What you missed earlier; Tesla's earnings report; My friend Anton Wahlman's take on Tesla's problems; Summary of all of Warren Buffett's public writings; Profile of Berkshire Hathaway's Greg Abel; Podcast interview with Berkshire's Ted Weschler; Funny Buffett story
1) Earlier today, I made a big prediction during a special broadcast...
Regular readers know I appeared on 60 Minutes twice, where I accurately called the 2008 housing collapse and the subsequent market rally.
I also predicted the 2017 bitcoin collapse to the day... called the top of cannabis stocks to the hour on Yahoo Finance in 2018... the bottom of Netflix (NFLX) to the day on CNBC before the stock went on to rise 90-fold...
And on March 23, 2020, I called the bottom of the COVID-19 crash to the day – saying I was "trembling with greed" and that it was "the best time to be an investor in more than a decade."
But my newest prediction in today's special broadcast is just as important – that there's a completely new way of investing for 2024.
We're airing the broadcast with all the details right here.
2) Moving on, I'll shift gears to focus on two of the most fascinating companies – and people – in the world: Tesla (TSLA)/Elon Musk and Berkshire Hathaway (BRK-B)/Warren Buffett...
As Tesla soared 102% in 2023, it inflicted more pain on short sellers last year than any other stock, according to S3 Partners:
But short sellers are having the last laugh so far in 2024, as TSLA shares were down 16% year to date through yesterday and fell more than 10% earlier this morning after the company reported its quarterly update after the market's close yesterday (you can see the 32-slide presentation here).
Fourth-quarter numbers of $25.2 billion in revenues, a 17.6% gross margin, and adjusted earnings per share of $0.71 slightly missed estimates.
But the main reason the stock is down is this sentence on page 12 of the slide presentation in the "Outlook" section:
In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas.
Here's my friend Anton Wahlman's take on it: Tesla: Stranded in the desert, out of juice. Excerpt:
For starters, Tesla said that its 2024 unit sales would grow at a slower pace in 2024 than it had done in 2023 (up 38%). Well, how much slower? When a company refuses to offer a number, you know it's really bad. You should assume close to 0% as a baseline scenario, with negative growth not being off the table. My guess right now is that unit sales will be up 10% in 2024, a lousy number for a former "growth company."
Any sales growth at all, and perhaps even standing still at 1.8 million units, would depend on more price cuts. That would mean falling margins, falling earnings. Tesla is now in a place where its earnings at the end of 2024 will have been falling for around two years.
When the dust on earnings revisions [settles] in the next few short days, and then again with further revisions possible after the 10-K is filed also presumably in not that many days from now, it looks like the consensus may land at $2 per share for 2024. If Tesla were a regular automotive company, that would imply a share price closer to $10 than $20.
I will give Tesla the luxury of still being awarded a much-higher multiple to the $2 per share, however, and say that if the $2 per share holds, we may be looking at a share price of $40 to $60 at some point over the next 6-12 months.
Wahlman also noticed something that I would have missed...
This is the current liabilities section of Tesla's balance sheet in the third quarter (page 21 of this slide presentation for that quarter):
And here's the same information Tesla just reported in the fourth quarter (page 26 of the fourth-quarter presentation):
Do you notice the difference?
Tesla has removed the line for "Customer deposits," which totaled $894 million in the third quarter. Generally, companies only remove critical information like this when it's unflattering... which appears to be the case here with Tesla, as Wahlman writes in his post:
Before January 24, it appears that the Wall Street consensus was that Tesla would sell 63,000 CyberTrucks in 2024. Now it seems like that you can still get a CyberTruck in 2024 if you order now.
What does that mean? If true, it means that Tesla didn't have more than 63,000 firm "orders" for the CyberTruck, despite having talked about 1 million to 2 million "refundable deposits" at various points over the last couple of years. Basically, almost all people wanted their deposits back.
Small wonder then, that Tesla abolished the line called "customer deposits" on its balance sheet presentation. Maybe it will return when Tesla files its 10-K in the coming days.
The market for an expensive electric pickup truck is simply not all that large. As Ford learned, it's in the general order of 50,000 units sold to early fanboy enthusiasts. Better not plan for annual production above that general number.
I think Wahlman's prediction of a "share price of $40 to $60 at some point over the next 6-12 months" is much too pessimistic, but Tesla is definitely a stock to avoid right now.
3) Let's next turn to a few things related to Berkshire Hathaway, which remains – as I've said for years – "America's No. 1 Retirement Stock"...
