Is Tesla a good investment?

[JLee]

I'm curious about this claim. The model 3 starts at (base price) $38,000. A cost of $28,000 puts it at a much higher profit margin than other automakers. I don't know a lot about the auto industry but a quick search on automaker's margins shows a 13% - 21% gross margin. The $10k profit on a $38k model 3 is 26% gross margin, and that's the base model. Higher models have higher margin.

Tesla owns their dealerships. That's also gross vs gross comparison, so for the main line auto makers the same costs (or more!) would apply.

This does make the assumption that Tesla's ownership of the dealerships is a cost advantage over the main line auto maker model. It could very well be that independent dealerships operate significantly more efficiently than Tesla's dealer network.

I doubt it - building new from the ground up has an inherent efficiency advantage.

[talltexan]

A problem of the legacy automaker dealerships is that they're largely determined by how the country was laid out in the middle part of the last century. Regulatory drag made it very costly to move them since then and created all sorts of local monopolies.

[lemonlyman]

Well, that was an unexpected week.

[MustacheAndaHalf]

If Tesla bets the company on the Cybertruck, then it could have problems.  Ford sells 900k F-150 a year, and has an all-electric version planned.  Elon Musk has targetted people like him with cars, which works.  I don't think he'll figure out what F-150 and Ram pickup truck owners like... and Ford already has an all-electric F-150 in the works.  Probably a steeper uphill battle than Tesla realizes.

Yep, only 650,000 preorders for the Cybertruck which will be far more rugged than any current thin-skinned painted pretty pickup truck. Definitely in trouble there...

"will be" sounds like counting chickens before they hatch.  That leads to situations where someone throws an object at a window during it's first public appearance, and the window unexpectedly cracks.  What you've heard, and what "will be", are two different things.

I would also point out that it's unclear if the Tesla 3 is profitable.  Producing a lot of something that isn't profitable might not be sustainable.  That may not be true for China and Germany, but the question is if Tesla can keep ahead of competition.

For the next few years, my guess is "yes".  By the time they make Cybertrucks, who knows.

You do realize these arguments are years old and a decade old respectively?

Heard all the same about preorders on the Model 3, and here it is the best selling EV in the world. The "Tesla isn't profitable" has been going on longer (nevermind that the last 3 quarters they posted a profit, despite the pandemic shutdown...)

You're claiming that profitability is an "argument" that can be settled once 10 years ago.  That's not how capitalism works - companies need to show they're profitable constantly, not one time 10 years ago.

Tesla has a forward P/E ratio between 256 (Yahoo Finance) and 435 (Morningstar), neither of which I would call profitable.  What is Tesla being compared against that justifies those valuations?
https://finance.yahoo.com/quote/TSLA/key-statistics?p=TSLA
https://www.morningstar.com/stocks/xnas/tsla/valuation

[lemonlyman]

If Tesla bets the company on the Cybertruck, then it could have problems.  Ford sells 900k F-150 a year, and has an all-electric version planned.  Elon Musk has targetted people like him with cars, which works.  I don't think he'll figure out what F-150 and Ram pickup truck owners like... and Ford already has an all-electric F-150 in the works.  Probably a steeper uphill battle than Tesla realizes.

Yep, only 650,000 preorders for the Cybertruck which will be far more rugged than any current thin-skinned painted pretty pickup truck. Definitely in trouble there...

"will be" sounds like counting chickens before they hatch.  That leads to situations where someone throws an object at a window during it's first public appearance, and the window unexpectedly cracks.  What you've heard, and what "will be", are two different things.

I would also point out that it's unclear if the Tesla 3 is profitable.  Producing a lot of something that isn't profitable might not be sustainable.  That may not be true for China and Germany, but the question is if Tesla can keep ahead of competition.

For the next few years, my guess is "yes".  By the time they make Cybertrucks, who knows.

You do realize these arguments are years old and a decade old respectively?

Heard all the same about preorders on the Model 3, and here it is the best selling EV in the world. The "Tesla isn't profitable" has been going on longer (nevermind that the last 3 quarters they posted a profit, despite the pandemic shutdown...)

You're claiming that profitability is an "argument" that can be settled once 10 years ago.  That's not how capitalism works - companies need to show they're profitable constantly, not one time 10 years ago.

Tesla has a forward P/E ratio between 256 (Yahoo Finance) and 435 (Morningstar), neither of which I would call profitable.  What is Tesla being compared against that justifies those valuations?
https://finance.yahoo.com/quote/TSLA/key-statistics?p=TSLA
https://www.morningstar.com/stocks/xnas/tsla/valuation

750k production runrate, $50k asp at 25% margins. Soon to be 1 m+ when Shanghai phase 2 is complete this winter. Berlin and Austin factories starting in 2021 (early and late respectively). + Energy. Those projections don't include moonshot products and services.

If I believed Yahoo, I'd agree with you but it's a difficult way to invest in a company. Read the 10qs, follow their news, etc. and make your own valuations. I said above $2k/share by Q1 above. There has been one from Wedbush and one from Morgan Stanley at that price since. Maybe Yahoo is right but they give zero rational behind that projection. So it's meaningless to me.

