Tesla should ditch carmaking business for batteries, bond manager says

Jeffrey Gundlach: Tesla “could be wildly transformational the way electricity and electromagnets were.”
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NEW YORK (Bloomberg) -- Jeffrey Gundlach has some advice for billionaire Elon Musk: Get out of the car business.

The bond manager, who says he’d rather buy Tesla Motors Inc. shares instead of Twitter Inc., sees a 30 percent chance that the electric-vehicle maker will give speculative investors a “killer” return. Gundlach said he’s been trying to get together with Musk, a fellow Southern California resident, to persuade him to cut a deal with competitors in which Tesla would stop making cars and instead supply automakers’ batteries.

Tesla “could be wildly transformational the way electricity and electromagnets were,” the 54-year-old founder of DoubleLine Capital LP said Tuesday in an interview with Matthew Winkler, editor-in-chief of Bloomberg News, at a forum at Bloomberg LP’s headquarters in New York. “What does Twitter create? It creates information flow, but it’s not really creating anything. If you’re going to buy a high-flier, I would rather own Tesla.”

Musk, 42, Tesla’s CEO, is the 121st richest person in the world, with an estimated net worth of $9.8 billion, according to the Bloomberg Billionaires Index. He plans to add a mass-market electric car in about three years, powered by battery packs. Shares of the company have surged 38 percent this year through Tuesday amid a global push to sell its electric cars.

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Twitter shares dropped to their lowest price Tuesday since debuting in November, slumping 18 percent to $31.85, after it lifted restrictions on sales of shares by insiders and early investors. The stock has declined 50 percent this year after the company reported slowing user growth, raising concern that it may not be able to add more mainstream members.

Simon Sproule, a spokesman for Tesla, declined to comment.

Gundlach, known for specializing in mortgage-backed securities, has beaten 97 percent of fund peers over the past three years, according to data compiled by Bloomberg. The manager, who previously posted top returns at TCW Group Inc., was early to spot trouble in the U.S. property market and correctly predicted the subprime mortgage crisis in 2007. He told investors in 2012 to bet against Apple Inc. shares before they started falling.

Gundlach started DoubleLine Capital after being ousted as chief investment officer of TCW in December 2009 after a dispute. Since his first mutual fund was opened in April 2010, his firm has attracted almost $50 billion in assets, including $32 billion in the Total Return fund.

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