While investors are less affected by the appeal from Tesla stocks and also believe less in Bank of America following the Fed’s expressed line, on the horizon, Berkshire Hathaway could emerge as a valuable ally for both companies
Bank of America and Tesla stock analysis
Let’s take a look at the reasons for the moment of crisis for two of the largest U.S. companies, Bank of America and Tesla suffering in the value of their shares.
One savior for Bank of America and Tesla stocks
Two weeks ago on Twitter Elon Musk responded to a tweet by a brilliant Canadian trader by igniting analysts’ fantasies.
Trader Gurgavin Chandhoke, a Canadian of Indian descent, had written on Musk’s social:
“Warren Buffet’s Berkshire Hathaway now has over $128 billion in cash, what stock should he buy?”
So far the usual, views provocation typical of social media, but what would happen from there shortly was something unimaginable.
Elon Musk takes the conversational spotlight by responding to the trader’s provocation.
Musk suggests that Warren Buffet invest Berkshire Hathaway‘s cash “starting with T….”
The allusion to the electric automotive company leaves no doubt in the interpretation given the company’s three cornerstones (historical stock performance, solidity, and results on the balance sheet).
For the naturalized Canadian entrepreneur, Buffet should broaden his portfolio by reserving a nice chunk for Tesla and not just the other eight largest companies in America.
Musk essentially feels like the big outcast in the game since other companies in Buffet’s family foundation portfolio are underperforming by far.
The investment genius’ holding company is to date the majority U.S. shareholder of eight apex American companies including American Express, Chevron, Coca-Cola, HP, Moody’s, Occidental Petroleum, Paramount Global, and Bank of America.
Tesla’s founder also did not spare criticism for Charlie Munger, chairman of Wesco Financial.
The Tycoon reminded Munger that if he had invested in Tesla when they had lunch together in 2008 he would now be among the richest men in America.
Tesla (NASDAQ: TSLA) falls again after a positive start to the year partly as a result of quarterly earnings data.
The short-term reversal began Wednesday, continued yesterday following Berenberg’s downgrade of the stock, and continues today.
For Berenberg, the uptrend will show weakness after such significant growth since the beginning of the year.
Tesla has cut and intends to cut again the selling prices of its fleet of cars, and according to the investment firm, this is an investment in the future.
The watchword is volumes and not more margins (at least in the short term).
Berenberg stated :
“This allows it to position itself competitively concerning the launch of new electric vehicles (EVs) with the start-up of the Berlin and Austin plants, which replicate elements of Shanghai’s low-cost processes.”
Tesla is up 37 percent since the beginning of the year, but the run seems to have stalled in fact and even according to some analysts.
Today the quintessential electric car stock is worth 162.70 euros, down 5.22 percent from yesterday.
Also weighing on the stock are the recent problems with the steering wheel of the latest Teslas produced.
The steering wheel, it seems, can be easily disassembled, creating a safety problem that has led to the recall for modification of many units.
Bank of America (BAC)
Panic also gripped lovers of Bank of America, which like Tesla is having difficulties.
Last Friday the stock lost 6 percent in the stock market after a small regional bank declared bankruptcy.
In addition to the fear of default, Powell’s policy of calling for increases in the certificate of deposit rates weighs on the U.S. bank.
The sell-off had already occurred in the fourth quarter and this period closely resembles it.
Under pressure are not only the U.S. banking sector but also the entire U.S. economy in the medium term.
The likely compression of rates in the face of what is happening, in reality, raises concern.
Major volume banks like Bank of America are protected by protections from the state but are not entirely invulnerable to monetary policies.
If BAC’s value collapses much below $23 a share it would be a catastrophe comparable to the last great financial crisis.
Bank of America today loses an additional 6.20 percent, stopping at $30.54.
Even major banks such as Silicon Valley Bank (SIVB) had to run for cover by issuing new shares leading the stock to lose 56 percent in 24 hours.
The banking sector as a whole is in a sharp crisis because of the Fed chairman’s words.