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

[heltok]

While the market is down, some low content humor:

 

[Prunesquallor]

Erm, yes, that's why we want to retire young!

Anyway, it's not true what you say. Youngsters (me included) are so full of *sugar*, anxieties, biases, preferences, and the like, that they let a lot of the good life slip past. I'm way happier in my 50's than at any time my life.

Not giving a f*ck about a lot of inconsequential stuff helps too...

OT
Stay healthy. I stopped going into an office regularly a year ago. Still working from home, but my time is much more flexible. I’m in better health now (eating habits, significant weight loss, exercise) than I have been in 25 years. Im in my early 60s and I feel like I did in my 30s. Even the pandemic "helped" as I was outside much more this spring running, walking, biking.

My plan/hope is that TSLA returns will make for enjoyable times when I stop working for good in a year or two. When combined with our pensions and other (boring) investments we should be in a very good place.

 

[Right_Said_Fred]

I get that S&P inclusion will generally appreciate TSLA shares across some timeframe. I just don't get how anything special is going to happen to TSLA that doesn't happen to most other companies on inclusion.

Big or small, surely there are other examples where S&P500 inclusion causes buying a large % of the float.

Did those stocks see doubling or tripling of stock price (even temporarily) ? I doubt it.

This article about the inclusion of Twitter in the S&P 500 also looked at the effects of an inclusion of other companies: Will Twitter Head Higher as Part of S&P 500?

The results are a bit of a mixed bag:

Looking at Twitter, which was included in early June of 2018, you can see a big price bump of about 20%, but soon after it drops back to its old level:

What is uncanny is how much the TWTR chart before inclusion resembles the TSLA chart of the last six months:

 

[Prunesquallor]

it's a nice idea, but still some way off, I think. Even if Tesla nailed the technology, the legislation would need to catch up.

So in the meantime, lets get the manned Tesla ride-hailing up-and-running, with the favourable lease deals for drivers. What are we waiting for?

This!^
I had been wondering what was going to keep life interesting with TSLA after S&P, battery day, GF5 and a couple of good quarters. I think Tesla human-piloted ride-sharing will make Wall Street lose its mind.

 

[Ggusev]

I’m especially fascinated by the bulls who took their 50-200% gains, sold everything and vanished forever. I wonder how they’re doing now.

I unlocked the HELOC and was heavily buying the July'19 megadip with everything I had. That was very stressful time for me, and I'm so thankful to FactChecking and Artful Dodger for their support which helped me so much to hold through that time.

I sold in January, 1/3 at 550, 1/3 at 590 and last 1/3 at 750. Earned ~440k and could not be happier. Bought my modelX (initially I was saving for 7-seat Y in 2021), put rest into the mortgage prepayment thinking that for next trading opportunity I'll use increased heloc limit.

Next thing was Covid, in February it was still far away and everyone was thinking it's gonna stay a distant chinese trouble. I was drinking with my friends and we spoke about Nassim Taleb's strategy of buying deep puts which cost cents but once in decade or two can do incredible big return due to black swan event. My friends were rock solid that just like Ebola caused LOTS of fears but actually never reached north america, and Covid is likely to end in similar way. That moment I made a decision to buy supercheap puts -30% of current levels and spent about hundred thousands on those, buying puts for everything what hit ATHs in January (yes, including tsla).

April 14th I made exactly one million.
Currently all this money invested in Boeing at $120. I still love Tesla and am superjealous to see $1200 but still think that BA will do better in short term. Now I sell covered calls every two weeks and for premium add more BA stock to my account. Eventually covered calls will be my way to retire early. Dixi.

 

[UnknownSoldier]

This article about the inclusion of Twitter in the S&P 500 also looked at the effects of an inclusion of other companies: Will Twitter Head Higher as Part of S&P 500?

The results are a bit of a mixed bag:


View attachment 560511

Looking at Twitter, which was included in early June of 2018, you can see a big price bump of about 20%, but soon after it drops back to its old level:

View attachment 560512

What is uncanny is how much the TWTR chart before in lusion resembles the TSLA chart of the last six months:


View attachment 560513

I don't necessarily think it's that uncanny that the TWTR chart before inclusion looks like TSLA. Typically what happens before inclusion in the S&P 500 is the company fulfills one last criteria: being profitable for 1 continuous year (4 quarters). I bet a lot of the companies which were added saw a surge in stock price beforehand because the company has exited the money-burning startup or growth phase and is becoming consistently profitable, that results in new investors buying in.

There was a mad rush to buy into TWTR when they were turning profitable, just as there has been for TSLA. I'm willing to bet this also happened for AMD and TTWO (Take Two Interactive, one of the "Big 4" video game publishers), if you look at their charts it's probably a similar story. The other ticker symbols I'm not familiar with.

 

[traxila]

This article about the inclusion of Twitter in the S&P 500 also looked at the effects of an inclusion of other companies: Will Twitter Head Higher as Part of S&P 500?

