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USA: Tesla Motors (TSLA): A Glamorous Growth Stock

We prefer putting our money in companies that have rapid sales and earnings growth as well as big stories for future growth; it’s the combination of the two (along with a healthy market and impressive charts) that puts the odds in your favor. But we also know that, in a bull market, you can come across a speculative name with a big enough story, and with enough pieces already in place (like top-notch management), to attract big investors.

We refer to these as glamour stocks, and we think Tesla Motors (TSLA) can be one of those. We wrote about Tesla in the November 16 Cabot Market Letter; read that article for background. The short story is that Tesla is aiming to be the leader in the still-emerging electric car industry, but it’s aiming to do so not by emphasizing green advantages, but by making electric cars that are high-performance and extremely stylish.

Tesla’s Roadster, a high-performance electric vehicle (0 to 60 in 3.7 seconds!) that was launched a few years ago and sells for a cool hundred grand, has been a hit among the ultra-rich crowd, with 2,150 sold, including 150 in the fourth quarter. But the real potential lies in Tesla’s two new autos—its Model S sedan and its Model X crossover, which combines elements of a sports car, an SUV and a minivan.

The Model S is causing the excitement now; it’s been in testing for many quarters and deliveries are set to begin in July. Impressively, the backlog has been accelerating, with 1,500 new reservations (each of which requires a $5,000 deposit) in the December quarter, bringing the total to north of 8,000. Tesla believes it can produce and ship 20,000 Model S sedans per year, likely starting in 2013. At north of $50,000 per pop, that’s big money
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