[aspiringnomad]

Buying TSLA shares is a great idea. But only if your goal is to learn what it feels like to have a stock you own go to zero in a bankruptcy. It's the single best short in a market full of overvalued companies. The unsecured bondholders will also lose most of their money (and bondholders have to get 100% of their money back before shareholders get a penny). I think the odds of bankruptcy this year are over 10% and over 70% by the end of next year. They will lose about $1 billion this quarter, and the same next quarter, and will lose at least $500 million per quarter even if they eventually can start making 5000 Model 3's per week (which I don't think they can do until next year, even if they are still in business).

The stock price got so out of control because of incredibly naive people who have no idea what they are doing with investing, but did listen to the media worship and maniacal proclamations from Musk (who routinely intentionally misleads investors in order to separate them from their cash). People are going to lose enormous amounts of money as reality hits. Don't be one of those people.

Tesla beat the over 70% odds of bankruptcy stacked against it last year. I wonder what the odds of bankruptcy are this year.

[The_Big_H]

I could not help but notice.

Market Cap Tesla = $285B

Market Cap Ford + GM = $60B.

[MustacheAndaHalf]

If Tesla bets the company on the Cybertruck, then it could have problems.  Ford sells 900k F-150 a year, and has an all-electric version planned.  Elon Musk has targetted people like him with cars, which works.  I don't think he'll figure out what F-150 and Ram pickup truck owners like... and Ford already has an all-electric F-150 in the works.  Probably a steeper uphill battle than Tesla realizes.

Yep, only 650,000 preorders for the Cybertruck which will be far more rugged than any current thin-skinned painted pretty pickup truck. Definitely in trouble there...

"will be" sounds like counting chickens before they hatch.  That leads to situations where someone throws an object at a window during it's first public appearance, and the window unexpectedly cracks.  What you've heard, and what "will be", are two different things.

I would also point out that it's unclear if the Tesla 3 is profitable.  Producing a lot of something that isn't profitable might not be sustainable.  That may not be true for China and Germany, but the question is if Tesla can keep ahead of competition.

For the next few years, my guess is "yes".  By the time they make Cybertrucks, who knows.

You do realize these arguments are years old and a decade old respectively?

Heard all the same about preorders on the Model 3, and here it is the best selling EV in the world. The "Tesla isn't profitable" has been going on longer (nevermind that the last 3 quarters they posted a profit, despite the pandemic shutdown...)

You're claiming that profitability is an "argument" that can be settled once 10 years ago.  That's not how capitalism works - companies need to show they're profitable constantly, not one time 10 years ago.

Tesla has a forward P/E ratio between 256 (Yahoo Finance) and 435 (Morningstar), neither of which I would call profitable.  What is Tesla being compared against that justifies those valuations?
https://finance.yahoo.com/quote/TSLA/key-statistics?p=TSLA
https://www.morningstar.com/stocks/xnas/tsla/valuation

750k production runrate, $50k asp at 25% margins. Soon to be 1 m+ when Shanghai phase 2 is complete this winter. Berlin and Austin factories starting in 2021 (early and late respectively). + Energy. Those projections don't include moonshot products and services.

If I believed Yahoo, I'd agree with you but it's a difficult way to invest in a company. Read the 10qs, follow their news, etc. and make your own valuations. I said above $2k/share by Q1 above. There has been one from Wedbush and one from Morgan Stanley at that price since. Maybe Yahoo is right but they give zero rational behind that projection. So it's meaningless to me.

Your view depends on ignoring financial data from both Yahoo Finance and Morningstar?
What company should Tesla be compared against to justify 256 and 435 P/E ratios?

[lemonlyman]

Those are forward P/E which means those are their analysts projections. Yes, I ignore those because I make my own valuations when I invest in a company. Also because they're short term. Tesla is not mature company.

Look at any growth stock's Forward P/E as they funnel equity and would be profits back into future product growth. It's so short term and, more importantly, unexplained that it's a meaningless number to me. Maybe it works for you and that's great. Unless they explain the sales, expenses, asp, etc, I don't understand how they arrive at their projections anyways.

[TomTX]

Your view depends on ignoring financial data from both Yahoo Finance and Morningstar?
What company should Tesla be compared against to justify 256 and 435 P/E ratios?

Sounds like you're the one ignoring financial data by focusing on a single parameter rather than the big picture.

It's expensive to scale up production in a capital-intensive industry. Tesla has been roughly doubling production every 2 years.

Growth is worth something. Likely to be a bit low this year because pandemic - but 2Q for Tesla was better than the fossil car manufacturers.

You should also look at EBITDA and other measures of a company's performance.

[PaulMaxime]

You're claiming that profitability is an "argument" that can be settled once 10 years ago.  That's not how capitalism works - companies need to show they're profitable constantly, not one time 10 years ago.

