Romney’s 'Biggest Loser' Scores Huge Victory

Wyatt Investment Research

In the heat of the presidential campaign, Mitt Romney lumped Tesla Motors (TSLA) in with failed Solyndra, calling them both “loser investments.”

Tesla’s famous CEO - Elon Musk - never fired back at the remark. He fervently reminded investors that Tesla was on track to be cash flow positive. And the company never so much as requested an extension for, much less missed, a Department of Energy (DOE) payment.

It turns out that Musk won’t need to do much additional defending. The public will do it for him after Tesla achieved a milestone that should silence even the toughest critics.

At a New York City event, Tesla Motors’ Model S was named Car of the Year by Motor Trend magazine.

The selection of the Model S marked the first time a vehicle with a non-combustion engine won this prestigious award in its 63-year history.

Even more amazing than the win by Tesla’s electric car is that it won by unanimous decision.

Musk characterized the award as a “pivotal turn in history” after Tesla’s “long and difficult journey.” Though Tesla has struggled to grow their financials, Musk regularly explained to investors that it was a supply issue and demand for their electric powered vehicles was healthy.

The Motor Trend award followed Car of the Year titles from Automobile Magazine and Yahoo! Autos earlier this month.

Though the first two nominations were positive news, the Motor Trend title is more significant because of the award’s esteem. Here’s what the judges had to say  ...

They noted the Model S’ superb acceleration and efficiency saying, “it drives like a sports car, eager and agile … it’s also as smoothly effortless as a Rolls-Royce, and carries almost as much stuff as a Chevy Equinox and is more efficient than a Prius.” The judges deemed, “by any measure, the Tesla Model S is a truly remarkable automobile, perhaps the most accomplished all-new luxury car since the original Lexus LS 400.”

That’s incredible praise for a car produced by a supposedly “loser” company. With a price tag starting at $57,000 and the ability to drive more than 265 miles on a single charge, this electric car will be a big win for consumers. Tesla believes the exposure gained from the award will convince buyers of the car’s unique attributes.

In a CNBC television interview, Musk said, “the car of the year award has a great deal of credibility in the industry and with consumers. And that additional validation, I think, is probably what a lot of people were looking for to buy the car.” He also thinks that the award will have a huge sales, awareness, adoption and psychological impact because of the unanimous decision in a strong field.

Consumers aren’t the only ones who should listen to Musk. Investors may want to heed his words as well. Musk has proven to be a successful entrepreneur and inventor. The Wharton alumnus is widely revered in the business world for founding SpaceX and co-founding PayPal, which eBay (EBAY) purchased for $1.5 billion.

If he’s right about the award’s influence, winning it could light a fire under already enthusiastic buyers. More importantly, Tesla will be able to oblige this demand after recent operational expansions.

In a November letter to shareholders, Tesla mentioned that it successfully transitioned to a mass production car company, growing from the ability to manufacture five cars per week to 200 (10,000 per year). By next month, the company believes it will expand production capacity to 400 cars per week.

Management believes that its production rate puts them at a level where business will be cash flow positive. Moreover, they expect to deliver 3,000 Model S cars in the fourth quarter and more than 20,000 next year.

It’s been a difficult fourth quarter for the indices and TSLA could be the super-charge many portfolios need.



Equities mentioned in this article: TSLA, EBAY, YHOO

Positions held in companies mentioned above: None

 



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