Stanphyl Capital's Value Stock Pair Trade: Short Tesla, Long GM & Volkswagen

After another brutal year in 2021, Tesla Inc TSLA short sellers are off to a strong start to 2022 with the stock down 14.3% year-to-date after the company was forced to recall 53,822 vehicles that included a Full Self-Driving Beta feature that allowed cars to automatically roll past stop signs.

Spiegel’s Auto Pair Trade: One of Tesla’s most vocal short sellers has been Stanphyl Capital Partners Managing Member & Portfolio Manager Mark Spiegel.

In Stanphyl’s January letter to investors, Spiegel discussed his bearish take on Tesla and how he is using long positions in General Motors Company GM and Volkswagen VWAPY as the long end of an auto value stock pair trade with Tesla.

Related Link: Is It Time To Invest In These 2 Companies Critical To EV Industry Supply Chain?

Spiegel said he still considers Tesla grossly overvalued and is maintaining his short positions in the stock despite closing out a long-term short position in the ARK Innovation ETF ARKK after roughly a 50% gain on the position. The ARKK fund is down about 50% from a year ago.

"VW sells nearly 10 million vehicles a year vs. around 1.2 million a year for Tesla. Yet Tesla’s diluted market cap is over 8x VW’s, meaning that an investor pays around 70x as much for each Tesla sold as for each VW sold!" Spiegel said.

Betting On Value: Spiegel said Volkswagen and GM are "relative value paired trades" against Stanphyl's Tesla short position. GM shares trade at just 8 times 2022 earnings estimates, and Spiegel said the company is making all the right investments in electric vehicle and autonomous driving technology.

"Keep in mind that unlike Tesla, which sells a LiDAR-less fraud to rubes, Cruise is already running a fleet of fully autonomous cars in San Francisco," Spiegel said.

So far in 2022, the long GM and Volkswagen and short Tesla trade is working: Tesla shares are down 14.3%, while GM shares are down just 8.7% and Volkswagen shares are up 4%.

Benzinga’s Take: Spiegel takes a lot of criticism for his bearish take on Tesla, which has certainly been costly in the long term. However, Stanphyl reported a full-year return of 25.9% in 2021, suggesting Spiegel seemingly managed the fund well enough overall to nearly completely offset his misfire on Tesla.