Sun Sentinel Palm Beach Edition
On paper, ‘Teslanaires’ get rich off car’s buzz
In June of last year, Patrick Hop poured his life savings — $30,000 — into Tesla Motors stock, then trading at about $32 per share. When the stock hit $115 this July, he dumped all his shares and invested in options on Tesla stock, which are high-risk bets on future performance.
Now Hop, a 22-year-old senior from Millbrae, Calif., studying applied math at the University of California at Berkeley, estimates he has made about $250,000 — at least on paper.
“I have a high risk tolerance, but I don’t think the stock is that risky,” he said.
Hop is far from alone in being bullish on Tesla, which has developed a cult following not seen since the early days of Apple.
The company’s stock has skyrocketed more than 300 percent this year because of a string of successes, from a rave review in Consumer Reports to better-than-expected sales of the all electric Model S sedan and, last week, five-star safety ratings in crash tests.
The Palo Alto, Calif.based maker of electric cars has a market cap of about $18 billion based on Friday’s stock price of $161.84 per share, and some analysts say shares could double again within the next three to four years as Detroit races to play catch-up.
The Tesla Motors Club forum, an online bulletin board for Tesla owners and fans, is filled with posts about the “Teslanaires” — those who have realized $1 million in paper gains through Tesla stock trades.
“There is a bullmarket in Tesla right now, but don’t confuse a bull market with genius,” warned Manny Schiffres, executive editor of Kiplinger’s Personal Finance Magazine. “As long as Tesla keeps going up, people will think they aren’t vulnerable. A year ago Apple peaked at $705; now it’s about $500. You should never put a disproportionate amount of yourwealth into one stock.”
Many Tesla investors, like Hop, engage in options trading, which involves pledging to buy or sell stock at a specific price by a specific date. “Options are derivatives,” Schiffres said. “You have to be right on the company, the direction of the stock and the duration, because options expire. It’s very much like being in a casino.”
Bob Gotchall wanted to buy a Model S but couldn’t justify the cost to his wife. So he figured that if he invested $50,000 in the stock and doubled his money, he could buy the car.
“I figured if the carwas a good buy, the stock was an even better buy,” said Gotchall, 40, of Austin, Texas. Asthe stock began to rise, Gotchall started adding more and more Tesla options to his portfolio. “I started to have days where my balance would go up by $10,000. I sold and bought, panicked and re-bought and watched a ticker way too much during the day.”
Gotchall, who on some days now is a Teslanaire, recently had to come clean with his wife. “I said, ‘I don’t want to alarm you, but we have hundreds of thousands of dollars more than we did last week,’ ” he told her in May, after Tesla reported its first quarterly profit in 10 years.