Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[winfield100]

OT but it's Sunday here in the USA.

With the 110v outlet, what's your charging routine? I assume you either do not let the battery deplete too low, or you don't charge to 90% (or you have the flexibility to let the car charge for a couple of days). Your insight would be helpful.

Just plug in and charge, eh.

 

[Zextraterrestrial]

My rough napkin projection of Share Price for TSLA (IMHO) by October 2020 is a conservative $621:

- $360 August 7th, 2018 was fair value before Elon's infamous $420 Funding Secured tweet and Saudi stake announcement
- $180 Since then, SP dropped 50% in extreme fear campaign. Stock market works on fear and greed.
- $540 We are now in greed mode and expect share price to increase by 50% from 2018 levels.
- $621 However Nasdaq has gained 15% since August 2018, so let's go with the average.

I believe a big catalyst for TSLA share price increase in 2020 will be the lack of competition from OEM and realization that the Tesla killers simply do not exist. The competition will slowly come out with delays and inferior specs and Tesla's lead will be bigger. The OEMs are already realizing it's not easy being green.

Edit: Nothing is certain. Invest within your means with a long term horizon (+5 years). A financial wide recession would significantly impact most all investments.

I think this is spot on. Probably will hit higher highs briefly, no idea how high that could be?
The competition is what I’m waiting for. In coastal Northern California the new fast charge infrastructure that still is just almost turned on will only support a few cars charging at a time. 4 chargers but only 2 can be used at a time!? That will be for all other OEM vs Tesla’s currently 8 chargers, which is expandable too. The EVGo(I think that’s the co?) have a non expandable layout.
I’ve heard it’s opposite in Europe somewhat but I just don’t see competitors having a good usable product for road trips and all purposes for a long time.

 

[Chunky Jr.]

I see a lot of similarity between the current state of transport and the early days of the personal computer. At first everyone tried to do their own proprietary design, but eventually the industry standardized on a common architecture and innovated/differentiated themselves via case design, graphics processing, add on software, price, etc. I see the EV industry going the same way, with the common architecture being the Tesla skateboard and the other automakers innovate with interior and exterior design, software, and price.

The competition is realizing how hard it is to compete with Tesla to build a compelling skateboard, so it now turns into a build/buy decision for the skateboard, and I think the industry will move towards buying. Eventually someone will come up with a compelling Tesla clone like AMD did with Intel. At some point, Tesla could be producing more skateboards for other manufacturers than it does for themselves.

I could be way off on this, but to me it seems like history is repeating itself here.

 

[S3XY]

I love retirement. I hope you do, too.

Keep a suit or two. I just wore one to a wedding.

Keeping them is easy. The difficult part is continuing to fit in them.

 

[HG Wells]

I see a lot of similarity between the current state of transport and the early days of the personal computer. At first everyone tried to do their own proprietary design, but eventually the industry standardized on a common architecture and innovated/differentiated themselves via case design, graphics processing, add on software, price, etc. I see the EV industry going the same way, with the common architecture being the Tesla skateboard and the other automakers innovate with interior and exterior design, software, and price.

The competition is realizing how hard it is to compete with Tesla to build a compelling skateboard, so it now turns into a build/buy decision for the skateboard, and I think the industry will move towards buying. Eventually someone will come up with a compelling Tesla clone like AMD did with Intel. At some point, Tesla could be producing more skateboards for other manufacturers than it does for themselves.

I could be way off on this, but to me it seems like history is repeating itself here.

Don't forget the Z80 from Zilog. BEST CPU of its time.

Altair, IMSAI, Southwest tech, and my favorite Processor Technology with the SOL 20.
LIFE was wonderful. I had all those and several more.

 

[ReflexFunds]

Great post. Two questions:

1. Why would anyone ever get a company car with 37% BIK? That'd be 18.5k of annual taxable income on a 50k car. Zero down lease on a 50k car should be ~600/mo or 7.2k per year. Why would a company lease a car for an employee and trigger 18.5k of annual taxable income instead of just paying a 7.2k annual taxable bonus so the employee could lease the car themselves?

