Two Intriguing Reasons to Love Tesla

 | Aug 29, 2013 | 12:45 PM EDT  | Comments
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I was speaking yesterday to a good friend of mine who works in tech and who has owned Tesla (TSLA) since before the stock had its initial public offering.

He still owns it. He hasn't sold any shares -- and he doesn't plan to do so.

Given that the stock now has market capitalization of more than $20 billion, I asked him why. "I know," he replied. "It's wild, isn't it? That's like double what Chrysler's worth [or its parent Fiat]."

He told me there are two things that keep him holding the stock and believing that the Tesla run is far from over.

First, Intellectual Property: We don't really hear about this mentioned in relation to Tesla. But, according to my friend, the company is accumulating a massive number of patents related to electric-car technology.

If you believe a large number of cars on the road will be electric five years from now, the value of those patents should become very high. One of the larger car manufacturers will probably see some value in buying those patents and -- of course -- buying the company.

There's an enormous focus now on how many cars Tesla is selling each month or each quarter. Also mentioned quite often is the market value of the company on a per-car-sold basis. From my friend's perspective, this focus completely misses the whole underlying value being created by Tesla right now in perfecting how to build an electric car and do it well.

Second, Tesla's Marketing Magic: Not since Apple (AAPL), and its founder Steve Jobs, have we seen a company with the magic pixie dust of marketing that Tesla does.

A good case in point is Tesla's recent video and keynote address, showing off its new technology that swaps out your electric battery in your car. The live demonstration showed one man filling up his gas tank conventionally and, at the same time, a live demonstration of the electric car battery being swapped out. In the time it took for the conventional guy to fill it up, Tesla was able to swap out batteries from two cars.

The audience for this demo was obviously in rapt attention. They are believers.

But, more than just possessing the ability to get people to drink the Kool-Aid, Tesla has been able to continually surprise and delight people with their products and market them so that you constantly expect further surprises.

It's this upward-cycle aspect of marketing that turns the initial Model S customers into promoters. We saw that in the early days of Apple, and we're seeing it now.

The Tesla ride may not be done yet.

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