Tesla has a forward P/E ratio between 256 (Yahoo Finance) and 435 (Morningstar), neither of which I would call profitable.  What is Tesla being compared against that justifies those valuations?
https://finance.yahoo.com/quote/TSLA/key-statistics?p=TSLA
https://www.morningstar.com/stocks/xnas/tsla/valuation

If low P/E is your jam then I don't think Tesla will ever be something you'll invest in. Nothing wrong with that value investing can be very profitable. The company is going to invest every dollar of cash flow in growing their production capacity and in lowering prices over time. Management is going to run this thing as close to the edge as they can get away with for as long as possible to meet their mission.

They take the "accelerate the world's transition to sustainable energy" mission very seriously.

I think the only reason they care about profits right now is that they want to get included in the S&P 500 which would be a huge boost to their valuation. As long as cash flow is strong profits are really not that important - you end up being taxed on them and unless you pay dividends what's the point if you have large ambitions?

 To reach their goal they need many more than the 4 existing factories (Fremont, Reno, Shanghai, Buffalo) the 2 under construction (Shanghai and Berlin) and the forthcoming ones (Maybe Texas or Oklahoma?) so I don't expect the investment to slow down any time soon. They have a stated goal to grow 50% per year.

This type of corporate investment is not unprecedented. Take a look at Amazon which still has a P/E of over 150. Amazon also invests most of its cash flow in growing their business and it's definitely a choice. They really only started throwing off lots of profit once AWS became a big deal. People have been shouting that AMZN is way overvalued for a very long time and their stock has pretty much gone straight up.

I've been an investor in Tesla since 2012 at ~$34 a share and am comfortable holding the stock now above $1500 (and my largest position at ~10%). It's going to fluctuate a lot from here both up and down. Has the valuation gotten ahead of itself? Maybe. But the stock went nowhere while the company continued to grow from less than 20,000 cars per year to around 500,000 this year.

They are growing market share while the legacy auto makers are losing theirs, are saddled with huge debt and pension obligations an outdated dealer network and huge investments in "buggy whip" ICE technology that will only slow them down.

P/E is a backward looking instrument. The market is forward looking. TSLA is definitely more risky here at 1500 than it was at 200 for sure but I'm holding on for the next 10 years where I believe that they will be much bigger than they are today.

[MustacheAndaHalf]

Tesla has a forward P/E ratio between 256 (Yahoo Finance) and 435 (Morningstar) ...

If low P/E is your jam then I don't think Tesla will ever be something you'll invest in. Nothing wrong with that value investing can be very profitable ...
This type of corporate investment is not unprecedented. Take a look at Amazon which still has a P/E of over 150 ...
P/E is a backward looking instrument ...

I don't think forward P/E is a "backward looking instrument".
https://www.investopedia.com/terms/f/forwardpe.asp
"Forward price-to-earnings (forward P/E) is a version of the ratio of price-to-earnings (P/E) that uses forecasted earnings for the P/E calculation."

I disagree that a forward P/E of 345 (average of Yahoo and Morningstar) is "low P/E".  A hint that you're wrong is in your example, where even Amazon has a forward P/E of 149.25.  Amazon is the #3 holding in Vanguard Growth ETF, with the other two being Microsoft (fwd P/E 34.1) and Apple (fwd P/E 25.5).  I can keep pointing to growth stocks which have forward P/E below 345, if you want to argue about "value" vs "growth" stocks.

So I think you're wrong about P/E:  Tesla's forward P/E ratio is extreme.  You call everything below 345 "low P/E", even though almost all of the S&P 500 would be "low P/E" by that usage.

It's also interesting that nobody in favor of Tesla compares it to other automobile makers.  I ask repeatedly which company should Tesla be compared to, and the only answer I've gotten is Amazon.  Tesla, the car maker, should be compared to Amazon, the online sales giant.  Which again, to me makes no sense.

[TomTX]

  I ask repeatedly which company should Tesla be compared to, and the only answer I've gotten is Amazon.  Tesla, the car maker, should be compared to Amazon, the online sales giant.  Which again, to me makes no sense.

Okay, which other car manufacturers are very heavily or exclusively BEV with a growth rate similar to Tesla? Fossil cars are D-E-A-D going forward. There are bans all over the world - just with a delay to allow transition to cleaner technologies.

A: A few Chinese manufacturers, but they're not (individually) at Tesla's scale or market reach. They also don't have the battery development, stationary storage or autonomous driving experience Tesla does.

[ender]

  I ask repeatedly which company should Tesla be compared to, and the only answer I've gotten is Amazon.  Tesla, the car maker, should be compared to Amazon, the online sales giant.  Which again, to me makes no sense.

Okay, which other car manufacturers are very heavily or exclusively BEV with a growth rate similar to Tesla? Fossil cars are D-E-A-D going forward. There are bans all over the world - just with a delay to allow transition to cleaner technologies.

A: A few Chinese manufacturers, but they're not (individually) at Tesla's scale or market reach. They also don't have the battery development, stationary storage or autonomous driving experience Tesla does.

Exactly. I don't really understand the fixation on P/E with stocks for companies that are obviously aggressively growing in marketshare.