2. Since the new BIK rate will apply to cars leased today why don't we see a massive EV ramp already?

1. I guess nobody actually does get these high emission company cars anymore since the new more aggressive CO2 driven BIK rates. I think UK policy is likely heavily focussed on putting pressure on corporates to start the EV transition. Generally the ICE BIK rates are not particularly favourable for employees anymore, they used to be a lot better a few years ago. Now I'd guess most company cars are for companies that have a good reason to own them, rather than an employee just trying to get a benefit. This is likely to start changing with the new EV rates.
2. I've heard (but not verified) that many company car lists are only refreshed once per year in April so Model 3 has not yet been available. Also, 20% of annual UK car volume is in March which suggests most company car leases end in April ready for new cars at the start of the new tax year.

 

[Fred42]

It's the week-end, I am resting in an Italian Tesla Destination Charger Hotel and want to guess about something else than the TSLA SP.

So how about guessing when and for where Tesla will announce GF5?

It will have to be pretty soon, in order for Tesla to keep up its crazy high growth rate.

Just to throw something out there I will make this guess: 2020H1 will see GF5 announced for Eastern USA.

My guesses:
Las Vegas - They have a good relationship with Nevada but expansion of GF1 has turned into a problem. Las Vegas has a work force (not really big) and costs are low. Close to CA for some things that will be shipped between plants and manager travel.
Arizona - This was a contender for GF1. Close to CA.
Houston - Close to port for parts coming in from China and vehicles going out. Reasonably low costs. Requires a deal that Texas lets them sell cars, a big win.
North San Jouquin valley - close to other operations for shipping and executive convenience. Available labor. Lower costs than immediate bay area. Close to SF port for parts coming in from China and vehicles going out.
GF1 - Maybe somehow they can get past labor force obstacle.

 

[StealthP3D]

Given it’s a Sunday and Tesla share price is at new highs, I thought it worth elaborating on my prior post and explaining more about my views of what a share price actually is and what needs to happen to drive a share price on to a new level.

I generally find theory, papers and studies in finance are of a far lower quality than those I read in Science or Machine Learning. Nearly always I can almost immediately find absurd assumptions or failure to account for or isolate key variables which make most of the conclusions largely meaningless. In particular I find many of these papers start with the ridiculous assumption that the efficient market hypothesis is correct and this leads them to make big mistakes when setting up their analysis.

Even outside of the financial academic community and their efficient market dream world, I find very few people actually working in financial markets ever take a moment to think from first principles what is actually happening and what terms in finance actually mean.

For example many Short Investors and market makers seem to have never considered what shorting actually is. In my previous post I talked about this process and described Shorts creating new synthetic shares when they short a stock, but that is a term I made up because I don’t even know if finance has a word for it.

Similarly, few people in finance seem to have actually thought about what a Share Price actually is. And I can’t even find a reasonable answer for it when googling.

Wikipedia’s first sentence includes the obviously false: “In layman's terms, the stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for.” Yes it is the lowest amount it can currently be bought for, but it is not the highest amount someone would be willing to pay.
Investopedia tells you: “Most people believe a stock's value is determined by its price. That's only true to a certain extent. But there is a real big difference between the two. The stock's price only tells you a company's current value or its market value.” Yes this is true, but it is not a functionally useful definition when considering what will actually drive changes in the price.​

A company’s stock price is not the true value of a company’s equity. Nobody knows the true value of a company’s equity, not an individual investor, not company management and not the market as a whole. A company’s true value is the discounted value of its real future cash flows. We can make educated guesses what these future cash flows will be, but we cannot know for certain, and hence it is impossible to know a company’s true value.

On my definition, a share price is:
The equilibrium point where the available capital owned by Active Investors with a company valuation estimate greater than the current share price is equal to the number of shares (plus synthetic shares) available for active investors to purchase.