The website Compounding Quality did a nice job of summarizing all of Buffett's public writings going back to 1956 in this 64-page PDF. Here's an excerpt of the summary posted on X:
4) Along the same lines, here's a useful tool for fellow Berkshire/Buffett junkies: a digital archive of all the shareholder letters from 1965 to 2022 that can be searched in novel and useful ways:
5) Here's a Wall Street Journal profile of Greg Abel, who will become Berkshire's CEO when Buffett steps down: The Man Preparing for a Berkshire Hathaway Without Warren Buffett. Excerpt:
Buffett, the 93-year-old chairman and CEO, unwrapped one of corporate America's longest-running mysteries in 2021 when he confirmed that Abel was his pick to succeed him in the role as CEO.
Abel, now 61, is currently in charge of all of Berkshire's noninsurance businesses, which range from building materials to chemicals, footwear, and candy. Berkshire even owns one of North America's largest railroads...
Buffett shows no inclination to step aside. But the death last month of Charlie Munger, his longtime business partner, has put a spotlight on what happens to the eighth most valuable U.S. company when the man who built and held it all together for decades – Buffett himself – is no longer there...
Buffett is Berkshire's CEO, chairman, and investment chief. When he exits, those duties will be split between several individuals, including Abel. Two other deputies, the money managers Ted Weschler and Todd Combs, are expected to run the massive investment portfolio once Buffett leaves the job.
6) Speaking of Weschler, he did a one-hour interview with the I Am Home podcast from Nebraska Furniture Mart (a Berkshire subsidiary) on April 27, 2022. You can listen to it here, and here's a transcript. The most interesting part is how Buffett approached him to work at Berkshire:
Ted Weschler: I flew out to Omaha and met [Buffett] in his office and it clicked. It really clicked.
It's kind of interesting because there are bookends to my career. My first job at W.R. Grace, I was an analyst and then I happened to have a job as the aide to the CEO there, who was a guy by the name of Peter Grace. Peter and I had a great relationship, but I viewed him more as a monarch than a CEO. He had all the trappings of being the high-and-mighty CEO of a Fortune 50 company. You had to go through six doors to get to his office. Everything was maximum intimidation and all the rest of that.
And then Warren's just like, I show up at headquarters and he bounces out in the hallway and says, "Great to meet you, Ted! Come on in. Grab a seat on the couch." And [he] immediately put me at ease. It was just great – we visited at the office for maybe 45 minutes or an hour.
There were a number of connections. He had actually met Peter Grace a couple of times, so we had some Peter Grace stories that we connected over. And then, we ended up having like a three-hour dinner at Piccolo's – and it really, really clicked.
Then, I actually bid on it the following year – and won it again for $1 more. This time, I had a little bit more time to think about questions.
Nebraska Furniture Mart: The first time, you only had a few days and you didn't expect to win. How do you plan questions for Warren Buffett?
TW: Yeah, my mind was kind of racing. But, again, he's got this wonderful way of putting you at ease. It was just conversational.
I had a lot of questions about investing, lessons learned, philanthropic dispositions, that kind of thing. [There were] a lot of natural topics that came out. I wish I would have had more time to buff and polish, but that's okay.
NFM: It still worked out. [Laughs]
TW: Yeah. But, another year later, I've got it again – and, that one, I did have a few weeks to think about. I put together a legal pad of dozens and dozens of things that I wanted to hit on. We did the same deal, we went to Piccolo's, and it was terrific. But I had probably three pages of questions.
Toward the end of the dinner, I said, "I think I've hit everything just naturally off of my checklist, but I just want to look at my notes. Do you mind? And you can ask me anything, if you want, Warren."
And, as I'm looking down at my notes, checking stuff off, he says, "I think you'd be a pretty good fit out here. Do you have any interest in working at Berkshire?"
I just absolutely panicked. This was absolutely not what I was thinking.
7) This is a funny story from Buffett's youth I had never heard before: Warren Buffett Says, 'I Took Pleasure in Tormenting My Teachers' – He Bet Against Their Retirement Stock, Risking Their Financial Security for Fun. Excerpt:
"When I was about 12 or 13, we moved to Washington, my family. I was mad, I was having fun in Omaha. And I lost all my friends, and now I moved to a town where they were all strange, so I was very, very unhappy," Buffett said. The emotional upheaval led to a loss of interest in school, and he found a way to express his discontent.
"At school, I just lost interest. I took pleasure in tormenting my teachers," he said in the documentary. "At that time, for example, AT&T was the stock that all teachers owned for their retirement. So I decided it would drive my teachers a little crazy if I were to short the stock... So I shorted 10 shares of AT&T and brought the confirmation to show the teachers that I was shorting the stock. They found me a big pain in the neck, but they did think I knew a lot about stocks."
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.