If P/E was the only thing that mattered, 99% of startups would never get investment money (even/especially pre-IPO, where most startups hemorrhage money, so even if P/E isn't a thing practically the same idea applies). Who would invest money in a company that loses money!?

People expect that long term, Tesla is positioned incredibly well for profitability and growth/domination in the electric vehicle market (and other areas).

[lemonlyman]

Tesla has a forward P/E ratio between 256 (Yahoo Finance) and 435 (Morningstar) ...

If low P/E is your jam then I don't think Tesla will ever be something you'll invest in. Nothing wrong with that value investing can be very profitable ...
This type of corporate investment is not unprecedented. Take a look at Amazon which still has a P/E of over 150 ...
P/E is a backward looking instrument ...

I don't think forward P/E is a "backward looking instrument".
https://www.investopedia.com/terms/f/forwardpe.asp
"Forward price-to-earnings (forward P/E) is a version of the ratio of price-to-earnings (P/E) that uses forecasted earnings for the P/E calculation."

I disagree that a forward P/E of 345 (average of Yahoo and Morningstar) is "low P/E".  A hint that you're wrong is in your example, where even Amazon has a forward P/E of 149.25.  Amazon is the #3 holding in Vanguard Growth ETF, with the other two being Microsoft (fwd P/E 34.1) and Apple (fwd P/E 25.5).  I can keep pointing to growth stocks which have forward P/E below 345, if you want to argue about "value" vs "growth" stocks.

So I think you're wrong about P/E:  Tesla's forward P/E ratio is extreme.  You call everything below 345 "low P/E", even though almost all of the S&P 500 would be "low P/E" by that usage.

It's also interesting that nobody in favor of Tesla compares it to other automobile makers.  I ask repeatedly which company should Tesla be compared to, and the only answer I've gotten is Amazon.  Tesla, the car maker, should be compared to Amazon, the online sales giant.  Which again, to me makes no sense.

Well, we disagree then. Tesla is a disruptor of older industries. If you want to find a comparable company, you won't. And you won't find forecasted P/E answers you want especially if you won't go the extra mile to create your own valuations. Good luck in your investments.

[PaulMaxime]

So I think you're wrong about P/E:  Tesla's forward P/E ratio is extreme.  You call everything below 345 "low P/E", even though almost all of the S&P 500 would be "low P/E" by that usage.

It's also interesting that nobody in favor of Tesla compares it to other automobile makers.  I ask repeatedly which company should Tesla be compared to, and the only answer I've gotten is Amazon.  Tesla, the car maker, should be compared to Amazon, the online sales giant.  Which again, to me makes no sense.

I didn't say that anything below 345 was low p/e. I said that if you invest based on p/e AT ALL then Tesla is not for you. I don't care about P/E at all for rapidly growing companies that are investing all their cash flow in growing their business. Cash generation, revenue growth, and vision is what I look for.

The comparison with Amazon is because Amazon has for years invested nearly all their cash flow rather than turning it in to profits. Profits that don't matter at all if you have a better place for the money.

There are lots of different styles of investing. I like to look for fast growing companies that are looking to the future. Other people want stable businesses with large profits. Both are valid. Tesla is just not for you.

[HPstache]

TSLA still kicking ass and taking names.  Wish my total stock fund had more than 0.4% TSLA in it...

[theoverlook]

Buying TSLA shares is a great idea. But only if your goal is to learn what it feels like to have a stock you own go to zero in a bankruptcy. It's the single best short in a market full of overvalued companies. The unsecured bondholders will also lose most of their money (and bondholders have to get 100% of their money back before shareholders get a penny). I think the odds of bankruptcy this year are over 10% and over 70% by the end of next year. They will lose about $1 billion this quarter, and the same next quarter, and will lose at least $500 million per quarter even if they eventually can start making 5000 Model 3's per week (which I don't think they can do until next year, even if they are still in business).

The stock price got so out of control because of incredibly naive people who have no idea what they are doing with investing, but did listen to the media worship and maniacal proclamations from Musk (who routinely intentionally misleads investors in order to separate them from their cash). People are going to lose enormous amounts of money as reality hits. Don't be one of those people.

Tesla beat the over 70% odds of bankruptcy stacked against it last year. I wonder what the odds of bankruptcy are this year.

Ha! That post has aged very poorly. TSLA closed 3/26/2018 at $266.13, and is $1,594.30 as we speak. Hope nobody made big decisions based on that sentiment. Shorting anything is dangerous; shorting TSLA has been catastrophic.

[talltexan]

I have to admit, I've been wrong about Tesla so far, and only saved from shorting it by the remarkable premium that the market demands for put options. For the jumps in share price this season look...cartoonish. I'm reminded of something like $GBTC three years ago when I see them. They suggest such a possible variation in future outcomes, that I cannot feel good about a long position, either.

[ChpBstrd]

What does it mean to be "wrong" about a stock like this?