Hence a share price is changed by 3 key things:

• Changes in fair value estimates of individual investors that are currently invested in or valuing the company. These valuation estimates/share price targets do not have to be rational, analytical or even conscious. This could be investors that think that a stock is currently undervalued based on gut feel, it could be people that bought because they see upcoming positive catalysts which they think will increase the price (such as S&P 500 inclusion or M&A), it could be people buying based on signals from technical analysis. For people that do build a firm valuation model, there is still huge disagreement on which valuation methodologies to use and which fundamental assumptions to make about future cash flow. Some investors may make all their investment decisions based on multiples of historic financials. Some may make a single base case model and perform a discounted cash flow analysis. Some may make many or even hundreds of different models for future results and take a probability weighted average valuation. These valuations or gut feels will mostly be changed by changes to a company’s fundamentals, technicals or upcoming catalysts. Often there is a strong correlation between an investor's valuation and the actual stock price. For example at any moment the investor may always think the stock should be worth 30% more, and as the stock goes up they subtly tweak their models to justify this higher valuation. This is because emotion and gut feel is a far larger driver of investment decisions than investors like to admit (even to themselves).
• Increased or decreased pool of capital considering the stock & making fair value estimates. The pool of investors may increase because people simply had not heard about the stock before. It could increase because some investors had previously dismissed the stock based off a media narrative or equity analyst reports without ever forming their own valuation opinion, but when the narrative changed they decided to do some work. It could increase because investors had previously been unable to invest based on fund mandate requirements such as only profitable companies or only companies in the S&P or only dividend paying companies etc, and one of these factors now changed. The pool of investors may decrease because a fund decided to cut all exposure to a particular sector, or because the stock was too volatile and they decided it wasn’t worth the stress etc. Note that each individual investor only has a certain amount of their wealth or fund available to invest in a particular stock. So the pool of capital considering a particular stock is also constrained by position or risk limits, but these could also change up and down, particularly if a stock starts to be considered less risky.
• Changes to number of shares available for active investors to purchase.This can change due to share buybacks, changes in short interest, share issuance, purchases by passive index funds (which reduce the share pool available for active investors to use for their valuation based investments), share lock up expiry, changes in shares held by Options or Convert Delta Hedging etc. A reduction in these shares reduces the pool of shares that active investors are competing to buy and hence lowers the threshold of investor capital needed for the company to reach a particular share price.

To illustrate this with regards to Tesla.

• There is a certain pool of available capital available (for a single stock) controlled by Active Investors who have considered a Tesla investment and have formed their own view of valuation. Perhaps this is $150bn, perhaps $200bn, we don’t know. But each of these investors will have a view on whether Tesla is under or over-valued based off a financial model, technicals or gut feel etc.
• Currently there are 206m Tesla shares available for longs to buy – 180m real shares and 26m synthetic shares created by shorts. In reality Elon’s 34m shares are not available for active investors to purchase, so this leaves just 172m shares worth ~$69bn. Again, some of these shares are already held by passive funds tracking an index such as Russell, Nasdaq or MSCI, perhaps this is 10m shares, so again these are not available for Active investors to purchase. This leaves $65bn of Tesla long exposure available for Active investors to purchase.
• Of the say $200bn available capital controlled by Active Investors who have considered a Tesla investment, $65bn need to think Tesla is undervalued for us to achieve the current share price. Within the $200bn of potentially Tesla friendly capital there will be a wide distribution of views on valuation. $135bn thinks Tesla is worth less than $400 so would only invest if the share price fell below this level. Maybe $25bn thinks it is worth more than $600 so would only begin to sell if the share price rises above $600. $40bn have valuations between $400-600 and each would sell when share price rises above their valuation (unless they have changed their view on valuation in the meantime). These numbers are not estimates by the way, they are completely made up just for illustration.

So from here share price can change for 3 reasons:

• Change to the valuations made by this current $200bn pool of capital. This could be due to company specific or market wide reasons. For simplicity, if some event caused every single investor to increase their valuation by the same amount, say $50, then investors that were previously uninvested because they thought Tesla was worth $350-400, now think Tesla is undervalued (with valuations now ranging from $400-450. So these investors will now buy shares until a new equilibrium price is found. What exact price this moves to will depend on the distribution of different investor’s value estimates, but it will not likely be as high as $450.
• New investors considering a Tesla investment and adding to the $200bn pool of capital. This will change the whole distribution of valuations and will change the equilibrium point where the value of available Tesla shares is equal to the amount of capital valuing the company above the current share price. So this can change the share price even if no individual ever changed their Tesla valuation.
• Changes to the pool of shares available for active investors to purchase. For example since May the number of synthetic shares created by shorts has reduced by around 17 million. This has reduced the pool of shares available for active investors to purchase, and hence reduced the amount of Active investor capital needed to reach a particular share price. Similarly, if 20 million shares get bought by passive S&P 500 trackers, these shares will be removed from the pool of shares available for Active investors to compete over. These passive funds effectively have an infinite price target on Tesla because nothing will cause them to sell aside from changes in the size of their funds. So these things can permanently change the share price even if no investor changed their valuation and even if no new investor started considering an investment.

