Defense wins championships. Of all the hoary sports clichés that are misused in everyday life, that is my least favorite. We saw last night in the Super Bowl how useless that phrase was, as the Chiefs and Eagles lit up the scoreboard in Glendale, AZ.
Chiefs' QB Patrick Mahomes once again burnished his credentials for an eventual Hall of Fame entry, and Eagles' QB Jalen Hurts played very well in a losing cause too. In contrast, both defenses were underwhelming, to say the least.
But when I mange portfolios, I do believe, to a certain extent, in playing defense. At Excelsior Capital Partners everything we own pays us for the privilege of doing so. This constant stream of income allows for opportunistic reinvestments when markets overreact and allot us opportunities.
We have money coming through the front door, while people like Cathie Wood and her leaky (ARKK) are dependent on a constant stream of inflows from gullible, and poorer for following her advice, investors.
But with Elon Musk in attendance at last night's game, noted Tesla (TSLA) critic Dan O'Dowd actually bought air time for a 30-second commercial touting the weaknesses of Tesla's misleadingly-named Full Self-Driving system. I watched the ad, but space limitations prevent me from delving fully into the technical merits of Mr. O'Dowd's argument here.
Just know that Tesla's FSD is classified by California's DMV as Level 2 (we know this thanks to the excellent reporting of CNBC's Lotra Kolodny) on the 5-level (it's actually six levels, since "0" counts as "no autonomy") scale of Advanced Driver Assistance Systems, as codified by the Society of Automotive Engineers.
Tesla is light-years away from approaching fully autonomous driving, and with the Model 3 coming up on its sixth birthday in July 2023, we would have to be convinced that some kind of magical over-the-air software update could somehow make a six-year-old piece of hardware omniscient. It's part and parcel of the hero worship -- and lack of unbiased analysis -- that has accompanied Musk and TSLA for years.
It was very expensive last year as TSLA shares fell 65% in 2022, and even this year's meteoric (and completely unfounded, in my opinion) rally in TSLA is showing signs of fading, as TSLA shares are in the red today after Mr. O'Dowd's broadside, in the midst of a very green Nasdaq tape.
The biggest asset in Tesla's FSD is not AI, or machine learning or ChaptGPT or some other concept that few understand, it's simply the slowness and fecklessness of America's joint vehicle regulators, NHTSA and NTSB. If those dueling agencies ever put their resources together, they could, in a worst-case scenario for Elon, actually order Tesla's FSD to be shut off via the same over-the-air updates that enabled it in the first place.
I have been following autos in some way, shape or form for the past 30 years, and I have no faith in the clowns in Washington. But I want to play defense against the flaws in Tesla's FSD, as pointed out many times by Mr. O'Dowd and others.
I would do this in one of three ways:
- Buy shares in a company with COMPETING technology to Tesla's camera-reliant FSD. Tesla has removed RADAR from some versions of the Model 3 and has never offered LIDAR, which is a 3D-imaging system that I believe holds the key to truly autonomous driving. If you want exposure to other ADAS technologies than Tesla's cameras, you can buy shares in autonomous driving pioneers Israel's Mobileye Global (MBLY) , recently spun out from Intel (INTC) , or Luminar (LAZR) or Velodyne Lidar (VLDR) .
- Buy puts on TSLA. I would do this today, ahead of tomorrow's all-important release of US CPI data from the Bureau of Labor Statistics. April 2023 puts on TSLA with a strike price of $180 are currently trading at $15/contract. I own some of those. If CPI runs hot tomorrow, tech will be whacked again, and whatever the real-world limitations of its products, TSLA is considered a Big Tech company, and certainly valued as one.
- Allocate funds that you might have invested in TSLA into solid dividend-paying companies, like Exxon (XOM) , Genuine parts (GPC) (the first company I followed as a Wall Street analyst and long-time holding of mine), or even Apple (AAPL) . Get paid to wait.
So, Elon was in attendance to see very questionable defense being played on the field at the Super Bowl last night, but just make sure your portfolio is not similarly uncovered with exposure to a very questionable technology.