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Dillian: Don't Put Tesla in the Rearview

I worked at Lehman with a guy who was an "early adopter." He was always bringing in new gadgets to work. One day he brought in an iPod, the first day it went on sale. "This is going to change the world," he said.

That was in 2002.

With the benefit of hindsight, we can see that it would have been pretty obvious that Apple (AAPL) was a company on the move. There were some people out there for which it was obvious, like my early adopter friend who bought the stock. It is nice to be on the right side of a 50-bagger.

My first boss in the business said in my job interview that it helps to be a little clairvoyant. I thought I was doomed to fail because I wasn't the least bit clairvoyant. But clairvoyance is actually a skill that you develop over time, if you work on it. After 15 years of watching companies succeed and fail, you start to figure out what it is that makes them succeed and fail.

Chipotle (CMG), for example, was another one that I missed. In 2007-2008 there was one in Midtown that I would eat at all the time. It was brand new back then. I told people, I could eat here every day. This is where you smack yourself upside the head like in those V8 commercials. Why did I not buy this stock?

What is it about CMG that's so special? The food is awesome. And it's cheap, but expensive enough that they have better profit margins than fast food. The menu is super-simple. The stores are cool. They play cool music. And cool people go there (here in Myrtle Beach, it literally is where the pretty people hang out).

The food is natural and good for you. So, it's awesome, cool, simple and good for you. CMG is just a great product and a great experience. It also helps that CMG's competition, McDonald's (MCD) and Yum! (YUM), are just so haplessly bad.

Look around the investment landscape for a product or service that people are raving about, the "I could eat here every day" kind of experience. Smack yourself in the head like the V8 commercial again. Of course. Tesla (TSLA).

Just the other day Jeremy Grantham said that TSLA was the greatest thing in the world. He wasn't saying anything new, nothing that hasn't been said by every Tesla owner anywhere. But since it's Jeremy Grantham, people paid attention. TSLA is CMG in 2007. It is awesome, cool, simple and good for you.

Apart from the petulant George Clooney, you cannot find one person who is not bananas about this car. This is what the bears have yet to figure out about TSLA. It's electric, but the story really has little to do with the electric part. It really is just the best-made car out there, by a long shot.

When Elon Musk talks about Tesla, his emphatic point is that Detroit just makes garbage -- stupidly-engineered cars -- and that his cars are better. Ford's (F) answer to the fuel efficiency problem is to make trucks out of aluminum. They are still thinking inside the box. Like CMG had the haplessly bad MCD and YUM, TSLA has F and General Motors (GM) to kick around.

I believe that in 2019, people will look back and do the V8 smack and say, man, TSLA was so obvious. But it doesn't seem obvious now because there are always two sides to any argument and any reasonable investor will listen to both of them.

But rule number 42 for me is: don't overthink things. If something has a good chance of being obvious in hindsight, buy it like a jerk.

At the time of publication, Dillian was long TSLA, short MCD.

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