Spotlight: Tesla Motors

Tesla Motors (NASDAQ:TSLA) might easily be the most hyped stock of the last couple of years. Investing in Tesla in July 2010, would have amounted to a 950% profit today. But is the current stock price of $201.62 justified? If we take a look at the income statements of Tesla, we notice that they have never made a profit yet, but because Tesla is operating in a relatively new market segment high development costs can be expected and usually profits will come only after a few years. So it's not a surprise that Tesla has failed to gain profit yet. Still, investors seem to expect a large profit in the future, because the stock price is sky high for a company with negative results. Are these investors too optimistic or are they simply timing the market right while Tesla's stock price is still low? Tesla's CEO Elon Musk said last week that he expected Tesla to be profitable in 2020. Moreover, he said he does not fear the competition by General Motors (NYSE:GM) and other electric car manufacturers. We feel that Musk is overconfident of his own chances in the market. Simply because General Motors announced a car for a lower selling price and with a higher action radius than Tesla's cars. These two aspects are key when producing electric cars. Hence, we think it's odd that Elon Musk dismisses the danger of competition. Consequently, we also feel that his statement of profitability in 2020 might be overstated and that this could easily be 2025. Moreover, as time goes by, it becomes easier for other companies to enter the electric car segment, because they can produce with lower R&D costs due to reverse engineering, which will harm Tesla's profit. Therefore, even though the electric car segment might be the future for the car industry, Tesla's chances in the market may be highly overstated and current investors in Tesla may be too optimistic. This makes Tesla a big gamble in the stock market and its a gamble that Stock Smash is not willing to take.

Spotlight: ASML

Is ASML(AMS:ASML) the holy grail on the Dutch stock market? Five years ago, the chip-manufacturer traded for 203,66% less than it does today (€90.30). Can they keep up this incredible growth or has the moment past to gain substantial profit on this stock? As they announced their fourth quarterly results today, we immediately saw a rise of their stock price by 4%. The reason for this: a record of sales in 2014 (€5.9 billion), also resulting in a 25% growth in profit year on year. But these are not the only indicators that the stock price will soar ever higher in the future, since ASML also announced a repurchase of shares for €1 billion in the next two years. A share repurchase is often an indication that the current share price is cheap compared to its real value (otherwise companies would not repurchase shares, because then they would simply pay too much for the stock). This indicates that the real value is likely to be higher than the current stock price, hence an upward spike can be expected. But what can be expected from ASML in the long run? ASML recently issued a statement in which they expected the total sales in 2020 to reach €10 billion (compared to €5.9 billion in 2014), which amounts to an ambitious 9,2% sales growth. Since ASML is highly competitive and is also highly spending on innovation, we think that this number might be quite accurate or even conservative. ASML is highly spending on a new laser technique (EUV), which may alter the chip-industry as a whole. This technique will definitely boost ASML's sales and profit, therefore we also think that ASML will prove to be a great stock in the future. ASML may not be the holy grail on the stock market, but it surely is quite a pearl.

ManVsMarket: Should you listen to stock experts?

Early October 2014 Stock Smash decided to test whether stock expert advice is really helpful, so we created 2 S&P portfolio's; 1 with 10 stocks advised by an expert (of investorplace.com) and 1 with 10 random stocks. Today, it is 3,5 months later, so lets see how both portfolio's did. If you had followed the advice of the expert you would have gained a gain of 9.32%, compared to 8,20% gain in the random portfolio. So we congratulate the experts with their win.
However, this comparison might not be fair, because a closer look at the results tells us that the experts seem to have taken a much greater risk than the random portfolio. Hence, we might have expected a bigger margin between the expert portfolio and the random portfolio. Therefore, we at Stock Smash feel that this is a rather false victory for the expert portfolio. We will keep track of both portfolio's and hope that next period will indicate a more clear outcome.

The results of both portfolio's are shown in the table below.