If evidence, reason, and analysis show a stock should go up to $5, and it goes to $100 instead, we tend to say there was something wrong with the evidence, reason, and analysis. We don't tend to say the market was wrong. We also refuse to say the outcomes of evidence, reason, and analysis have little if anything to do with stock prices. We believe efficient markets hypothesis so deeply that we can only blame ourselves for not doing the obvious thing by putting 100% of our portfolio into TSLA a couple of years ago, and yet we look at the price today and say it is correctly priced because of EMH. The system is both rational and it can be gamed, we just know it!

Similarly, what does it mean to be "right" about a stock like this?

Is the doofus on wallstreetbets who put his life savings all into TSLA a couple years ago and who is now FIREd smarter than the rest of us? Is he smarter than the people who bet almost everything on pets.com and netscape in 1999?

I'm questioning the entire way we talk about investing. It's a lot more like gambling than a lot of us would like to admit.

[sherr]

I'm questioning the entire way we talk about investing. It's a lot more like gambling than a lot of us would like to admit.

Really? Investing in individual stocks has always been likened to gambling by the vast majority of people here. To the point where the people who do pursue individual investments jokingly refer to themselves as "heretics".

Don't be one of those doofuses; invest in broad indexes. Pay attention to asset allocation, not individual investments. This seems pretty standard advice.

[ChpBstrd]

I'm questioning the entire way we talk about investing. It's a lot more like gambling than a lot of us would like to admit.

Really? Investing in individual stocks has always been likened to gambling by the vast majority of people here. To the point where the people who do pursue individual investments jokingly refer to themselves as "heretics".

Don't be one of those doofuses; invest in broad indexes. Pay attention to asset allocation, not individual investments. This seems pretty standard advice.

So no individual stock is "a good investment" compared to index funds? I'm entertaining the idea. It jives with decades of efficient frontier research. We just happen to live in a time when people are getting rich quick on bubble investments like bitcoin and TSLA.

[sherr]

So no individual stock is "a good investment" compared to index funds? I'm entertaining the idea. It jives with decades of efficient frontier research. We just happen to live in a time when people are getting rich quick on bubble investments like bitcoin and TSLA.

The argument isn't that there aren't any actual "good investments", just that doofuses like me and you are too doofusy to distinguish which is which. I know I certainly am, I would never have invested in TSLA 2 years ago, and that was the exact same time I was buying one of their cars! Insert "it is difficult to make predictions, especially about the future" and "the market can remain irrational for longer than you can remain solvent" and similar platitudes here.

And that chasing individual "good investments" is overall a fool's errand because - lacking that ability - you'll just come out at or behind where the index arrives anyway, only with a lot more volatility and personal risk of losing everything along the way.

I mean yeah I get it, I'm jealous of the guy on reddit that turned $30k in his ROTH IRA into $1MM over three months too. But we all know that for every one-in-a-million guy like that, there's also the 999,999 people who didn't win and don't post to brag about it.

And then add in the effects of missing the 10 best days, which you are of course much more likely to do if you're trying to time the market and/or transferring things around in individual stocks than if you're a set-it-and-forget-it automatic long-term indexer.

Long-term indexing isn't gambling, because everyone wins at it! Investing in or shorting TSLA? Both of those options seem nuts!

[theoverlook]

We just happen to live in a time when people are getting rich quick on bubble investments like bitcoin and TSLA.

Is there ever a time when that wasn't true? Sure the specific investments change but there's always been speculative high risk high potential reward investments. Most of them fizzle out, some don't.

[lemonlyman]

For me personally, Tesla has accomplished 25-30 years of equivalent index investing in a few years time. I've just used my superpowers as naive accountant to forecast valuations of individual companies, resulting in me retiring years earlier compared to when I only bought an index. I'm a heretic just as likely to be called an idiot during 50% downturns (Jan 2019 - July 2019) or 65% downturns ( Feb 2020 - Mar 2020) or lucky like during large upswings such as now. We don't need to get into an individual stock vs index fund argument. Plenty of that elsewhere. Research your own securities. Or don't.

[ChpBstrd]

We just happen to live in a time when people are getting rich quick on bubble investments like bitcoin and TSLA.

Is there ever a time when that wasn't true? Sure the specific investments change but there's always been speculative high risk high potential reward investments. Most of them fizzle out, some don't.

2000-2003 and 2006-2009 come to mind. Of course, speculative short positions might have done well at that time.

[londonstache]

If I was asked to place a bet on what I think will be Tesla's biggest earner in the future, I believe it will be battery storage technology and not EVs. In the same way that AWS is the biggest contributor to Amazon profits, not online retailing.

[PaulMaxime]

For me personally, Tesla has accomplished 25-30 years of equivalent index investing in a few years time. I've just used my superpowers as naive accountant to forecast valuations of individual companies, resulting in me retiring years earlier compared to when I only bought an index. I'm a heretic just as likely to be called an idiot during 50% downturns (Jan 2019 - July 2019) or 65% downturns ( Feb 2020 - Mar 2020) or lucky like during large upswings such as now. We don't need to get into an individual stock vs index fund argument. Plenty of that elsewhere. Research your own securities. Or don't.

