In June 2012, Patrick Hop poured his life savings — $30,000 — into Tesla Motors Inc. stock, then trading at about $32 per share. When the stock hit $115 this July, he dumped all his shares and invested in options on Tesla stock, which are high-risk bets on the stock's future performance.
Now Hop, a 22-year-old senior from Millbrae, Calif., studying applied math at the University of California at Berkeley, estimates he's made about $250,000 — at least on paper.
"I have a high risk tolerance, but I don't think the stock is that risky," he said.
Hop is far from alone in being bullish on Tesla, which has developed a cultlike following not seen since the early days of Apple. The company's stock has skyrocketed more than 300 percent this year thanks to a string of successes, from a rave review in Consumer Reports to better-than-expected sales of the all-electric Model S sedan and, last week, five-star safety ratings in federal crash tests. The Palo Alto, Calif., electric carmaker, whose stock closed Tuesday at $167.01 per share, now has a market cap of about $18.5 billion, and some analysts say shares could double again within the next three to four years as Detroit races to play catchup.
Along the way, scores of individual investors have placed heavy bets on Tesla's stock, which is one of the most volatile on the Nasdaq.
Some bought Tesla stock as a way to finance their purchase of the Model S, which has a base price of about $70,000, before a federal subsidy. Many are convinced that Tesla is the next big growth stock, like Apple or Google, and they don't want to miss out.
The Tesla Motors Club forum, an online bulletin board for Tesla owners and fans, is filled with posts and message threads about the "Teslanaires" — those who have realized $1 million in paper gains through Tesla stock trades.
Many Tesla investors, like Hop, engage in options trading, which involves pledging to buy or sell stock at a specific price by a specific date. Timing is everything, making options trading a risky bet that can rack up big gains or gut-wrenching losses.
Financial consultants typically advise against heavily investing in one stock, yet it is advice easily ignored by Tesla fans like Rod Stelling, a 69-year-old retired microbiologist who lives in California's Napa Valley.
Stelling paid $40,000 to reserve a Model S three years before the car was built and got the 64th vehicle off the Fremont, Calif., assembly line. He has "100 percent confidence" in Tesla and says that two rides in the Model S are all it takes to be convinced that CEO Elon Musk and his executive team know what they are doing.
"As soon as I could buy stock, I bought stock," said Stelling, who got in close to the IPO price, which was $17 in June 2010. "My brother-in-law is still convinced they are going to fold. My money manager thinks I am crazy. He says we should diversify, but I'm not going to do that. I've made $250,000 on this. My car is paid for. Of course, you haven't really earned anything until you sell, but I'm holding on. The stock may go over $200 this year."