Let’s start with a little quiz. There are two companies. Last year Company A had $166 billion in sales and over $9 billion in profit. Meanwhile Company B had $7 billion in sales and lost $675 million. So which company is worth more? As of yesterday the answer was company B.
The companies are General Motors and Tesla. Both are in the auto business. Both make cars that run on hydrocarbons (you may not see the coal burning power plant when you charge up a Tesla but that is where the electricity comes from). A majority of households can buy a GM car while very few can afford a Tesla. I’m not knocking Tesla. It’s an innovative company that will likely do very well. However, it is worth a tiny fraction of GM. News reports hail this as a new age in the auto industry. That is ridiculous. Unless the government hobbles GM, it will outsell Tesla for a long, long time. Ridiculous valuations are nothing new. Four hundred years ago, people paid a fortune for a few tulip bulbs. When making an investment, focus on the near future. The pie in the shy is too costly.
0 Comments
Leave a Reply. |
Archives
January 2020
Categories |