Tesla builds outstanding cars
Tesla (NASDAQ:TSLA) builds among the best cars on the planet if not the best, based on speed, handling, and safety.
Tesla's newest car the Model 3, passed the European New Car Assessment Program (NCAP) crash tests and evaluations with flying colors. It achieved a 96% in the Adult Occupant Protection category, which tests crash safety for both driver and passenger. M3 received an 86% in Child Occupant Protection. Yet another obviously named category, this one has three tests that not only gauge protection against impacts, but it evaluates how easy it is to hook up a child seat. It did especially well in the Safety Assist category, thanks to its suite of driver aids. "The Tesla Model 3 achieved one of the highest Safety Assist scores we have seen to date," said Matthew Avery, director of research at Thatcham Research, which runs the only UK-certified Euro NCAP crash-test center. - (Excerpted and paraphrased from Roadshow (CNET))
What's next for TSLA?
Now that TSLA beat its record on production @ 95K units, the next hurdle is profits. I believe TSLA will be profitable, this is because Europe and China sales will likely be the best-equipped and most profitable models first. I also believe that much of the sluggish performance in delivery last quarter was logistical and in changing assembly to accommodate foreign sales. I think those efforts also yielded efficiencies which will aid profits. Also, did you notice all the emails from Musk asking everyone to pull in expenses, like he's done in other quarters? No? That's right, there weren't any. If TSLA makes a tiny profit or is even flat it will be a great victory, since it is widely expected to lose several dollars a share for Q2. If during the earnings conference call there's news that the Shanghai factory is on track to begin assembly by the end of the year, TSLA should run above $300 and reach for old highs over the next few months. I am not sure Musk will make that claim, but I suspect there will be some update on Shanghai on the earnings call and it should ignite upward momentum. They are making unbelievable construction progress over there in a blazingly short amount of time. In any case, I am a bull on TSLA, irrespective of the current consolidation below $240. If we are lucky TSLA will fall below $220, and I would be pounding the table to buy. Right now we hold whatever shares you still have at this point.
Great Charts Say There is Plenty of Alpha
The charts of the stocks below all have jumped above the 150-Day Moving Average (the line in green). This reveals an opportunity for alpha in the turn to upward momentum. I expect the stocks below to continue to rise and regain their old highs and possibly exceed them.
Arista Networks (NYSE:ANET)
ANET, besides crossing over the 150 DMA, also has a double bottom. This is a good chart formation, not as good as a "Cup and Handle" or a "Head and Shoulders" but good.
Electronic Arts (NASDAQ:EA)
EA is doing very well with "Apex Legends" and with the 2nd release of AL, the stock has broken out of a consolidation phase of several months. It is still nicely above the 150 DMA even though it fell hard on Wednesday. I attribute this to the very strong spike on anticipation of the release, which was very vulnerable to "Sell on the news" profit-taking. I suspect that EA will resume its very strong upward momentum.
ETSY maintained its uptrend for the past 6 months. The recent turn above the 150 DMA looks to me as a reacceleration to the upside.
The black line I drew here shows that the uptrend for ETSY has stayed intact.
In a recent previous missive, I did a "back of the envelope" calculation that easily justifies GOOGL at above a trillion-dollar valuation. Here the chart shows that the momentum has turned to the upside.
GOOGL is also exhibiting a well-defined "Cup and Handle" chart formation.
We have a Director at Worthington Industries (NYSE:WOR) buying $850K of stock.
My take: WOR is a metal bender (steel) with manufacturing in the USMCA and assorted European countries. Did he know beforehand that the US would slap Vietnam with 400% tariffs on steel? Maybe. What about the poor PMI numbers we had for June, perhaps things are starting to look up? Let's keep an eye on industrial companies and what they say. My thesis is that we will see a powerful rebound in GDP in the 2nd half for the USA. Maybe we don't need any cuts right now (WE DON'T)
Craig P. Omtvedt (Director) of Conagra Brands (NYSE:CAG) spent $670K on CAG shares.
My take: I don't really have one. Prepared foods is not one of the stars of the stock market but the purchase was pretty big, so it bears watching.
Two insiders at Greif (NYSE:GEF) bought over $500K in shares. It says GEF is in consumer cyclical packaging, but reading a little deeper it looks like most of the packaging is intermediate goods for manufacturers of consumer goods. Again, this is an area of manufacturing, which means that if insider shareholders are buying in shares maybe there is more growth on the come.
I will reserve judgment and wait for other data points lest I be accused of confirmation bias. My overarching belief is that contrary to all the current negativity, we will reaccelerate in growth going into the end of the year.
I remain an interest-rate cut skeptic
It also means that I am skeptical that Powell having taken so much flack for that last raise in December (which I was very against) will be hesitant to cut. The best way to use a carrot is to dangle it just out of reach of the beast. Tantalizingly close, and always about to be gotten with a little more forward motion. Eventually, you need to reward it, but you would be a fool to give up the entire carrot quickly lest you run out of carrots. This is the horn of the dilemma Powell finds himself stuck on. If only Janet Yellen started raising, wait, if Ben Bernanke started raising just a tiny bit, and then Yellen a tiny bit more and sooner, we'd have plenty of carrots to entice the animal spirits in the next recession. I hope that Powell will say he is "cutting, and soon just not in July, Maybe September! Almost definitely, maybe, it'll be soon though." That is what he should do. Will he? Will, he let himself endanger the reputation of independence the Fed has worked so hard to achieve? I don't know for sure, and that is what makes it all the more fascinating, doesn't it?
Happy Independence Day!