Dear Mr. Berko: In March 2014, I asked you about investing in Tesla, and you told me Tesla is not an investment but rather a stupid speculation. I was surprised by your various negative comments about Elon Musk and his business management skills. But I still bought 200 shares of Tesla at $216. I sold it last month at $236. It took me that long to realize that you were right.
I’d like to know your opinion of the car and truck replacement parts and accessories business as a medium-term investment. My stockbroker believes that AutoZone is the best investment of the lot, and he thinks the stock will split. He also suggested that I take a flier on a French cellphone company called Orange. I would sincerely appreciate your comments.
— DL, Destin, Fla.
Dear DL: I think P.T. Barnum and Elon Musk would have been great buddies. Tesla, one of the greatest shows of the 21st century, is making fools out of millions of Americans. Tesla (TSLA-$252) makes beautiful cars; however, I’m convinced that this company lacks the right product and the necessary management skills and that it will never earn a profit. But its stock price has been impressive, and with a $29 billion market cap, TSLA is worth half as much as Ford even though Ford sells 75 times as many vehicles.
According to the U.S. Bureau of Transportation Statistics, at the close of last year, there were approximately 260 million registered passenger vehicles traveling America’s highways and byways east and west of the Mississippi. And according to the National Automobile Dealers Association, the average age of those vehicles is 11.4 years. Now the Federal Highway Administration, a division of the U.S. Department of Transportation, tells us that the average male drove 14,282 miles in 2013. Seeing as the average passenger vehicle, according to former Chrysler CEO Thomas LaSorda, has about 10,000 moving parts, quite a few of those moving parts will eventually begin to show wear and tear. And because it’s less costly to replace worn brake pads or install a rebuilt water pump than it is to purchase a new car (according to Rep. Nancy Pelosi), AutoZone (AZO-$679) should continue to increase its revenues, earnings and share price.