Joel Greenblatt: Tesla, Groupon And Zynga's 'Business Models Are Suspect'

Renowned investor and founder of Gotham Funds Joel Greenblatt was on CNBC recently to discuss the stocks that he perceives to be overvalued and on his shorting list, including Zynga Inc ZNGA, Groupon Inc GRPN and Tesla Motors Inc TSLA.

Tesla Unattractive

“Tesla is doing great, but they are still not earning money,” Greenblatt said.

“They have a huge market cap; we like companies that are gushing cash and if you are losing money and have a large market cap, those are the things that we find unattractive despite the fact that they have nice potential prospects. The market has taken that into account, plus a lot more.”

Tesla's True Worth

“We really play the percentages,” Greenblatt replied when asked if Tesla has ever reflected its actual worth.

“Obviously the future is unknown, but if you bought a lot of companies that were losing money at these kind of valuation levels, on average you'd end up losing money.

“So, we like to fish where you can make a lot of money, generally; it doesn’t mean that there aren’t some that don’t work out, but we play the percentage.”

Related Link: Play-By-Play Recap of Zynga's Q4 Earnings

NASDAQ Nears 5,000

When asked to discuss how he places Zynga, Groupon and Tesla in the same bracket, especially in light of NASDAQ approaching 5,000, Greenblatt explains whether or not he thinks the market is overvalued.

“Well there are a lot of overvalued companies,” Greenblatt replied. “Generally, if you have high market caps and no earnings or negative earnings, it takes a big move to justify those prices. So, in general, that’s what we are not attracted to.

“In our long/short portfolios, we run a long/short hedge fund and we also run long/short mutual funds and we own over 300 stocks on the long side and 300 on the short side; they are not equally weighted.”

He added, “So, those [Tesla, Groupon, Zynga] are a couple of names that rank quite low – meaning they are very high priced and lose nice amounts of money and their business models are suspect at this point.”