If I may, I'd like to put some focus back on the long-term view and I'm overdue for an annual update. Here's my previous updates for reference:
1. From 2020 comparing the market & TSLA to the Dot-com bust
2. One year later (2021)
Here is where we are now:
1. Nasdaq 5-year performance (trailing 5 year windows):
95 - 2000 (Dot-com): +456%
Dec 2015 - Dec 2020: +157%
Dec 2016 - Dec 2021: +190%
Dec 2017 - Dec 2022: +60%
2. Sampling of biggest individual performers from Dot-Com and initial Covid disruption:
95-2000 (avg 11x - 40x)
- Intel: +998%
- Cisco: +3,910%
- Oracle: +1,220%
- Microsoft: +1,600%
Dec 2015 - Dec 2020 (avg 2.5x - 6x)
- Apple: +401%
- Amazon: +375%
- Netflix: +361%
- Facebook: +155%
- Zoom: +559% (measures from IPO in 2019)
- TSLA: +1,234% (wow!)
Dec 2016 - 2021 (1.5x - 3x)
- Apple: +148%
- Amazon: +338%
- Netflix: +339%
- Facebook: +184%
- Zoom: +222% (measures from IPO in 2019)
- TSLA: +2,085% (holy cow!)
Dec 2017 - Dec 2022 (big spread! -34% all the way to +725%)
- Apple: +226%
- Amazon: +53%
- Netflix: +63%
- Facebook: -34% (ooof!)
- Zoom: +16% (measures from IPO in 2019)
- TSLA: +725% (wow!)
3. S&P 500 P/E
Dot-com: 44
Covid Peak: ~37
Current: 20.62
4. Yields
Current average earnings yields (E/P) are:
- Dot-com: ~2.2% (1/44)
- Dec 2020: ~3-3.3% (1/29.5)
- Covid Peak: ~2.7-2.9% (1/37)
- Now: ~4.7-5.2% (1/20)
Meaning, investors expect about a 4.7-5.2% return for every dollar they put in to S&P500 type equity now vs the 2% they expected during the dot-com bust and the 2.7-2.9% at the covid rally peak.
10-year US bonds:
- Dot-com: ~6% (crazy! investors went nuts investing in 2% yield equity versus 6% risk free!!)
- Covid Peak: ~1.5-1.7%ish (sensible, basically no return in bonds versus ~3% in equity -- TINA -- there is no alternative)
- Now: 3.5-4% (likely going higher than 4%)
View attachment 882870
Summary:
The one-two Fed punch of liquidity drying (fewer dollars needing to find a home) against an increasingly enticing risk-free return rate (I-bonds hit over 9% for individuals!) makes for a very different landscape for investors. Companies with weak to no earnings have gotten particularly punished.
As a whole, commodities prices have declined substantially from covid peaks. Supply chain shortages have eased significantly and surpluses have popped up in retail here and there. This and other factors have clearly sowed concern and pricing-in of some amount of recession on top of normal interest rate correction.
Much has been written about Elon and the leadership team at Tesla lately. Tesla continues to be an incredible outlier. We've seen a meteoric rise in valuation at
just the right time as substantial earnings began to be produced.
It's clear that what was written in 2020 still applies:
And we can now add the following:
- weathered and continued >50% growth during a historic pandemic supply chain disruption masterfully (remember the chip shortage? battery shortage? parts shortages?)
- Took advantage of a monetary and fiscal stimulus environment to raise capital at premium valuations and ramped a gigafactory in China to a current run-rate over 1m vehicles while also building two new gigafactories
And now enjoys:
- industry leading margins, earnings, growth
- virtually no debt
- ~$20b war chest of cash
There's so much more that could be added to those lists, but I'll leave it here. The future is bright.
