In this podcast, Motley Fool senior analyst Bill Mann discusses:
- Economic takeaways from England’s sudden need for a new prime minister.
- Questions about Tesla‘s accounting.
- Why he believes that, despite falling in 2022, Tesla’s stock is still pretty expensive.
Plus, Motley Fool analyst Buck Hartzell talks with Boston Omaha co-CEOs Adam Peterson and Alex Rozek about the nuts and bolts of their business, and how they’re handling short-term pain. We’ve got part of that interview here.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Oct. 20, 2022.
Chris Hill: We’ve got the latest from Tesla and some breaking news from the UK. Motley Fool Money starts now. I’m Chris Hill, joining me in studio, it’s Motley Fool senior analyst Bill Mann. Good to see you.
Bill Mann: Too bad there’s nothing to talk about today.
Chris Hill: When the news fairy shows up, the news fairy shows up. We’ll get to Tesla in a second. But yes, for the second time in 45 days, our friends on the other side of the pond are in need of a prime minister.
Bill Mann: Liz Truss was the in office for one Brian Clough, or was it 3.1 Scaramuccis?
Chris Hill: 4.1 Scaramucci, 44 days for Liz Truss, setting, I believe a new record for a briefest tenure as British prime minister.
Bill Mann: She is the first prime minister since Winston Churchill to serve under two monarchs, though.
Chris Hill: I look forward to reading that in her upcoming biography.
Bill Mann: Yes. Soon to be found in the history section of your local bookseller.
Chris Hill: Much of this seems to be motivated by economic forces, negative ones obviously. As a U.S. investor, do you look at this and think anything specific one way or the other? Because it seems this is interesting to watch. But I don’t know that this is necessarily having an impact on any of the companies in my portfolio.
Bill Mann: Maybe, maybe not. Obviously, some of the biggest issues that are facing the U.K. right now are supply-driven, and so there’s very little that you can do when you have supply issues to create incentives on the demand side, that doesn’t really help that much. YouGov came out with a poll that was asking about whether or not people thought it was right for Liz Truss to resign and it was one of the most profoundly one-way polls I’ve ever seen — 79% of the U.K. citizens who took this poll that it was right for her to resign. I think that probably the big moment for her government was when they came in and decided that one of the things that they ought to do is cut taxes at a time in which again, with a supply issues out there and with debt and with issues out there, put the entire pension system of the United Kingdom at risk, and it was something, I believe that you need to give anyone who is new to running any organization. I guess you could call a country an organization. Sure. A little bit of a burn-in time, but this was such an unforced error that anyone who had any amount of knowledge about how the financial system worked could have said, this might not be the best idea.
Chris Hill: Let’s move on to Tesla then. Third-quarter adjusted profits were higher than expected, but Tesla’s revenue was light and shares are down a little bit today, 3%-4%, that sort of a thing. Not surprisingly, Elon Musk projecting all the optimism in the world on the call in terms of the demand that he says they are seeing for Q4.
Bill Mann: On a price-to-optimism basis, this company is supercheap.
Chris Hill: It is supercheap. There are a couple of things I want to get to, but just in terms of the results and the comments from Musk, what stood out to you?
Bill Mann: It’s still a pretty expensive stock. I think that is the basis that you need to — I think people put too much emphasis on what a quarter represents. Tesla is a company that is trading. It’s a $675 billion company with about $80 billion in run rate sales, that puts them at a price-to-sales [ratio] of about 8. Which is an awful lot for and I know that this is not quite fair, but what is essentially a car company. I would not put too much emphasis on what the stock is doing today after this quarter. It was a pretty good quarter. I mean, I still have endless questions about the accounting at Tesla. I mean they produced 50% more cars essentially, with barely any more operating expenses. That is hard to understand. There’s no such thing as immaculate auto production. I do have questions about that. At its core, it was a good quarter. But when you have an expensive stock — and Tesla may be the one remaining expensive stock — a good quarter isn’t what gets you to maintain the stock at those levels.
Chris Hill: It’s not what gets your market cap to go higher. Speaking of market cap, Musk just volunteered, again with his optimism, his belief that the company has the potential not just to be bigger than Apple, but to be bigger than Apple and Saudi Aramco combined.
