Gurus Ron Baron (Trades, Portfolio) and Murray Stahl (Trades, Portfolio) added to their stakes in Tesla Motors (TSLA, Financial) during the third quarter.
Baron bought 111,256 shares and Stahl bought 32 shares for an average price of $216.58 per share.
Tesla Motors was named after Nikola Tesla, a Serbian-American inventor who invented the alternating current (AC) induction motor, which many people consider to be the greatest invention of all time because it enabled electricity to travel hundreds of miles.
Before Tesla’s alternating current invention, Thomas Edison’s direct current was being used. But with direct current, electricity could only travel short distances. For direct current to operate, there needed to be a power station within a radius of 2 kilometers because electricity lost energy as it traveled through the wires. Direct current also carried significantly less power, and it only had the ability to illuminate dwellings.
Tesla designs, develops, manufactures and sells high-performance fully electric vehicles and electric vehicle powertrain components. The company is run by Elon Musk who is the company’s CEO and product architect. He also co-founded PayPal (PYPL, Financial).
Tesla has a market cap of $32.33 billion, an enterprise value of $31.99 billion, a price-book (P/B) ratio of 11.24 and a quick ratio of 0.87.
According to GuruFocus Tesla has a 4 of 10 financial strength rating with a cash-debt ratio of 1.14, an equity-asset ratio of 0.21 and a Piotroski F-Score of 6 indicating its financial situation is typical for a stable company.
Tesla also has a 6 of 10 profitability and growth rating with an operating margin of -11.15%, a net-margin of -14.74%, a return on equity (ROE) of -50.99%, a return on assets (ROA) of -8.87%, revenue growth (three years) of 101.60% and earnings per share growth (EPS) of 23.40% over the previous three years.
Baron and Stahl likely decided to add to their stakes for the following reasons.
- The company is producing high-powered futuristic electric cars that are in demand with over 370,000 Model 3 reservations.
- The company is run by a vigilant leader, Elon Musk, who has already shown that he has the ability to execute after co-founding PayPal.
- The company has increased its revenue growth by 88.40% and its book value growth by 40.50% over the previous five years.
Since Baron and Stahl added to their stakes, the company’s market price has dipped by an estimated 7%.
Disclosure:Â Author does not own any shares of this company.
Start a free seven-day trial of Premium Membership to GuruFocus.
