tournament. Click here for further information and to register. I hope to see you there!