Just as a note. Instead, on the efficient market definition, which forms the foundation for much of financial theory and models, a share price is:
The true value of the company given all available information (presumably where the market has magically arrived at the correct answer because it is an infallible and emotion free superintelligence).

Hence a share price is changed by 1 thing: New information which changes the fundamental value of the company and is immediately perfectly reflected in the share price.
So on this definition a share price cannot be impacted by supply and demand. The change in available shares driven by changes in short interest, share buybacks, purchases by index funds, new investors, share lock up expiry etc cannot change the share price.

That was an interesting read that I think helps people wrap their heads around a lot of the dynamics at play in a stock market and TSLA in particular. But I found it pretty light on the effect of human psychology. Not that it ignores it altogether, but the human factor deserves more light. Here's an example:

My FIL is in his late 80's. After Q3 was reported on the news on TV, he called his broker up and told him to buy some TSLA in his account. He hasn't read a TSLA financial statement, he didn't know what the stock price was (or the market cap), he's never driven a Tesla, he doesn't know how many car models Tesla is currently offering or how many they have announced for future production. He doesn't know how much debt Tesla has or what the short position is and he certainly has no idea what the P/S ratio is, he just thought it sounded like a good investment. And this is with the MSM constantly hammering negative perspectives. And, get this, in my estimation, his stock market returns over the last 60 years outperform 95% of all individual investors. This was not a small position he took. When I talked to him a month or two later, he still didn't know what the stock price was or whether it had gone up or down. Because it wasn't reported in the media very widely and his use of a computer is pretty much limited to a bit of e-mail. He will look at his monthly account statements and hear Q4 results as reported by Bloomberg or CNBC and probably let it ride. He said he bought it with long-term holding in mind but would sell it if he heard that things didn't look so good. And this is far more common than people who put a high premium on analyzing the details assume. He has a better entry point than many people on this forum. And will probably hold it through some noise that would make many here sell-off a portion of their holdings. This is why his returns are so good. he's a slow, methodical investor whose style has evolved over the years to pick out the likely winners and hold them.

People over-emphasize the structural details and under-estimate the importance of perception to the market valuation of a company. Perception drives 90% of the shorter-term fluctuations of a company's market value. With a company as young and dynamic (hard to value) as Tesla, there is considerable volatility. That means perception can account for 50% or more of their value. Short attacks can be successful because of that fact. When they start walking the price down it makes some people think the company is worth less. There are people who sold recently at $180/share because they thought it might be worth a lot less a year from then. They were scared. That's the human factor and, no, I don't believe in the efficient market theory except to the extent that I believe a company is worth whatever someone is willing to pay you for it and you are willing to sell if for. To that extent, the efficient market theory is 100% correct. I don't believe in the underlying theory - that it's market worth is close to its true value or that the overall market always gets it approximately right. That is demonstrably false.

Short-term share price predictions are fraught with fickleness so I don't like to make them unless I see certain patterns lining up in such a way that my level of conviction is high. This is one of those times. I see TSLA shares rallying hard through the end of the year. There might be a couple of down days but I think the vigor displayed by TSLA shares will continue to surprise and delight most longs. $450 before the EOY is not out of the question, although around $430 is more likely.

The New Year will likely see the rally continue, the momentum is strong. Remember, the human influence takes time.

I have seen a lot of very conservative statements in recent days. I'm talking about statements that paint Tesla generally in a cautious way. That brings old negative perspectives back to the forefront. It seems the recent outstanding performance is the catalyst for this. Again, this is the human factor that is so under-emphasized by most investor discussions. I'm sure some of this cautiousness is due to "investor shell-shock" or "investor PTSD" due to TSLA volatility. Yes, if you buy high on euphoria and it crashes down that causes a negative reinforcement. And some of those doubts are undoubtedly brought here by TSLA longs who sold into this rally far too early and have either a minimal position left or less than their full complement of TSLA shares. That causes another kind of investor pain and can cause a person to doubt the robust nature of this rally. Because they will probably still be proven right and smart for selling, right? This kind of mistake is forced by being too close to the "action", too anticipatory about what will happen next. You know, previous euphoria has led to pain so they had better sell.

