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Hedge for July?

Discussion in 'TSLA Investor Discussions' started by Nb1277, Apr 10, 2017.

  1. Nb1277

    Nb1277 Member

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    I am long TSLA (quite heavily so relative to the size of my portfolio) and very much looking forward to a PxxDL Model 3 so I don't fall into this camp but we've seen a lot of negativity on TMC lately regarding the upcoming vehicle. Of course, most of us here are the die-hard fans with exceptionally high expectations for the company's products, but is there a risk that the negativity of a vocal minority catches wind in the mainstream press and leads to even a perceived decline in demand for the Model 3? Specifically, I'm referring to the complaints of minimal interior, fewer features and the other methods of downplaying the car Tesla has recently employed being taken to heart and becoming a point of concern for some on the forum.

    With 400K+ reservations, there is little doubt in my mind that Tesla will be production constrained for a year or two in almost any scenario but given that equities, particularly Tesla, are valued based on future expectations, are folks concerned that unrealistic expectations for a $35K car could create a headwind for the stock in July when the configurator opens and the vehicle begins shipping?

    Aside from unforeseen production challenges and perhaps a short term minor issue next Q of the Osbourne effect, I feel comfortable with the current price until July but I'm wondering whether a hedge makes sense given the risk outlined above and the weight of the Model 3 in the valuation of the stock. Then again, a good hedge would be expensive.

    Anyway, thoughts? Unnecessary concern?
     
  2. FlyF4

    FlyF4 Member

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    I'm wondering (and doubting) that the car really will be just $35K. At best, that will be a base price that probably most customers won't accept. You want windows with that? Ka..ching, $3K please. You want wheels with that? Ka..ching, $5K more for that.... etc.:rolleyes: Yea, yea, a bit of sarcasm here. My point being if the base price increases, or the fact you get practically nothing for that price, then it would affect demand and hence, maybe the stock price as well as investors get cold feet. I sold my stock a couple weeks ago to put the money into another stock.... glad I did even though I really wanted to wait for the earnings report.
     
  3. Nb1277

    Nb1277 Member

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    @FlyF4 Curious, what did you buy?
     
  4. FlyF4

    FlyF4 Member

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    #4 FlyF4, Apr 10, 2017
    Last edited: Apr 10, 2017
    Gee, almost answered the wrong post. I didn't sell Tesla because I was worried about the price. I just got scoop on a biotech stock I was watching for a few months. NVCR. Didn't have it long though. Might buy back Tesla at some point in the future, just not now at this lofty evaluation. Best of luck
     
  5. neroden

    neroden Happy Model S Owner

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    Maybe? Do I care? My investment thesis was for Jan 2019, so the bounces in between are largely irrelevant to me. If you need cash in July, perhaps sell some to make sure you have it.
     
  6. Nb1277

    Nb1277 Member

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    You too. Assuming you bought prior to March 31st, looks like you're off to an excellent start!
     
  7. Nb1277

    Nb1277 Member

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    So you're assuming that, if there is an adverse impact on demand, it would be relatively short lived (resolved prior to Jan 2019)?
     
  8. neroden

    neroden Happy Model S Owner

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    Hell yeah. That is absolutely my opinion. Look at the present-day demand for Model X, which came out late, to poor reviews and quality complaints (and a drop in the stock price!)

    People want a $35K electric car. Even if the Tesla Model 3 has three serious competitors (it doesn't yet), the latent demand can't be met by all of them put together. Any damage to the stock price based on reaction to reviews will be temporary, until the traders notice that the Model 3 is still selling.

    One day, when we're getting close to all cars sold being electric, I'll have to take a serious look at Tesla's competitive position. I don't think that'll happen by 2019, though. Until then, demand for the cars is basically unstoppable.

    Though I have no idea what the stock price will do in reaction to a *perceived* drop in demand, I'm sure that would be temprorary as the perception would be proved false sometime in 2018.
     
  9. GoTslaGo

    GoTslaGo Learning Member

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    Not sure if this answers your question, but one trick I've done over my years of investing is to use "re-balancing" to offset risk. Now the traditional teaching has been you sell the overweight sector and buy the underweight sector.

    So let's say you want to have a 60/40 ratio of stocks/bonds. And let's say in your scenario, due to the run up of TSLA, you're 80/20. Traditional teaching would be that you sell a % of your stock holdings and buy enough bonds to bring your ratio back to your 60/40 goal.

    My personal take on this scenario is to just buy more bonds (or bond funds, I'm too lazy to research all those bonds out there) to bring your ratio to your goal, and NOT sell your stock. This way you don't miss out on appreciations of your stocks. If the stock price goes down, you add more of the stock to keep your ratio. This assumes you're super confident in the stock, or if you're not inclined to follow individual stocks, stock mutual funds.

    Obviously this would not be a day-to-day activity, but since you have a target date, you can pick out intervals leading up to that date to "rebalance" as needed.

    FWIW, this is probably one of the first times I've actually started selling some of my stock mutual funds to re-balance. Mainly because as I've read more here and elsewhere I've realized how fossil fuel heavy most index/passive stock funds are. And I truly believe we are moving to a different phase in the world economy.
     
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