Truly. I have a diversified portfolio of individual equities and I have more than twice what I would have if I indexed. I'm pretty lucky. Tesla is a part of that portfolio.

[The_Big_H]

For me personally, Tesla has accomplished 25-30 years of equivalent index investing in a few years time. I've just used my superpowers as naive accountant to forecast valuations of individual companies, resulting in me retiring years earlier compared to when I only bought an index. I'm a heretic just as likely to be called an idiot during 50% downturns (Jan 2019 - July 2019) or 65% downturns ( Feb 2020 - Mar 2020) or lucky like during large upswings such as now. We don't need to get into an individual stock vs index fund argument. Plenty of that elsewhere. Research your own securities. Or don't.

Truly. I have a diversified portfolio of individual equities and I have more than twice what I would have if I indexed. I'm pretty lucky. Tesla is a part of that portfolio.

If you can make twice the market consistently with your investing/stock picking skills you should probably stop whatever you are doing and start a hedgefund and become a billionaire.  That kind of skill is a billion dollar gift you should use it.

Otherwise, some less than charitable mustachians might attribute this as luck rather than skill.

[PaulMaxime]

For me personally, Tesla has accomplished 25-30 years of equivalent index investing in a few years time. I've just used my superpowers as naive accountant to forecast valuations of individual companies, resulting in me retiring years earlier compared to when I only bought an index. I'm a heretic just as likely to be called an idiot during 50% downturns (Jan 2019 - July 2019) or 65% downturns ( Feb 2020 - Mar 2020) or lucky like during large upswings such as now. We don't need to get into an individual stock vs index fund argument. Plenty of that elsewhere. Research your own securities. Or don't.

Truly. I have a diversified portfolio of individual equities and I have more than twice what I would have if I indexed. I'm pretty lucky. Tesla is a part of that portfolio.

If you can make twice the market consistently with your investing/stock picking skills you should probably stop whatever you are doing and start a hedgefund and become a billionaire.  That kind of skill is a billion dollar gift you should use it.

Otherwise, some less than charitable mustachians might attribute this as luck rather than skill.

I'm not opposed to the fact that I've been lucky for sure. Can't hardly believe it myself but I've been tracking my returns against the S&P 500 total return index since 2007.

Equal parts luck, getting good advice and a decent grasp on keeping my emotions under control. Buy and hold, add to my winners, don't let the noise of the market get to you.

Managing other people's money is a whole different ball game. The fact that I'm small and I don't have to answer to anyone except myself are huge factors in my returns.

Having clients that are breathing down your neck about the most recent quarter never helped anyone invest well.

[lemonlyman]

For me personally, Tesla has accomplished 25-30 years of equivalent index investing in a few years time. I've just used my superpowers as naive accountant to forecast valuations of individual companies, resulting in me retiring years earlier compared to when I only bought an index. I'm a heretic just as likely to be called an idiot during 50% downturns (Jan 2019 - July 2019) or 65% downturns ( Feb 2020 - Mar 2020) or lucky like during large upswings such as now. We don't need to get into an individual stock vs index fund argument. Plenty of that elsewhere. Research your own securities. Or don't.

Truly. I have a diversified portfolio of individual equities and I have more than twice what I would have if I indexed. I'm pretty lucky. Tesla is a part of that portfolio.

If you can make twice the market consistently with your investing/stock picking skills you should probably stop whatever you are doing and start a hedgefund and become a billionaire.  That kind of skill is a billion dollar gift you should use it.

Otherwise, some less than charitable mustachians might attribute this as luck rather than skill.

I don't believe I have the skill to do that. I would make the hasty prediction I've never encountered anyone who does. Investing billions moves stock prices and markets. That's a completely different way of planning compared to investing small amounts of money. Nor do I have the skill to sell and raise capital, manage a large team, or know the regulations required to start and operate a hedge fund. I would say, perhaps, those less charitable mustachians and bloggers don't actually know everything about investing. That, maybe, believing you're incapable of learning about business and finding companies worth your investment is a potent reason why you haven't.

[waltworks]

I don't believe I have the skill to do that. I would make the hasty prediction I've never encountered anyone who does. Investing billions moves stock prices and markets. That's a completely different way of planning compared to investing small amounts of money. Nor do I have the skill to sell and raise capital, manage a large team, or know the regulations required to start and operate a hedge fund. I would say, perhaps, those less charitable mustachians and bloggers don't actually know everything about investing. That, maybe, believing you're incapable of learning about business and finding companies worth your investment is a potent reason why you haven't.

More likely you got lucky, and for every person chiming in here who got lucky, there are 9 (or more) who didn't get lucky who we'll never hear from. When your luck runs out, we'll stop hearing from you, just like all the other folks over the years.

Regardless, kudos. I'm not trying to be mean, I'm glad you beat the market. I just doubt it involved your skill as much as you think it did.

-W

[lemonlyman]

More likely you got lucky, and for every person chiming in here who got lucky, there are 9 (or more) who didn't get lucky who we'll never hear from. When your luck runs out, we'll stop hearing from you, just like all the other folks over the years.