But I don't see this rally being driven by euphoria, it's a rational and broad-based movement of new money into TSLA stock caused by a major change of perception that is still continuing and on-going. I hope, come the end of January, Q4 results and discussion by Tesla management reinforce this movement of new money into TSLA but the actual results and announcements of new initiatives will have to speak for itself. What I've seen to date points to good things coming. None of my comments are intended to minimize the contribution of short-sellers buying into this rally. This was a huge contribution. I'd like to ask for a minute of silence to properly recognize the hard and very real sacrifices the shorts endured, the suffering that was necessary to benefit our cause.... O.K., it's been 3 seconds, that's long enough.

Here's to wishing a Merry Christmas and prosperous New Year to all longs!

 

[bpjod]

OT but it's Sunday here in the USA.

With the 110v outlet, what's your charging routine? I assume you either do not let the battery deplete too low, or you don't charge to 90% (or you have the flexibility to let the car charge for a couple of days). Your insight would be helpful.

120V 15A outlet = 1,440 W charging (only charges at 12A as per code).

If plugged in 12h per day (e.g. 8pm to 8am daily) then this nets you 1,440W x 7d x 12h = 121 kWh per week.

At 150 Wh/km that yields 800 km or 500 miles off driving per week. That should cover most peoples’ weekly needs. Add a few L2 and L3 charges while shopping or while having lunch and supercharging on longer trips and everything is great.

Upgrade the outlet to 120V 20A (most of the time this is a simple and cheap upgrade), get a NEMA 5-20 adapter, and the range added each week improves by 33%.

 

[The Accountant]

One Short has Capitulated:
Whitney Tilson: Tesla Probably Not A Good Short Now - ValueWalk

Quote from Article:
Lastly, as I discussed in my e-mail two weeks ago on commitment bias, it’s critical not to get emotional about any investment and to keep an open mind to disconfirming information. I was 80% confident that Tesla wouldn’t report a profitable quarter this year, but when it did, I immediately recognized that a key pillar of my short thesis had been blown to bits and changed my opinion.

 

[StealthP3D]

You ordered a Cybertruck in Germany? Can you tell us how you plan to use it?

Hopefully, it's for food and wine runs to Italy and France.

 

[Fact Checking]

• • @Fact Checking
  • Please amplify
  • I’m unsure and my age addled cerebral cortex is unsure.
  • I think I was a “weak long” but now an “accumulating long” ( tho a bunch of TSLA shares helped partially finance 2 vaca to Kaua’i (daughter) and a vehicle)
  • I don’t understand what is “neuter effect of 25 million share equivalent strong longs”
  • Does this mean I have time to accumulate more before the “melt-up” at lower prices?

Basically 25 million shares shorted means the Nasdaq computers created 25 million new tradeable TSLA shares out of thin air and gave it to longs, expanding the pool of active TSLA shares (the "float") by 25 million.

As @ReflexFunds said it, this has profound permanent effects on the TSLA price level: it completely eliminates the price raising effect of 25 million "strong long" shares, which would otherwise not be available for sale for any of the current prices. (It also deepens price crashes - like the $178 bottom this year.)

 

[Intl Professor]

@Intl Professor
Point of info re RHPS
We saw the premier showing in Kansas City, Missouri
Very late aug/earlySept, 1976, at the world science fiction convention, “Big Mac” at 3am, 42 yrs ago, when we were “young”
Ya do the time warp every New Year’s Eve at midnight it keeps ya “young”

I saw the **sugar** thing once several decades ago with an absolutely gorgeous girlfriend who nearly bored me to death with her exclusive and continuous conversation about Hollywood celebrities. One of the few times then my brain won a victory over bodily urges, so my memory may be off since then the girl and movie were tainted in connection.

