Editor’s note: This column is the latest update in our 10 Best Stocks for 2014 contest. Kyle Woodley’s pick for the contest is Tesla Motors Inc (TSLA).
“All I do is win.” – DJ Khaled
After spanking the experts with my renegade pick of Discover Financial Services (DFS) in 2012, I jumped back into the contest officially this year, picking Tesla Motors Inc (TSLA) as my best stock to buy and hold for 2014. And as you can see here, I trounced the rest of the panel again.
Stock picking contests are fun as all let-out. They’re competitive, they give you a chance to talk smack (this guy talks the most), and for what it’s worth, those who take it seriously can provide some pretty good ideas for readers. (An equal-balanced holding in all 10 of our picks would’ve beaten the S&P 500 by about 3 percentage points).
But contest or not, it’s just a stock pick. Getting it right doesn’t mean you did everything right. Getting it wrong doesn’t mean you did everything wrong. All you can do in either instance is re-evaluate what happened, and you take what profits, losses and/or lessons you can from it.
So … what can we learn from this year’s Best Stocks contest and TSLA?
No One Should Have an Investing Timetable of Jan. 1-Dec. 31. Duh.
In the Best Stocks contests, we use a buy-and-hold strategy starting Jan. 1 through Dec. 31 of any calendar year. Which no one does, and no one should.
Jon Markman, who runs Trader’s Advantage, actually had the best idea despite coming in second. He picked Emerge Emergy Services LP (EMES) — a master limited partnership that was absolutely demolished by falling energy prices late this year and still finished up 28%. However, at its peak at the end of August, EMES had ripped off a monster 225% run.
If you were sitting on a tripler, you wouldn’t wait out an arbitrary Dec. 31 deadline — you’d protect profits or cash out. Wall Street doesn’t care about your calendar.
Heck, I would’ve cashed in my 80% gains on TSLA at that same point in the year if I wasn’t holding it through the end of 2014 on principle.
Speaking of Tesla …
Tesla Is a Phenomenal Company … and a Phenomenal Stock
OK, so we learned that Tesla is a brilliant company (if you didn’t already know that), and I don’t think there’s much argument here. No disrespect to Chevy’s Volt or Nissan’s Leaf, but when you think about electric cars, you think Tesla — which is impressive considering we hardly took EVs seriously even five years ago.
But you can’t deny that Tesla has carved out one heck of a foothold in the EV space, proving that electric is not antonymous with quality, nor luxury. The Model S won a bucketful of prestigious awards in 2015, and one of Wall Street’s biggest gripes with the company is that it can’t keep up with demand.
What’s more up for debate (and I’m sure it will show up in the comments below) is whether TSLA is a good stock. It sure was for 2014, but will it be for 2015?
My two cents: TSLA rocketed some 350% in 2013 and slowed to “just” 50% gains this year. Momentum’s a hell of a drug, but it’s never in infinite supply. The problem with production, while a good problem to have, still is a problem. Major automakers throughout 2014 started to clip their connections with TSLA — presumably because they see themselves competing more directly against Tesla in the near future.
And then there’s the Gigafactory …
Tesla’s battery factory is the biggest monkey wrench if only because it’s so different from Tesla’s core business. It’s one thing to evaluate TSLA as an automaker — but another when it’s producing lithium-ion batteries from a factory that isn’t built yet, for many partners that it hasn’t secured yet. It’s a huge unknown, and Wall Street hates uncertainty.
That said, the Gigafactory isn’t scheduled to be complete until 2020, which means we’ve got a few more years of loose conjecture to go on that front — and that’s why I still like Tesla at least for the next couple years.
The Model X is expected to be ready for delivery in 2016, and Musk himself said “The Model X is sold out for 2015,” so demand isn’t an issue there. Meanwhile, Tesla expects to sell 50,000 cars in 2015 — which would be a 50% jump from its projections for 2014 sales — and that’s based on the knowledge that TSLA literally can’t build Model S units fast enough. Also, I’d expect Musk and Tesla to pepper the year with Model 3 tidbits, which will excite the “Tesla needs a cheaper car” crowd.
It’s a small company that serves the wealthy and still is projecting extremely (but still realistically) high growth. Maybe that’s oversimplifying things, but it’s enough for me.
I Am Not an Expert
I got Tesla right, sure. But I didn’t get everything right this year.
Back in spring, when Russian equities were being dumped, I bought Yandex NV (YNDX), the leading Russian search engine that also operates in the Ukraine, Turkey and a few other countries. “What a bargain,” thought I, with Yandex nearly halved from its all-time highs. Russian stocks were being obliterated thanks to Vladimir Putin’s warmongering, but that wasn’t going to last forever.
Funny, that. It turns out that swelling up to Ukraine isn’t the only way to tank your stock market. As oil prices crumbled in the final few months of the year, so did any market confidence in oil-dependent Russia, whose ruble is plunging so bad that the country’s prostitutes have had to hike rates.
Sure, plenty of people didn’t see all this coming, but I really wet the bed.
Like a degenerate gambler that’s convinced he’ll finally rebound with just one more hand, I stayed in the game the whole time anyway, riding YNDX to some 30% losses with no stop-losses to catch me along the way.
It’s fun beating one’s chest, but it’s a heck of a lot more fun to make money. So as you reflect on the year that’s past and look toward 2015, do the smartest thing for yourself and learn from your victories and your losses.
That’s what I’ll be doing.
Note: Fortegra Financial Corp (FTF) might be showing a 100% loss on the contest page as of this writing — that’s due to a technical error in the programming. FTF was bought out earlier this year and finished 2014 up 20%.
Kyle Woodley is the Managing Editor of InvestorPlace.com. As of this writing, he was long TSLA and YNDX. Follow him on Twitter at @KyleWoodley.