The People Fund

Years ago, I swore off investing in individual stocks. I seemed to have a knack for the “buy high, sell low” strategy that I’ve learned inevitably accompanies most stock tips received from a friend’s dad’s buddy’s cousin’s neighbor.

Buy high, sell low?

Buy high, sell low?

Ironically enough, the only stock tip I’ve ever given out, Las Vegas Sands (LVS) circa late 2008, skyrocketed from ~$3/share to over $50/share shortly after Sheldon Adelson, its chairman, chief executive officer and principal stockholder, and his family, completed an investment in the company of $475 million in convertible senior notes in a private transaction.

How much did I make on the Sands?

Zero.

I didn’t buy a single share for myself. FML.

Thankfully some people I know cashed in so it wasn’t a total loss.

Adelson wasn’t going to let the Sands fail. While I couldn’t be certain of that, I used basic logic and common sense to deduce that if he believed it was worth $475m of his own money, it must have plenty of upside. And it did.

Frankie & Joey? Boom.

Frankie & Joey? Boom.

Wikipedia describes Adelson as a “business magnate,” or an “entrepreneur who has achieved wealth and prominence from a particular industry.”

Elon

Elon Musk of SpaceX, Tesla Motors & Solar City

I have recently been turned on to another business magnate, one who I believe will achieve prominence in at least 2 more industries. Elon Musk is the founder of SpaceX & the co-founder of PayPal and Tesla Motors. He is also the Chairman of Solar City. He reminds me of a younger, slightly more motivated Richard Branson (and if you know Sir Richard, you know it’s basically impossible to be more motivated than him.)

Sir Richard Branson

Sir Richard Branson

After reading everything I can get my hands on about Musk, I’ve been inspired to create a small “mutual fund” for myself, centered around men and women like Musk, Branson, & Adelson. The idea is to accumulate shares and hold long-term with the belief that these people simply won’t let their companies or ideas fail. I’m investing in the people more than any metric or statistic. I have named the fund, “The People Fund.”

I believe that over the next 30 years, men & women like Elon Musk will continue to build great companies, and when they do, I’ll be there to add shares to The People Fund. I will also add shares of companies that do a lot of business or have long-term contracts with Musk and Branson’s companies. This also helps with diversification. Unfortunately, Branson’s Virgin Group is a privately held conglomerate. It looks like Virgin Media was recently acquired by a private fund for $16b. It would’ve been nice to own Virgin Media a month ago. Virgin Group is a shareholder of Virgin Media.

200px-Virgin

Starting with $1,500 I have purchased shares of Solar CityTesla Motors, & Panasonic. I’ll re-invest periodically to dollar cost average, and I’ll constantly be on the lookout for more companies/people to add to the Fund’s Watch List. So far, I can’t find a way to invest in SpaceX, a privately held company. I do not believe there is one, however there are rumors of a SpaceX IPO in 2013.

Tesla Motors (NASDAQ: TSLA) is now trading > $39/share, up from its $15 IPO a few years ago. It is heavily shorted and I agree it may correct down to the $30-$35 range (or lower) this year. Alternatively, it may start to move up and never look back as Tesla is just starting to be cash-flow positive and profitable. There are lots of people short on this stock and lots long as well. There are a lot of good reads about Tesla linked below, including the below quote:

“Tesla will likely deliver 20,000 cars in 2013. An optimist looking at reservations might imagine 30,000 Teslas this year.
Given an ASP of $80k a car, Tesla’s 2013 car business looks like $1.6 to $2.4 billion. Throw in another $200 million for drivetrains and services and this year’s top line might go as high as $2.6 billion. If Tesla achieves 25% gross margins and brings 10% to the bottom line, they might conceivably earn $260 million. With shares at $34.52, and a $3.93 billion market cap, that’s a 15.1 PE. Compare this with PEs of 9.6 for Ford and BMW, 9.3 for Daimler, 7.7 for General Motors and it’s hard to get excited about Tesla stock. An investor might even go short, and quite a few have.
Interest in Tesla is not about where they are, but about where they are headed. If Tesla disrupts the car business, they could end up selling 5 million mainstream cars a year at a $40k ASP, and if they bring 10% to the bottom line and have a PE of 9, their share price will be a tidy $1,582.70. Investors at the current price will see a 4,584% return. This is why the ‘longs’ buy when the ‘shorts’ sell.”

I am very excited to follow Tesla’s progress as they look to revolutionize driving as we know it. Wouldn’t a Tesla + Google partnership be something special?! I wouldn’t rule it out as Google is also in California, loves innovation, has plenty of cash and is already in the self-driving car business.

google

Solar City (NASDAQ: SCTY) is at $15.48, up from a $9 IPO price in Dec 2012. This company is quite new and I believe there is plenty of upside as Musk is the chairman and has personal funds invested. Because I believe in Musk, and I enjoy the idea of Solar Power, I will enjoy owning and following this stock.

solar-city_logo

Below are some links and a must-watch video.

Elon Musk in his own words

Is Elon Musk the new Steve Jobs?

3 reasons to love Tesla in 2013

Elon’s near-bankruptcy as told by Men’s Journal

How far can you go in a Tesla?

Fuel Cells vs EVs

Tesla: Long vs Short

Do you know of any other companies/men/women that fit this profile? Suggestions appreciated. I currently have Tesla partners Toyota and Daimler on my watch list.

I will periodically post updates, feedback and performance of The People Fund. Needless to say, I’m not responsible for any losses you might incur should you happen to piggyback my fund – however when it makes a bunch of money feel free to send me some.

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About donniccolo

Logic. Common Sense. Open Minds. www.nicknicastro.com
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5 Responses to The People Fund

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