Hey this is tom nash, and on may 26th i posted this video and a lot of you have been asking me about it. Why did i double my position at 650 because the stock performed terrific in the past week? It did 16, but that wasn't the point of my video and my investment. I did that not expecting a 16 return in the week. I did it because of something entirely different and in this video i'm going to try to explain to you what i did now.

Obviously this is just a video, so we have to summarize things but on the screen right now, i want you to take a look at the tesla numbers and i want you to specifically look at financials. So one thing i understand about this market, whether it's going up or down whether this rally is sustainable or not. The one thing that is a constant which is not going to change for the next six months to a year is inflation? Inflation isn't going anywhere whether the market will rally or not, and if it's a debt, cat, bounce or real bounce inflation is here to stay. And if inflation is here to stay, i'm trying to hunt down the companies who, i think would suffer the least from inflationary impact now to be clear, there's no place to hide from inflation.

Every single asset class stocks spawns it's all going to go to by the way gold isn't what you think it is as far as an inflationary hedge, but that's an idea for a whole different video. So if inflation really gets bad there's nowhere to hide your cash is worthless. Your equities are worthless. So you know i've lived through actual hyperinflation in russia.

I can tell you that it ain't pretty, but assuming we're not going to hyperinflation and we do have persistent inflation for the long term, which kind of companies will do better versus the companies that will not and there's a set of rules here that i'm trying to Follow essentially looking for companies with high pricing power, high margins, great cash positions, low debt, consistently high cash flow and low capital requirements. Now here's the thing looking at tesla, the one thing i can tell you is they check most of these boxes quite effortlessly. Now, on top of that, obviously there's risk, but that risk is basically it can be financial risk. It can be political risk, so tesla does have political risk with everything that's going on right now, with elon elon is drawing a lot of fire, so that has to be priced in.

I just think the market didn't price it in completely entirely correctly, with that's a whole different discussion. So let's go through the numbers right. First of all, let's look at the balance sheet now, in times of inflation, interest rates will go up, capital will become more scarce. It's going to be harder to get a loan and the loans will become much more expensive.

Your cost of capital will go up, so, ideally, you would want to be a company that doesn't require taking loans, because you have plenty of cash. Now. Looking at the tesla balance sheet, cash and cash equivalents are 17.5 billion, if you add in the receivables, which is basically what their clients owe them. That's another two and a half, so let's say 20 billion dollars in cash 20 billion dollars in cash, not bad.

Now, if you compare it to their debt right here, their debt is 7 billion and i think it might be lower right now. The sounds a little bit higher than what i remember but 7 billion and you can see they've consistently reduced it from fourteen and a half. Thirteen point: three eight point: nine seven. So they have seven billion of debt versus twenty billion of cash and receivables.

So three times more cash than that, meaning they don't need to borrow and they don't need more loans. They have plenty of cash and they're not going to be a position where they're owned by the bank, with these new interest rates, etc, etc, etc. Now, on top of that, if you go to cash flow, you can see that the company is generating if you go to free cash flow right here and 1.3 billion 3.2 billion 4.6 billion seven billion. So this is in the past four years, one two three four! So in the past four years, tesla generated 1.3 billion, 3.2 billion 4.6 billion and 7 billion of free cash flow.

So the company is not only consistently cash flow, positive. In fact, it seems that they're increasing their cash flow over year over year over year. So in a position like this they're not going to be needing extra capital externally, which means they would not need the loan, probably which means they would not pay high interest rates right now, and that's just really important to understand. So, with these cash flows and with these margins, i'm going to show the margins here in a second, let's go back to the income.

I think the margins are. I said it before they're the best in the industry. There's no doubt about about it in my mind. So 12.7 ebitda 12.7 ebitda over revenues of 62 billion dollars.

So let's do it: 62 billion dollars: 12.7 ebitda. Let's pull it up on the screen and let's do simple math right. So we have 12.7 and the total revenues were 62.2. 12.7.

62.2 yeah. 20. 20 uh. Based on this rough napkin, calculation, ebitda uh ebitda is earnings before interest tax, depreciation, amortization, okay, so twenty percent for some for a company that builds actual products, heavy machinery - uh not bad at all, so the margins are solid.

Twenty percent - we all know demand for tesla - is going through the roof. People are waiting for six seven, eight months, even a year for a tesla vehicle, so the demand is there. We know that their balance sheet is super healthy. It's set up for inflation, they're cash flow positive, their margins are very, very high, which means they can absorb some of the price increases and their demand is super hard line, which means they can roll over a lot of the cost on the clients and basically not Get abused by inflation like this now here's comes the interesting part now.

On top of that, i want you to see right here the profitability, because these are really simple to show so 27 gross margin, 15 ebit margin, 20, eb the margin just to clarify that if you pull up, let's say just for reference, this will clarify this. For you, gm, so gm ebitda is 12.. You remember tesla. Let me show it again: tesla ebitda is 20.4.

You can do the same for ford just to give you an idea, 11.. So about half of tesla. You can actually even do it with toyota, which is the king. There is 15.3, so tesla has better ebitda margins than ford than gm double and still significantly about 20 higher than toyota, which makes 10 times more cars than tesla is the king of automotive right.

So margins are great. We know, demand is great. We know cash flow position is insanely good lots of cash, not a lot of debt. Cash flow, positive, consistent, going up great everything is perfect.

We know the growth is definitely there right. So this is toyota. Let's go back to tesla. Toyota is growing at 15 per year, tesla is growing at 73 per year.

You can clearly see the difference right, so the growth is there. Everything is there and for me, when i look at it, i see a company with very few external potential risks, political risks, which i don't see really harming tesla that bad. But what i do see is a company, that's growing that has terrific margins. That can actually not tamper with demand at all by increasing par.

You know, prices and rolling some of the expenses on the clients. They might have a little bit of more exposure than we'd like to to the prices of energy because they are an auto manufacturer, so prices of energy do matter for them. So it's not a perfect company for inflation because of the exposure to oil prices, but here's the flip side. It's a completely non-discretionary product.

If you think about it now, tesla is an expensive car. It's not cheap, not for anybody, but in this environment, where oil prices crude is going to 120 dollars getting a car that is cheaper to operate and electricity, even though energy prices go up, electricity does not go up as fast as gasoline, so the car is cheaper To maintain cheaper to run and basically, overall, a better experience, so tesla actually saves people money in the times of you know, when you have bad times getting a tesla and spending less money on gasoline is actually a smart business decision. So, even though they're not really non-discretionary products right, but i would just say, with these margins, with this growth, with this pricing power with this balance sheet, this is probably one of the best companies i've seen as far as the pricing goes, and a lot of people Tell me well, tesla is super expensive. Well, i don't think so.

I think it's a unicorn or maybe with one more stock palantir that is really set up for inflation. So that's why i'm absolutely gaga about the stock and that's why i doubled my position. So it did run up 16. It's coming down now in either case i don't mind, i haven't sold it's a long-term investment for me, but i just wanted to share with you why i made that decision, because i see inflation, taking a massive beating and and the market really suffering, and i see Tesla, because of the oil prices, increase, demand and continue to execute, and just you know, go inversely to the share price as the share price goes down, they get better and better.

So eventually it has to catch up just my two cents. Let me know below, if you agree with me, if you disagree with me and yeah and i'll see in the next video real soon. Thank you.