 

[Intl Professor]

People over-emphasize the structural details and under-estimate the importance of perception to the market valuation of a company. Perception drives 90% of the shorter-term fluctuations of a company's market value.

According to the Buddha, perception is reality.

 

[Buckminster]

Somebody in early access program was blown away by FSD sneak peek.

Mod: that quote can be found at 15:50

RSF

Big news my friends. What do we know so far:

• Sneak peak only but incredible progress.
• HW3 required - corroborates above.
• ~28th - we are going be talking about it.
• Videos from early access vloggers coming around 4th Jan - 1 day before wider release??

The last 2 bullet points seem disjointed,

 

[Off Shore]

Don't forget the Z80 from Zilog. BEST CPU of its time.

Altair, IMSAI, Southwest tech, and my favorite Processor Technology with the SOL 20.
LIFE was wonderful. I had all those and several more.

Big Board

 

[Yodi]

Georgia or the Carolinas.

Detroit my friend

 

[Krugerrand]

Wow! How about in ceramics, from knives to Turbine blades? Kyocera invented the category. How about Lithium-Ion batteries. You'll find that the first production was from Sony. Check Goodenough's team and you'll find a Japanese guy was his peer, although the excellent Mr. G got the credit.

The lists go on. Japanese engineers have pioneered in countless technological advances, especially in commercialization. If we discuss ICE advances you'll discover that theoretically advances happened worldwide but successful applications came from Japan first. I clearly remember a 12,500 RPM limited DOHC engine with needle valves (Honda S600) when Westerners struggled to increase pushrod cubic inches.

Japanese are not only diligent participants in pure research but they are with equal in applications.

The problems come as they do worldwide. When people become overwhelmingly successful they begin to be defensive and lose their willingness to take risks.

"entering late..." you cannot even imagine...

How did it happen that Tesla ended out with Panasonic as a partner? Which companies would risk to participate in the first successful BEV? One was German, the other Japanese. Toyota was there at the beginning and so was Daimler-Benz. Both had excited engineers, but both were too successful with obsolete technology that they blinded themselves to the future. The stodginess you see comes from defensiveness from huge success.

Bluntly, what some see as national character I see is the disease of Xerox, Kodak and GM in 2000. It is the disease of Boeing right now. To be sure Toyota, Nissan and Panasonic too are the victims of complacency. Panasonic (nee: Matsushita) made the first practical Plasma TV's, just as Sony made the first workable li-ion batteries. Every one fo those became the victims of their own success.

End of diatribe. I first worked in Japan in 1967. From then until now I deeply resent people who regard politeness as a mark of "caution, adverse 'sic' to risk..." . Those who do not understand cultural differences tend to dismiss differences as marks of inferiority.

FWIW, I absolutely know there are companies and people who possess the character you state. Those people ran Penn Central, Wachovia Bank, General Motors as well as the old Nissan, Fuji Bank and Toyota now.

They do not run Honda, Kyocera and countless others.

Let’s be clear, I did not say that politeness was a sign of caution, adverse to risk etc... That’s you’re own issue, not mine. I admire the Japanese. I was in fact referring to those who you finally acknowledged at the end of your post. Clearly, those are in fact the people I have come to know. And are relevant to the topic.

 

[hacer]

I inadvertently bought 100 shares at $420 a few weeks ago when a sold put was assigned early. I did not expect those shares to be almost break even this soon.

Um, those shares should have a quite healthy profit already - far above break even. Your cost basis of those shares is reduced by the premium you collected from the sale of the put. Since it was deep in the money at the time of sale, you should have collected quite a lot when you sold it.

 

[The Accountant]

One Short has Capitulated:
Whitney Tilson: Tesla Probably Not A Good Short Now - ValueWalk

Quote from Article:
Lastly, as I discussed in my e-mail two weeks ago on commitment bias, it’s critical not to get emotional about any investment and to keep an open mind to disconfirming information. I was 80% confident that Tesla wouldn’t report a profitable quarter this year, but when it did, I immediately recognized that a key pillar of my short thesis had been blown to bits and changed my opinion.

Interesting that the writer who wrote the piece above for ValueWalk immediately tweeted this:

I wonder if any of his bias leaks into his reporting. s/
I'm surprised he had the stomach to report Tilson's email.