Regardless, kudos. I'm not trying to be mean, I'm glad you beat the market. I just doubt it involved your skill as much as you think it did.

-W

Fair enough. Cheers! I hope you do well too. I'm about done here regardless. After 5+ years, there's very little left to learn and most of my favorite personalities are already gone.

[robartsd]

I don't believe I have the skill to do that. I would make the hasty prediction I've never encountered anyone who does. Investing billions moves stock prices and markets. That's a completely different way of planning compared to investing small amounts of money. Nor do I have the skill to sell and raise capital, manage a large team, or know the regulations required to start and operate a hedge fund. I would say, perhaps, those less charitable mustachians and bloggers don't actually know everything about investing. That, maybe, believing you're incapable of learning about business and finding companies worth your investment is a potent reason why you haven't.

Good point about managing other people's money. It's not that I don't think I can learn to invest my own assets at better than index fund returns, it's that I don't think it would be worth my time to do so. By the time I have enough investment assets that the difference in return that I think I could expect would be worth the time, I should be too close to FI to care. Of course my expectation is that with sufficient time spent studying businesses, the average yield from stock picking might be closer to 25% better than the index than the returns you've seen.

I agree with everyone here that expects Tesla to increase profits over the next decade or longer, but I also agree with those here who question if Tesla's price already exceeds the value of those increased profits.

snip

Reported as the spam that it is.

Now your quote is the record of it appearing here.

[PaulMaxime]

Good point about managing other people's money. It's not that I don't think I can learn to invest my own assets at better than index fund returns, it's that I don't think it would be worth my time to do so. By the time I have enough investment assets that the difference in return that I think I could expect would be worth the time, I should be too close to FI to care. Of course my expectation is that with sufficient time spent studying businesses, the average yield from stock picking might be closer to 25% better than the index than the returns you've seen.

Hmm. so if your portfolio managed the long term average (say 10%) for 20 years with no cash additions you would have ~6.7X your initial investment. Not bad.

25% better is 13.75% per year. In 20 years that's ~13.1x your initial money. Seems worthwhile to me. Twice the capital means you can withdraw more or retire earlier.

Is this guaranteed, no. Is it easy, no. Should you try? That's up to you. There's definitely a chance that you'll fail and end up with less than just indexing. It's not like it's all or nothing or you can't change your mind if it's not working.

Just like paying 1% to a financial advisor every year (9% vs 10% leads to 5.6x vs 6.7x) ends up absolutely killing your returns even though it seems small at the time, improving things a little compounds. As humans we really have a hard time understanding exponential processes.

[robartsd]

Hmm. so if your portfolio managed the long term average (say 10%) for 20 years with no cash additions you would have ~6.7X your initial investment. Not bad.

25% better is 13.75% per year. In 20 years that's ~13.1x your initial money. Seems worthwhile to me. Twice the capital means you can withdraw more or retire earlier.

Is this guaranteed, no. Is it easy, no. Should you try? That's up to you. There's definitely a chance that you'll fail and end up with less than just indexing. It's not like it's all or nothing or you can't change your mind if it's not working.

Just like paying 1% to a financial advisor every year (9% vs 10% leads to 5.6x vs 6.7x) ends up absolutely killing your returns even though it seems small at the time, improving things a little compounds. As humans we really have a hard time understanding exponential processes.

Not sure how 13.75% annual return is a 25% more than 10% annual return.

More importantly, it's not about how much return I make on money I have today. I'm accumulating savings to reach financial independence - the value of the higher returns is less because there's less average time in the market. My estimation is that at a savings rate of 1/3 of income (1/2 of expenses) one could expect to reach FI (25x expenses) in about 19 years if returns average 10% per year. Increasing the rate of return to 12.5% would shave just over 2 years off the expected time to FI. 2 years of full time work is about 4000 hours. 4000 hours over 17 years is about an hour per business day.

[PaulMaxime]

Hmm. so if your portfolio managed the long term average (say 10%) for 20 years with no cash additions you would have ~6.7X your initial investment. Not bad.

25% better is 13.75% per year. In 20 years that's ~13.1x your initial money. Seems worthwhile to me. Twice the capital means you can withdraw more or retire earlier.

Is this guaranteed, no. Is it easy, no. Should you try? That's up to you. There's definitely a chance that you'll fail and end up with less than just indexing. It's not like it's all or nothing or you can't change your mind if it's not working.

Just like paying 1% to a financial advisor every year (9% vs 10% leads to 5.6x vs 6.7x) ends up absolutely killing your returns even though it seems small at the time, improving things a little compounds. As humans we really have a hard time understanding exponential processes.

Not sure how 13.75% annual return is a 25% more than 10% annual return.

More importantly, it's not about how much return I make on money I have today. I'm accumulating savings to reach financial independence - the value of the higher returns is less because there's less average time in the market. My estimation is that at a savings rate of 1/3 of income (1/2 of expenses) one could expect to reach FI (25x expenses) in about 19 years if returns average 10% per year. Increasing the rate of return to 12.5% would shave just over 2 years off the expected time to FI. 2 years of full time work is about 4000 hours. 4000 hours over 17 years is about an hour per business day.

