Gyroscopic Investing

1NV35T0R (Greg) wrote:

dualstow wrote: TESLA is up 24% this morning.
The good news is that I bought in yesterday. The bad news is that I bought all of 15 shares as part of a long-term dollar-cost-avg-in. :-D
Oh well, it's going to be a wild ride anyway.

Any idea when you'd sell dualstow? You've been having a great run up lately. In the past week you've made as much as I did in a year hah.

dualstow wrote:I will never sell the shares. They'll probably go to my wife or nephew in 2070 or whenever I croak.

dualstow wrote:I will never sell the shares. They'll probably go to my wife or nephew in 2070 or whenever I croak.

Gumby wrote: I once said that about my AAPL shares that I bought at $9/share. Then when everyone started talking about how AAPL was on the verge of becoming the world's biggest company, I decided it was time to sell my shares after a 2,500% gain ...

Gumby wrote: After I sold, it tripled (and then tanked). And the worst part is that I never put that much money into it to begin with. I would have done better by just putting all my money into the PP. That's when I realized that there is no way, for me, to win with picking stocks — even if I literally pick the world's greatest stock.

rocketdog wrote: dualstow, not to get off-topic here but you look different somehow.  Have you lost weight? 

dualstow wrote:

rocketdog wrote: dualstow, not to get off-topic here but you look different somehow.  Have you lost weight? 

You mean the most recent avatar before this one?

Every so often a stock with a good story catches the eyes of traders and experiences a price spike in response. Tesla Motors (TSLA) is currently that stock. Since the end of April, shares of Tesla have approximately doubled in price, soaring from $53.99 on April 30, 2013, to $104.95 today. When hoopla such as this occurs, it is easy to forget that good stories do not always result in good investments.

Tesla certainly has a lot going for it right now. The high-end electric car company delivered better-than-forecast first-quarter results earlier this month. The company paid back an Energy Department loan last week. Earlier today, its CEO announced plans for a nationwide system of supercharging stations. And Tesla’s main competitor, Fisker Automotive, has hired bankruptcy advisers.

The underlying fundamentals are not favorable, however. Tesla is valued at 71 times book value (total assets less total liabilities). Its current market capitalization of $12.1 billion ranks among the top 10% of all stocks in our Stock Investor Pro database. Tesla is not projected to be profitable until 2014, with forecasts ranging from a loss of $0.15 per share to earnings of $2.26 per share. In other words, analysts are extraordinarily divided on how profitable the company will be next year. The difference in forecasts is even wider for 2015. Plus, Tesla has never generated positive cash flow from operations.

Pay attention to two particular points in the last paragraph. Companies expected to achieve strong future growth are often valued based on assumptions about future cash flow. Analysts project results out for several years and then discount the future cash flows using a rate of return intended to compensate investors for the perceived risks. An inherent problem with such models is “garbage in, garbage out.”? If the forecast growth rates prove to be incorrect—and there have been studies showing analysts projections become less reliable as the length of the forecast period is increased—the calculated valuation will be wrong. Even if the forecasts for the next two years are in the ballpark, Tesla will still have to spend significant sums on increasing production. Unlike software, each additional car sold requires the sourcing of materials and the use of labor to produce it.

Adding to the complexity of the problem are the logistics of electric vehicles themselves. Tesla’s Model S sedan will need to be recharged every 200 to 300 miles, depending on battery size and other factors. Though some infrastructure exists, charging machines are scarce overall. Tesla announced plans today to expand its supercharger network nationwide, but the charging stations still won’t be as ubiquitous as gas stations. Patience is also required on the part of the car owner, since even a supercharging station requires a wait of 30 minutes to get enough power to cover 150 miles of driving range.

Then there is the current limited market for Tesla’s vehicles. Pricing for the Model S starts at $62,400, after factoring in a $7,500 federal tax credit. The forthcoming Model X is expected to be similarly priced. Buyers also have to consider the potential hassles of servicing the vehicles, since only 37 service centers nationwide are either currently open or listed as “opening soon.”?

The idea behind a low-to-no emissions vehicle is a good one and Tesla certainly has an interesting story. But, what makes for a good story often does not make for a good stock. Much money has been lost over the years to good stories. Look past the headlines and consider what could go wrong, what the potential hurdles are and how reasonable or irrational the valuation is. A company with a less interesting story, but good financial strength and an inexpensive valuation can make you a bigger profit than a company with simply a good story but not strong financials or a reasonable valuation.

smurff wrote: If "the higher they rise, the faster they fall" has any legitimacy as a saying, I suspect that Tesla May become an example.  Fun while it lasted.

Pointedstick wrote: This is exactly the situation I was in with my "fruit company investment". What do you do after a big gain? Sell it all and potentially miss out on subsequent possibly parabolic gains? Sell half and risk the remaining half tanking?

If it were me and I had put more than a few thousand dollars in TSLA, I'd probably sell 75% now to lock in that nice fatty gain. Everyone's psychology is different but personally I've found that 50% is not enough to avoid regret if the remaining half falls.

dualstow wrote: The reason I am able to hold onto Tesla tenaciously is because I put in a total of $1000 to begin with. It's just for fun. Compare that to Greg who had 4% in TSLA at one point. So he was "right" to sell, and I am "right" to hold.

Pointedstick wrote: Remind me to tell you about the time my net worth was 35% AAPL sometime.

The stock market is a cruel mistress.

dualstow wrote:

Pointedstick wrote: Remind me to tell you about the time my net worth was 35% AAPL sometime.

The stock market is a cruel mistress.

You must have been grinning from ear to ear when it was over 700.