Bill Miller’s Investment Insights: Amazon a Buy, Tesla a Sell
Bill Miller, the renowned value investor, has an impressive track record. While managing the Legg Mason Capital Management Value Trust fund, he outperformed the S&P 500 index for 15 consecutive years from 1991 to 2005. Today, Miller has achieved billionaire status, having founded Miller Value Funds, where he actively continues his investment strategies. His experience makes him a significant figure for market watchers who track his investment moves.
Miller’s Take on Tesla: Overvalued
In the latest quarterly update from Patient Capital Management, where Miller serves as a minority owner and advisor, he expressed his views on two major stocks. He considers Amazon (NASDAQ: AMZN) a buy, while he labeled Tesla (NASDAQ: TSLA) a sell. Miller notes that Tesla, part of the “Magnificent Seven,” is overvalued. He clarified that he respects the company and believes Tesla is well-managed. Nonetheless, he emphasizes that its current price exceeds intrinsic value. He stated, “They’re going to have to knock the cover off the ball in terms of self-driving cars and AI.”
Data by YCharts; PE = price to earnings.
Tesla’s recent performance shows signs of struggle. In the first quarter, the company reported deliveries of only 337,000, marking the lowest quarterly figure in over two years. Increasing competition, particularly from the Chinese EV maker BYD, poses challenges. BYD has gained considerable market share in China, capturing over 30% due to its affordable vehicle options and advanced charging technology. Miller observed, “Tesla’s charging $8,000 for their self-driving system, and BYD has a self-driving system in a $9,000 car. BYD’s cars are just better.”
Much of Tesla’s current valuation relies on anticipated future developments, such as an upcoming Robotaxi demonstration showcasing the company’s unsupervised full self-driving (FSD) technology. Skepticism remains regarding implementation timelines and the actual advancements Musk aims to achieve.
Amazon: Probing the Concerns
Miller’s history with Amazon is notable; he was an early investor and claims to be among its largest personal shareholders outside of the Bezos family. His bullish stance is supported by confidence in CEO Andy Jassy, the strong performance of emerging divisions like Amazon Web Services (AWS), and a push into satellite internet services.
Concerns regarding Amazon’s exposure to China, particularly in light of ongoing trade tensions and tariffs, have made some investors uneasy. Wedbush Securities estimates that approximately 70% of goods sold through Amazon originate from China. However, Miller views these concerns as exaggerated.
Data by YCharts.
Amazon’s expansive resources and supply chain capabilities position it favorably even amid economic uncertainty. Jassy believes sellers could mitigate costs by maintaining their prices to capture market share. Miller acknowledges the potential risks posed by tariffs but maintains that Amazon’s diverse revenue streams, including AWS and advertising revenue, can mitigate these impacts.
With a forward earnings ratio of around 30, which is near its five-year low, Miller sees Amazon as trading at an attractive valuation even if challenges persist in the U.S.-China trade landscape.
Final Thoughts
Miller’s analysis illustrates a clear investment strategy: while he views Amazon as a strong opportunity, he flags Tesla as a riskier choice due to valuation concerns.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
