Making money: what the experts think
● Electric power
Tesla shares continued to rocket this week – surging by another 14% on Tuesday alone after Panasonic revealed that its battery venture with the electric carmaker “is in the black for the first time”, said Tom Howard in The Times. What a disaster for the many hedge funds who have bet big against the company. “Tesla is the most shorted stock in the US”, and short-sellers have already lost more than $8bn from the rally in the carmaker’s shares since the turn of the year, according to data group S3 Partners. If shares (which have more than doubled in 2020 and are up 400% since last June) continue to rocket, many could face “wipe out”.
● Short cuts
Hedge funds that have targeted Tesla include Greenlight Capital, Stanphyl Capital and Kynikos Associates. Tesla founder Elon Musk has publicly clashed with many of them – notably David Einhorn, the billionaire boss of Greenlight. Last November, Musk published a letter to Einhorn offering to send him “a small gift of short shorts to help you through this difficult time”. This week, he tweeted “three burning fire emojis” – interpreted as a taunt about Tesla’s continuing buoyancy.
● Green bubble?
“Renewable energy, electric cars and the demise of fossil fuels” – markets have embraced the green revolution with such “gusto” that it’s quite possible to believe that a green bubble is inflating, said John Stepek on MoneyWeek.com. It’s certainly got all the right ingredients. “There’s the tech-utopianism” that Musk represents, and an active fund management industry desperate to counter the passive funds that have been “eating its lunch” by pushing green investments. When you have an offshore wind company, such as Denmark’s Orsted, trading on a hefty price-earnings ratio of more than 40, and “talking about challenging the oil majors in terms of production”, you know something’s up. And Tesla’s stockprice inflation surely puts it in “bubble territory”. There’s bound to be “a snapback at some point” – so hold onto your oil and resources stocks. Predictions of a “healthier” future energy mix may indeed come true. “But everything we believed about the internet in 2000 also came true” – and that didn’t stop those betting big on it early on from facing ruin.