Why McDonald’s Is A Better Stock Than Tesla
Writing this, I’m not gonna position this as a bash of Tesla Motors. It’s a cool company doing cool things where they can change the world. Elon Musk is a great leader in his company and challenged American automotives to new levels. That all said, when it comes to where to put money, I’d with zero questions find it a safer and stronger bet to invest in the company that serves fries with 30,000+ locations over the company making electric cars. Don’t believe me? Let’s continue reading and see my logic.
Starting out, let’s actually look at why Tesla isn’t that great of an investment. Let’s really dive in with Elon Musk starchild and see the problems which could set it back.
Problem One-Elon Musk
Perhaps the largest issue with Tesla is the company is surrounded by the brand of one man. Call Elon a genius or call him a fraud, he’s still the face of an empire. At this point Musk has more attachment to Tesla now over what Walt Disney had to the Disney company in the 60s.
With all of that, Elon Musk while being the brand might have some problems. The first one being that it took a nearly three billion dollar bonus to keep him at Tesla as CEO showing some clear signs he’s open to walking. Second, Elon has at least on a public level put more time into building the brand of the Boring Company. Third, Elon is a man who has packed on a few pounds, has kind of these weird girlfriends and doesn’t really live that healthy of a lifestyle. If he died or left the company, the stock would enter a free fall. People would follow Musk and not follow Tesla.
This is a big problem and even other giants such as Apple, Facebook, Walmart and Microsoft aren’t as visibly attached with one name. The only thing comparable is Berkshire Hathaway and Warren Buffet which seems to have a bigger fallback set for the day Warren’s stock drops. This challenge is something anyone looking to invest long term into Tesla needs to think on and prepare for.
Problem Two-The Market Cap Is Nuts
Simplest way to put it. Ford Motors today sits at a revenue of 130 billion last year with profits. Tesla sits at a revenue of 11 billion last year with losses. Fords profit last year was nearly as high as Tesla’s entire revenue. However, Ford sits at a market cap of 42 billion and Tesla at 52 billion currently with me writing this article.
This is just a point that Tesla is likely overvalued for automotive companies and even if revenues climbed 1000%, it would still be smaller than Ford. People are banking on Tesla owning an unrealistic segment of the auto industry with electric cars and it probably isn’t gonna be that big.
Problem Three-The Car Industry Really Sucks
Next point against Tesla is just the auto industry as a whole. It really just sucks. It’s a market where people are moving in droves to cities causing less demand for cars. It’s living in a world people would rather Uber versus drive in. It’s a market where people are constantly producing new products designed to have a higher life expectancy. It’s also a market where used cars are a lot nicer over what they were. Combine that with mountains of insurance and regulatory compliance cost and a shitty industry is born.
Problem Four-Tesla Has Some Real Problems
This is maybe the simplest point to it all. Tesla just isn’t perfect. It seems like a lot of information such as battery tech, solar roofs, debt situations and more aren’t being made very public. Elon Musk while CEO saved solar city by buying it and arguably hurt his shareholders. A lot of problems exist which are real and don’t really seem to be easy fixes. A lot of things could happen where this entire company could be Theranos times five. It’s not likely, but it’s a risk.
With that, we’ve bashed on Tesla enough. Now time to actually look at a good old fashioned hamburger company and say why what started with Ray Kroc screwing over two brothers became what still holds as one awesome stock.
Reason One-McDonalds Has More Room For Growth Than Tesla
These are just a fact. Every week McDonald’s opens a new location in China. Food trucks are still a new and fairly unexplored thing for McDonald’s. India is still a mostly unexplored market for them. Africa is lacking. Retail still has a variety of products consumers enjoy such as McCoffee and others that aren’t tapped into enough.
While most people want to talk about the idea one company is gonna corner all of electric cars, there is just the fact McDonalds can continue to land locations in new countries, products on new shelves and even better hit access to American markets. This is a 30,000 store business that can by 2050 be a hundred thousand stores. There’s no reason growth can’t hold and it probably will.
Reason Two-McDonalds Has Land
When all else fails, go to real estate. Go to almost every small town in America and find a church, a post office, a drug den and a McDonald’s. McDonald’s has the best real estate in almost every town and city in the United States where regardless of trends and changes to the way people eat, they can pivot and modify products to fit that and be in front of everyone. This is a real value that even if the company failed in some weird scandal still gives them a 100% backup where the company will always hold value.
Reason Three-McDonald’s Has A Lot Of Stores
Along with land, there’s stores and stores can grow. When McDonald’s added breakfast to the 24/7 menu, sales grew and gained 8% domestically. As food production becomes more automatic and items can scale easier, items that have previously bombed such as fried chicken, fishes, pizza and more can rise up and expand existing sales even more.
Reason Four-Proven Survival
In 2002, McDonalds had its first quarterly loss and the stock was hammered. Outdated decor. Unpopular reviews on food and menu items. An overly aggressive growth strategy. These were things which made a menu for disaster. They also in that process lost their long time CEO to cancer and in under a year lost their second CEO to cancer at a tragically young age.
Coming back, they just paused expansion and entered a new effort to be better. Holding higher standards on sanitation. Making improvements to technology to speed up waits. Salads and menu items to modernize with health concerns. Premium coffees and teas that pulled people away from Starbucks. The simplicity of just hotter food and made to order food. Even eventually examining children were afraid of clowns and toning down on their lead mascot in advertising. McDonald’s made menu items to order and their stockholders had it their way.
This type of model is something Tesla hasn’t proven and likely won’t be able to prove, but McDonald’s has done if several times.
Reason Five-Realistic Stock Price
And this is just the biggest fact of them all. Despite a global real estate strategy where they are poised to continue growing and gaining prime real estate locations globally. Despite a history of combating failures and fixing them. Despite a multi decade history of success and innovation. Despite all of this, they are still a relatively cheap stock to get at a market cap of just 120 billion. It’s something that’s gonna hold and continue to exist.
Closing this up, we have Tesla which can be a great company, but we have McDonald’s which is a great company. This article isn’t a bash on Tesla, electric cars or Elon, but is a word of advice to all young investors. Just due to a stock being trendy or all over Facebook, that doesn’t mean conventional investments such as McDonald’s or Disney don’t have a big future left to them.