“In the short term, Wall Street is a popularity contest; in the long term, it’s a weighing machine.” This popular maxim, paraphrased from value investing guru Benjamin Graham, should be investors’ mantra to stay focused on the long-term prospects of stocks. Because over the short term, Wall Street holds all the cards.
With this in mind, let’s review Tesla Motors Inc (NASDAQ:TSLA), 3D Systems Corporation (NYSE:DDD) to determine whether either is a candidate for a long-term investment.
Retail Investors vs. The Pros: A Short-Term Mismatch
First, let’s review the environment in which these companies trade. Wall Street eschews the long-term in favor of quick wins, with quarterly results used to measure performance.
Powerful computers automatically read the news and social media posts, making interpretations, and executing thousands of trades a second. Trading computers are physically positioned next to exchange servers to reduce trading times down to microseconds. In some cases, market-moving data are provided to paying customers prior to public release –
According to CNBC (emphasis mine): “A contract signed by Reuters … and the University of Michigan … stipulates that the data (Michigan Consumer Confidence Report) will be posted on the web for the general public at 10 a.m. on the days it is released. However, five minutes before that, the data is distributed… for Reuters’ paying clients.”
Competing and winning consistently in this trading environment is, at best, a long shot for the individual investor. The good news? Wall Street’s short-term mentality leaves individual investors with long-term investment opportunities.
For my investments, I look for companies in a growth market with clear advantages over the competition (wide moat) and a valuation in-line with future growth prospects.
So how do Tesla Motors Inc (NASDAQ:TSLA) and 3D Systems, two Wall Street darlings, rate as long-term investments?
Tesla: Too Much Too Soon
Elon Musk is a genius, and the Model S is a beautiful, drool-worthy machine. The stock, however, might as well be stinkweed for the appeal it holds for me right now.
Are electric cars a growth market? No question: IDTechEx estimates that by 2025, 10% of all cars sold will be pure electrics.
Does Tesla Motors Inc (NASDAQ:TSLA) have a clear advantage over it’s competition? Hmmmm… kind of:
There is no doubt that Tesla is miles ahead of the competition with its premium-priced S Model. Consumer Reports gave it a 99/100 review score, the highest in the magazine’s history. But can Tesla deliver a compelling car model that appeals to a mass market? Tesla Motors Inc (NASDAQ:TSLA) faces formidable hurdles: