Elon Musk beat the odds with Tesla by building hype then converting it into cash, legendary investor Jeremy Grantham says

• Jeremy Grantham hailed Elon Musk's hype-building skills and Tesla's unlikely success.
• Musk is a "wonderful propagandist" who funded Tesla "out of bullshit and charisma," he said.

Jeremy Grantham marveled at Elon Musk's promotional skills, hailed Tesla's unlikely success, and poked fun at himself for dismissing its stock as overvalued when it traded at a tenth of its current price.

"I have to tell you my favorite loser story," the GMO cofounder and market historian recently told "The Compound & Friends" podcast.

Grantham recalled that he bought a "red, sexy" Tesla car in 2019. He wrote in a quarterly letter to clients that it was an amazing vehicle, but the company's stock was "incredibly expensive."

"From that day it's up 10 times," Grantham said, noting that when he made the bearish call, Tesla wasn't profitable and it was unclear if it would survive the next couple of years.

Tesla now trades at nearly $250; its shares changed hands for under $25 on a split-adjusted basis for virtually all of 2019. The stock surge means its market capitalization has ballooned from about $75 billion to over $750 billion in under four years, making it one of the world's most-valuable companies.

Grantham asserted that Musk beat the odds because "he was such a wonderful propagandist that he was able to talk the stock up way ahead of any possibility," issue stock to raise funds to invest in production, and repeat that process again and again.

"It was almost miraculous management, generating the money out of thin air, out of bullshit and charisma," Grantham said. "If you can look at a company that's worth a dollar and somehow imagine that it can talk its way to being worth 10 dollars — good luck."

The veteran investor also underlined the immense skepticism that Tesla faced not long ago, as many experts predicted it would be crushed by the auto industry's giant incumbents.

"If you go back three years, all you have to do, said the critics, is wait until VW and GM gear up and they're toast," Grantham said. "Because you're comparing people with decades and decades of grinding out vast volumes with these newbies."

"Three years later all you can hear is the sound of Tesla kicking their bottoms," he continued. "It is amazing."

Grantham heralded Tesla's progress versus its old-school rivals, and the broader clean-energy boom, at an event earlier this month.

"I love climate-change stocks," he said. "They will have an incredible top-line revenue growth, driving forward like Tesla and electric vehicles versus dopey VWs and old-fashioned cars. This is the area with the wind in your sails, and to fight it would be a terrible mistake."