Steven Eisman, of "The Big Short" fame, appeared on Bloomberg TV on Feb. 5 to discuss his covered Tesla (TSLA, Financial) short and one of his longs, General Motors (GM, Financial).
Eisman covered Tesla a while ago. Holding on longer exceeded his pain threshold, or as he said, "there is no glory in losing money." He covered his Tesla short because it has certain dynamic growth aspects coupled with cult aspects that meant he just had to walk away.
Tesla has a dream about conquering electronic vehicles. He thinks Tesla will not really conquer this market since other carmakers will come out with competitive vehicles. But the resolve of that argument is years away and, in the meantime, you can say anything (and as we've seen with Tesla going over $1000, the stock can go anywhere). He doesn't understand why it went up. In his view, sometimes things can’t be explained too well.
He does own General Motors. According to Eisman, General Motors has completely transformed. The company used to make bad products. Now, it is not really a car company anymore; it is a truck company with an option on autonomous driving.
General Motors has a great balance sheet, great management, is no longer in Europe, sells trucks and SUVs and is very profitable. The two leaders in autonomous driving today are Alphabet's Google (GOOG) (GOOGL) and General Motors.
The fundamental data lay out the story clearly. General Motors trades at a forward price-earnings ratio of 5.5. That's below Ford (F) at 7.5 and below Tesla at 87 times. It trades at 3 times free cash flow, versus 1.5 times for Ford and 56 times for Tesla. Finally, it trades at around its book value, while Tesla trades at 20 times book value.
If you consider that General Motors is actually losing money on its Cruise segment, which has been valued at around $15 billion and makes up almost one-third of its market cap, and its fundamental earnings multiples would look even better without it. The company looks really cheap.
Disclosure: Short Tesla.
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