10% return means multiply the previous value by 1.1. 1.1 * 1.25 = 1.1375.

But sure, the money you add later has less time to grow. True for me - I've had some large influxes in the past couple years because my privately held company did a couple tender offers where we could sell stock to external investors, and my income has grown over these past years. So 21.5% per year (my time weighted return ignoring cash flows) vs 10.43% per year for Mr. SPY means that I have 2.25X what i would have had with indexing in 14 years, because the most recent money hasn't had as much time to grow. But I'll take the extra.

[talltexan]

With all the attention on Tesla, I feel like we've missed the dramatic surge Amazon's shareprice has seen in the last four months. An already large company has basically doubled, with what feels like much less news coverage.

[ender]

With all the attention on Tesla, I feel like we've missed the dramatic surge Amazon's shareprice has seen in the last four months. An already large company has basically doubled, with what feels like much less news coverage.

Well, I mean TSLA was $255 a year ago and is now $1581 (a 6.2x increase).

AMZN "only" went up 1.6x from a year ago.

[robartsd]

10% return means multiply the previous value by 1.1. 1.1 * 1.25 = 1.1375.

Ah, I see how you came up with the number now, but I disagree with your reasoning. 10% return means you add 10% to the original value. You can shortcut this with math by multiplying the value by (1 + 0.1). I believe it should be (1 + (0.1 * (1 + 0.25))) not ((1 + 0.1) * (1 + 0.25)).

[PaulMaxime]

10% return means multiply the previous value by 1.1. 1.1 * 1.25 = 1.1375.

Ah, I see how you came up with the number now, but I disagree with your reasoning. 10% return means you add 10% to the original value. You can shortcut this with math by multiplying the value by (1 + 0.1). I believe it should be (1 + (0.1 * (1 + 0.25))) not ((1 + 0.1) * (1 + 0.25)).

Whichever way you want to do it. 12.5% return for 20 years == 10.5x your money vs. 6.7x so still pretty significant.

[Davnasty]

...snip

Reported as the spam that it is.

Reported as the spam-quote that it is :)

[BTDretire]

The conventional wisdom is,
"Buy low and sell high, and if it doesn't go up don't buy it."

Hmm, $505 to $1539, it did go up, so you should have bought it!
Mar 23 to July 27.

[bacchi]

I have to admit, I've been wrong about Tesla so far, and only saved from shorting it by the remarkable premium that the market demands for put options. For the jumps in share price this season look...cartoonish. I'm reminded of something like $GBTC three years ago when I see them. They suggest such a possible variation in future outcomes, that I cannot feel good about a long position, either.

You aren't kidding. A 20% OTM January put is ~$150. Wow.

Maybe I'll short it instead.

[bacchi]

The conventional wisdom is,
"Buy low and sell high, and if it doesn't go up don't buy it."

Hmm, $505 to $1539, it did go up, so you should have bought it!
Mar 23 to July 27.

You're admonishing yourself.

[BTDretire]

The conventional wisdom is,
"Buy low and sell high, and if it doesn't go up don't buy it."

Hmm, $505 to $1539, it did go up, so you should have bought it!
Mar 23 to July 27.

You're admonishing yourself.

If that's so, it's OK!

[FrugalSaver]

so when we geting added to the S&P?  been over 3 weeks now.  Does Elon do a split and take it to $2000 with that news as well?

[BTDretire]

so when we geting added to the S&P?  been over 3 weeks now.  Does Elon do a split and take it to $2000 with that news as well?

 Nah! he'll split it before that.
https://techcrunch.com/2020/08/11/tesla-announces-5-for-1-share-split-rallies-8/

[park10]

I have to admit, I've been wrong about Tesla so far, and only saved from shorting it by the remarkable premium that the market demands for put options. For the jumps in share price this season look...cartoonish. I'm reminded of something like $GBTC three years ago when I see them. They suggest such a possible variation in future outcomes, that I cannot feel good about a long position, either.

You aren't kidding. A 20% OTM January put is ~$150. Wow.

Maybe I'll short it instead.

Just a 2 week 1 std dev iron condor can be sold for more than $10, which is stunningly high premium...

[DarkandStormy]

More lies from Musk & Co. yesterday.

Where are the robotaxis?   Where is the semi that was supposed to be into production by 2019?  Where is the coast to coast fully autonomous trip that was supposed to be completed by 2018?  Where is the new gen Roadster that was supposed to be out in 2020?  Where is the 620 mile range that was "for sure" going to happen by 2017?  Where are the 10k/week Model 3s out of Fremont that "zero doubt" was happening by 2018?  Where are the solar roofs?

Musk and TSLA are built on outlandish lies and promises, which pump the stock.  Then when we get to the point of those promises not coming true, Musk doubles down.  They've mass produced a sedan and a hatchback version of that sedan with horrendous quality issues.  They're running at 1% margins and a 1k+ P/E ratio.  It's a cult stock.