In today’s stock market, the best stories win. Nowhere is that more evident than in Tesla shares.
The bull thesis for Tesla is mostly predicated on a simple story: Elon Musk’s cozy relationship with President Trump will be very good for Tesla. Investors are buying that story big time. Elon Musk reportedly spent $277 million to support President Trump and other Republican candidates in November. Since Election Day, Tesla’s stock has soared 72%, adding a staggering $570 billion to its market capitalization.
In a Bloomberg story about Musk’s Trump trade, Esha Dey writes: “What happened to trigger the turnaround? Nothing at the company, where demand for its cars is still wobbly and the future looks increasingly uncertain. Rather it was what investors regard as a political masterstroke by Tesla’s leader Elon Musk, aggressively supporting President-elect Donald Trump on the campaign trail and taking an unofficial role in his administration. ‘How do you put a value on the fact that Musk has deep access with the incoming administration?’ said Steve Sosnick, chief strategist at Interactive Brokers. ‘You can assign almost any number to it.”
Tesla isn’t the only company benefiting from a blockbuster narrative—story stocks are everywhere.
MicroStrategy (MSTR) is another prime example. The shares are up 422% year-to-date, adding about $69 billion in market-cap. MSTR presently trades at 122 times sales, which seems like an absurd valuation considering the S&P 500 trades at 3 times sales. But nobody really cares about MSTR’s backward-looking valuation or its income statement, because what draws investors to the stock is a compelling story about the future of the company’s balance sheet.
MSTR’s balance sheet is dominated by Bitcoin. Led by a charismatic CEO named Michael Saylor, MSTR has quickly transformed itself from a sleepy software company into a hyperactive Bitcoin acquisition machine. According to Saylor, Bitcoin is the best performing asset in the history of the world, it’s bound to become more popular, and MicroStrategy has devised an innovative approach to make bulk purchases of Bitcoin before a bunch of other countries, companies, and citizens do.
MSTR has been on an equity-issuance spree since late October when it announced plans to sell $21 billion worth of stock and a similar amount of bonds to buy Bitcoin through 2026. The company now holds 439,000 coins worth about $42 billion. It owns just over 2% of the world’s Bitcoin, and is the largest corporate holder in the world.
Through creative storytelling, Saylor has turned a once staid corporation into a sexy way to play the top crypto story in the world. And by doing so, he just catapulted his company into the NASDAQ 100.
Not every company or industry is as good at selling its story as Musk and Saylor are. Top executives from the Energy sector could learn a lot from those two.
Since November 25, the S&P 500 Energy (XLE) ETF has gone down almost every day, losing 11%. Crude oil is +4.0% over the same time frame. That makes zero fundamental sense. Normally, there is a strong correlation between oil prices and the performance of energy shares, because oil prices are the number one factor that impacts earnings.
But these are not normal times. It’s becoming clearer by the day that capital markets are becoming less fundamental. A higher share of the stock market is driven by retail and passive investors than ever before, which means there are relatively less professionally trained investors who know how to scrutinize fundamental numbers.
If energy CEOs want to see their shares perform more inline with their earning power, they need to come up with a better story to win the hearts and minds of investors. The energy sector is cheaper than the rest of the market for a reason. It’s because the storyline overhanging the sector is a buzzkill. The industry needs to counteract politicians who promulgate stories about a slow demise in the use of fossil fuels. Make their company’s story about innovation, transformation, and empowering humanity. The P/E will follow.
Valuations will always play a role in investing, but that role has changed over time. Modern investors who cling too tightly to certain valuation metrics to make their stock decisions are overlooking sea changes like social media, iPhones, meme coins, and other forms of technology that have made storytelling a bigger part of the investment calculus.
If you’re looking for story theme ideas for 2025, here are some areas where I see a lot of opportunity: AI, quantum computing, drones, space, nuclear, lasers, robotics, gig economy and FinTech.
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