Bill Mann: That’s pretty big.
Chris Hill: Leading a lot of people to ask to the perfectly fair question, well, if you have that level of belief and he couched it with the word “potential” and that sort of thing. But if you believe that, then why are you almost certainly going to be selling some of your stake so that you can buy Twitter?
Bill Mann: Which I don’t think anyone is suggesting will be larger than Apple or Saudi Aramco, much less the two combined. The Twitter thing is interesting simply because I think that galaxy brain Elon Musk stepped in front of logician Elon Musk and made an offer that he probably ought not have. I don’t know that it’s particularly fair now to say, he’s got to sell Tesla shares because he has a deal that he agreed to in April, which was I don’t know, it feels like another era at this point that he’s got to make good on. Yes, he will be selling shares. Of course. He did get an incentive of $23 billion in April also. I think he’s OK there and he’s still very heavily levered toward Tesla. I mean, if Tesla were to collapse, Elon Musk would be OK, but he’d be much less OK than he is now. I wouldn’t really put too much on that. You’re not talking about something that at this point is a choice that he’s making. That choice was made six months ago.
Chris Hill: If you’re a Tesla shareholder, one thought I had when I was just going through the quarter and looking through the some of the comments on the call. I’m not a Tesla shareholder, but I thought to myself, boy, I bet the shareholders are happy that he’s just talking about Tesla. Since like he’s back, he’s talking about the company because that’s I would be a little bit or if I was a Tesla shareholder, I would be a little bitter about how the last six months has played out in terms of like, why are you spending so much, like come back and focus on because by the way, as you said, it was a good quarter. Forget the questions around how big can this company get. There are legitimate questions about the service side of Tesla’s business.
Bill Mann: Absolutely.
Chris Hill: For people who own the vehicles, and as vehicles are wont to do from time to time, they need some service.
Bill Mann: Mine needs servicing now, if someone could get in touch. I think that that’s very true. When I interviewed Elon Musk and this was in 2011, one of the things that he talked about was that he did not believe that he would be a success if all he did was own a luxury car company. This is someone who has always been very, very clear about the fact that he’s going after big-picture problems. When you talk about big-picture problems, no one should be surprised when Elon Musk moves out of his lane just a little bit, but it has the last six months have not been a great six months for the brand of Elon Musk. And the brand of Elon Musk — whatever else you want to say about it — is as deeply in meshed with the brand of Tesla as any combination that I can think of. Yes, I’m sure they were happy that he was talking about the car company and not anything else.
Chris Hill: Bill Mann, always good to be in the studio with you. Thanks for being here.
Bill Mann: Great to be here, Chris, thanks.
Chris Hill: Tesla, like many public companies, has a conference call with analysts every quarter. But one company that does not do quarterly calls is Boston Omaha. Co-CEOs Adam Peterson and Alex Rozek joined my colleague Buck Hartzell to give a background on their company and share how they handle short-term pain as long-term investor-operators.
Buck Hartzell: Before we get in here, Adam and Alex, when we write up stock pitches and things for people, we usually tell them what kind stock they’re getting into, so we give is this is a small cap or a large cap and what can you expect with this company as you’re building out your own portfolio. But since we have both of you here today, I figured we’d give you a chance to describe for folks out there that are retail investors that are considering purchasing Boston Omaha, if they buy shares in this company, what company are they getting?
Alex Rozek: It’s a great question. I honestly don’t know what cap we would be, so I just got to plead ignorance on that one. You tell me what cap? But yeah, probably small. The company you are buying in Boston Omaha, the way I think about what I own in Boston Omaha is a collection of companies that have good returns on invested capital, that are durable, that are understandable, have barriers to entry, in many cases, the low-cost provider and whatever field we’re in. That and a number of other factors you layer on together and you get Boston Omaha. It’s really Adam and myself working with some tremendous managers and a few different businesses, billboards, broadband, surety bonds, and Boston Omaha asset management, those are our four verticals, trying to just create more value every day than we had…
Read More: Tesla: “On a Price-to-Optimism Basis, This Company Is Supercheap.” | The Motley Fool