There's no denying that Tesla (TSLA +0.06%) has been an innovative electric vehicle company, but is it still the best way to invest in the automotive industry? In this Fool Live video clip, recorded on Feb. 11, Fool.com contributors Brian Feroldi, Brian Withers, and Matt Frankel, CFP, discuss whether investors would be better off with Tesla or traditional automaker General Motors (GM 1.24%).
Matt Frankel: I know at least one of them is a Tesla fan. I'm curious to think of whether you think GM is a good stock to buy or a legacy automaker that isn't going to be a great place for investors to put capital.
Brian Feroldi: I'm in the not a great place to put capital camp.
Frankel: OK. Well, one of the investment principles I try to get across, and I'm pretty sure you've tweeted something to this effect, is that if you don't understand the other side of the argument, then you haven't done enough research yet. I totally get that not everyone is on board with that. There's a reason that GM trades for just over 10 times earnings. It's not because people are as optimistic as they are about Tesla. I know I'm in the minority there. Other Brian is being silent, so I'm wondering what he thinks.
Brian Withers: I'm very similar. I watched GM close factories and just the amount of plants that they had in Michigan alone. I remember a story in Fortune and how that's decimated. They've laid off hundreds of thousands of people over the years. I like Mary Barra. I think she's the right CEO for GM for this time. But yeah, I just can't get over the capital requirements. I like companies to have recurring revenue, and so it's hard to say that you're going to buy a new GM car every month. [laughs]
Feroldi: We don't have full time to debate [laughs].
Frankel: I see a couple of comments in the chat wanting a debate.
Withers: Yes Dog Mom she said, bring it on.
Feroldi: I will happily do that. There's obviously tons to talk about here and I will point out that we had a pretty extensive multi-hour debate about Tesla, a couple of months ago. We had hours upon hours of Tesla debate. We had the bear argument, the bull argument, that kind of thing. We could do the same thing with GM and Ford (F 2.45%).
Frankel: I'm going to try to egg Brian on a little bit right here. GM also made it clear that they have no interest in putting that $22 billion of cash in Bitcoin (BTC +2.05%). Another thing I love about the company.
Feroldi: They're making mistakes left and right is what you're saying man, right? [laughs]
Frankel: I mean, any CEO or any board of directors has a fiduciary responsibility to shareholders. How can you make the fiduciary argument for putting part of your company's assets that you're expected to use to grow the business, into a speculative asset? Regardless of what you think Bitcoin's going to do, I don't see how you can make the case to that's in shareholders best interest.
Withers: It's a marketing play. [laughs]
Feroldi: Exactly. One, it's a marketing play. Two, it's irrelevant. Tesla's worth $783 billion. $1.5 billion in Bitcoin is 0.1%, 0.2% of their market value.
Frankel: Yes, but what percentage of their cash is it?
Feroldi: 5%, 7%, something like that.
Frankel: It's not nothing.
Feroldi: Yes. Yes, they've made money on it so far. [laughs]
Withers: In the last couple of days, awesome. Yes.
Frankel: So did the person who bought the right lottery ticket yesterday. You can't really make that argument. Maybe next week we'll have a show where Brian Withers can be the referee.
Withers: There you go. [laughs]
Frankel: My argument is that, if their EVs sell as well as their gasoline cars, and if Cruise realizes its full potential, I think there's no reason GM can't be a 10x in the next decade.
Withers: Wow. You heard it here first.
Feroldi: You might be right.
Frankel: Like I said, it would still be worth less than Tesla. [laughs]
Feroldi: The tricky thing for me, the hard part that I have with the traditional automakers is, when there's a sea change in technology, it is extremely hard for a company to change its business model to a different platform. It's a very, very hard thing to do. It's not impossible. It's just extremely hard.
Frankel: I would argue that GM actually made a mass-market EV, two decades before Tesla was a company.
Withers: Yes.
Feroldi: Yeah, and then crashed it. [laughs] They should be the leader.
Frankel: It's not a total pivot, I'm saying. They've been developing EV technology for some time. The Volt was a pretty revolutionary vehicle in its price range. You really can't argue that. I'd say out of the traditional automakers, GM has a first-mover advantage in EVs.
Feroldi: Like Brian said, I think that Mary Barra is doing a great job. I like her as a leader. I just don't know if I would put capital on them succeeding, but I could be wrong.
Withers: I could totally be wrong, too.
