- Dan Niles of Niles Investment Management advises caution on Tesla (TSLA) stock, citing a fundamental issue: a year-over-year decrease in electric vehicle deliveries, which he believes is the primary driver of the stock’s downturn, not just market noise or political sentiment.
- Niles sees Tesla as overvalued with a PE ratio over 100, not aligning with his growth-at-a-reasonable-price investment approach, and prefers value-oriented investments over high-profile tech stocks like Tesla, although he acknowledges Elon Musk’s genius.
- Beyond Tesla, Niles is bullish on networking stocks like Cisco (CSCO) and Adtran Holdings (ADTN) for the next phase of AI infrastructure and surprisingly positive on regional banks, predicting they will benefit from higher interest rates and a less regulated environment under current U.S. policies, with a focus on ETFs like KBWB and IJJ for investment opportunities.
Dan Niles, the founder and portfolio manager at Niles Investment Management, recently shared his cautious stance on Tesla (TSLA) stock during a discussion on Fox Business, highlighting the primary reason to be wary of investing in the electric vehicle giant. Niles pointed out that Tesla’s deliveries of electric vehicles decreased for the first time in over a decade last year, a trend that has continued into January, as evidenced by revenue figures from various countries. This decline in deliveries, according to Niles, is the fundamental reason behind the drop in Tesla’s stock price, overshadowing other noise around the company like political sentiment or Elon Musk’s public persona.
Despite acknowledging Musk’s genius and his transformative impact on technology, Niles emphasized Tesla’s overvalued price-to-earnings ratio, which exceeds 100, making it a challenging stock for his growth-at-a-reasonable-price investment strategy. He suggested that while Tesla’s stock might bounce back technically in the near term, for long-term investment, he prefers stocks that offer more value. Niles does not include any of the so-called “Magnificent Seven” stocks in his top picks for the year, though he mentioned he would consider Meta (META) and Amazon (AMZN) if forced to choose from this group.
Niles also discussed his preference for stocks like Cisco (CSCO) and Adtran Holdings (ADTN), which he sees as crucial for the next phase of AI infrastructure development, focusing on networking rather than the initial build-out of data centers. He sees an opportunity in these stocks as enterprises continue to expand their networks to leverage data more efficiently.
Additionally, Niles expressed a surprising optimism towards regional banks, arguing that higher interest rates could benefit them by allowing more profitable lending. He dismissed concerns about past balance sheet issues by noting that many banks have since rectified those problems and could benefit from less regulation under the current political climate, potentially boosting capital market activities like IPOs and trading volumes.
Niles’s investment philosophy, particularly his focus on value and the current economic environment, led him to recommend ETFs like Invesco KBW Bank ETF (KBWB) for banking and iShares S&P Mid-Cap 400 Value ETF (IJJ) for small to mid-cap companies, asserting that U.S. policies are currently advantageous for these sectors. His analysis provides a nuanced view of the market, emphasizing fundamentals over short-term market sentiment, particularly when it comes to high-profile stocks like Tesla.
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