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Tesla Motors Builds a ‘Cult Stock’ Following as Investors Ditch Caution (TSLA)

Tesla Inc (TSLA)

Tesla Motors Inc enjoys a cult following among buyers of its EVs and you could be in for an earful if you offer any criticism of Elon Musk, Tesla, or its cars. Of course, Tesla fanboys also gripe and complain about things that could be improved but they’ll not take it lightly with an ‘outsider’ who refuses to worship at the altar of Elon Musk. I have no issues with the fan boys, I’m not sure that I won’t hold the same tribal sentiments if I have dropped almost 100k on a car.

In all fairness though, Musk is doing a great job with his cars and there’s no denying the fact that his EVs are obviously better built, much safer, and more eco-friendlier than most of the gas-guzzlers around. However, I am worried about the growing trend in which investors are turning Tesla into a cult stock. A Tesla fan boy just invested ALL his net worth on shares of Tesla – this could turn out to be the cringe-worthiest investment decision of the year.

DEFINITION of ‘Cult Stock‘ A classification describing stocks that have a sizable investor following, despite the fact that the underlying company has somewhat insignificant fundamentals.

Tesla Motors Inc. (TSLA) Store in Southern California

Here’s how much faith some people have in Tesla

Tesla Motors Inc made another loyal investor this week in Austen Allred, a 20-something senior growth manager at a San Francisco startup. Austen sent a tweet to Elon Musk telling him how much faith he has in his vision. The tweet reads,” @elonmusk Just put 100% of my net worth in $TSLA. Don’t even care if I lose it all. Thank you for what you’re doing and have done.” The content of the tweet is enough to be worried about Austen’s financial intelligence; after all, who makes an investment without giving a damn about losing it all.

Interestingly, Elon Musk replied to the tweet saying, “@AustenAllred Wow, thanks. We won’t let you down.” That’s a fair enough response and it is highly unlikely that Musk would expect to let his shareholders down. Musk’s fortune is probably more tied to Tesla than the fortunes of any of his other investors – except for maybe people like Austen Allred of course.

Interestingly, Austen isn’t alone in treating Tesla like a cult stuck. One of his followers, Karl Gray thinks Austen made the smart move because “people haven’t figured out yet that @elonmusk is the Vanderbilt & Rockefeller of our time, we will control ALL logistics + energy.” Another comment from Rome Strach suggests that Austen made the right choice.  In his words, “you do know that $TSLA isn’t about EVs, yes? It’s partly about EVs but there’s a much bigger picture.”

Putting your money where your mouth is

Tesla Motors Inc is doing a great job building EVs and the mass-market Model 3 will trigger a mass adoption of EVs. The firm is also moving up to become an energy company with its acquisition of Solar City. Tesla is shaping out to become a cult stock among investors and there’s not much anyone can do to stem the tide.

Austen says his critics do not move him. He says, “Don’t tweet at me telling me how bad of an investment $TSLA is. I understand the risks. Short it if you’re so convinced.” And while you are at shorting the stock, he says, “the thing I love about the stock market is you don’t have to debate, you just put your money where your mouth is”. We can only wait and see how long Austen will be willing to stay 100% long when Tesla hits its next rough patch.

This article is not intended as individual or reader-specific investment advice. Do your own research and consult a financial professional, if necessary, before investing in anything.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.