The results are a bit of a mixed bag:


View attachment 560511


Looking at Twitter, which was included in early June of 2018, you can see a big price bump of about 20%, but soon after it drops back to its old level:

View attachment 560512


What is uncanny is how much the TWTR chart before inclusion resembles the TSLA chart of the last six months:


View attachment 560513

This is good info.

The question I would have is whether these stocks were already included in mid cap index funds before the S and P designation. Fact Checking pointed out how many fund families simply transfer the shares so no real buying occurs in those cases. Don’t think this applies to TSLA at all.

Is TSLA included in any index funds at all right now? I would guess the total market indexes.

 

[wipster]

While the market is down, some low content humor:

Very, very... very low. And I already have Nord VPN thank you.

;-)

 

[EVMeister]

While the market is down, some low content humor:

Low content humor or low humor content?

 

[Artful Dodger]

Currently all this money invested in Boeing at $120. I still love Tesla and am superjealous to see $1200 but still think that BA will do better in short term. Now I sell covered calls every two weeks and for premium add more BA stock to my account. Eventually covered calls will be my way to retire early. Dixi.

Lol, what's your exit strategy for BA? You know Elon's coming to disrupt the industry, right?

Tesla electric aircraft: Elon Musk responds to ‘Model V’ concept VTOL

We need batteries with 500Wh/kg energy density to enable transcontinental commercial aircraft. We'll find out more on Battery Day in September. Personally I think that's 7-8 years off.

Intercontinental Flight will be disrupted by SpaceX/Starship Earth-to-Earth. I give that a non-zero chance of happening beginning in about 10 years (w. chances increasing year-by-year thereafter).

Congrats on your gains. Use them well!

Cheers!

 

[smorgasbord]

Assuming the market cap of >$200B holds up before S&P 500 inclusion, Tesla will be one of the largest companies by market cap to be added to the S&P 500 index in history. Normally, companies make it into the S&P 500 when their market caps are much, much smaller. Tesla already has a market cap large enough to make into the 20 largest companies in the S&P 500 by market cap, displacing Netflix at #20 with a $204B market cap since Tesla is now at $224B.

I'm not much of a market researcher or historian but if anyone can think of another case like Tesla where the company was already one of the Top 20 by market cap on the day of inclusion they should definitely let us know and what the result was after inclusion. As it is, Tesla will need to be on day 1 weighted to roughly 0.8% of the S&P 500's total market cap because the S&P 500 is a capitalization weighted index.

My first thought was of GOOG, which was added in March 2006 at around position #16, seeing its stock price jump 8.1% on the announcement (Google to be added to S&P 500 Index ).

Speculation was rampant before that. Here's a CNN article from Jan 2006: Will 2006 be the year Google gets added to the S&P 500? - Jan. 9, 2006 , which interestingly implies that the S&P committee doesn't just follow the explicit rules blindly, and can postpone additions/deletions for several months.

Here's a guy who uses the past 6 years or so of data to claim that one should short a stock being added on the day of addition. That is, funds start buying the newly added shares about 10 days before addition and need to be done by the day of. https://seekingalpha.com/article/40...ing-what-happens-when-stock-is-added-to-index

Although the pattern is far from consistent, there is evidence that stock prices rise after the announcement day through day 0 and subsequently decline after being included in the index.

 

[RobStark]

5.. something like 7 out of the largest 10 companies in the world are oil companies

Here's a list of the top 20 largest companies by market cap end of 2019:

1. Microsoft- $905 billion
2. Apple- $896 billion
3. Amazon- $875 billion
4. Alphabet - $817 billion
5. Berkshire Hathaway - $494 billion
6. Facebook - $476 billion
7. Alibaba - $472 billion
8. Tencent - $438 billion
9. Johnson & Johnson - $372 billion
10. Exxon Mobil - $342 billion
11. JP Morgan Chase & Co - $331 billion
12. Visa- $314 billion
13. Nestle - $292 billion
14. ICBC- $287 billion
15. Walmart - $280 billion
16. Bank of America - $266 billion
17. Proctor and Gamble- $260 billion
18. Royal Dutch Shell - $256 billion
19. Novartis - $245 billion
20. Verizon Communications - $244 billion

And 2020 has not been kind to oil companies

 

[wipster]

Thanks Unknown Soldier for your explanation of the advantages to TSLA of being included in the S&P500 and everyone else's ancillary additions, specifically dealing with the concept of virtuous cycle.

Now one more: Assuming it happens, how will it affect the FUD?

 

[ZeApelido]

Tesla needs to hurry on their VTOL aircraft or else they are gonna lose to this innovation.

https://twitter.com/russian_market/status/1279164984170348544?s=20

 

[smorgasbord]

Here's another article on high market cap companies being added to the S&P 500: Making room for Google in S&P 500 is no easy task

I was right about Google, and apparently Yahoo before that. GOOG came in at 0.63% of the index - TSLA is likely to come in at 0.98% (or so I read upthread). Then this little tidbit:

''This ultimately hurts the return on the S&P 500 going forward,'' said Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania. That is because managers of index funds will buy the stock at what could be a temporarily inflated price while selling shares of other components, likely driving them lower.

 

[kanweg]

If the current big investors sell part of their shares there could be no effect at all as well.

 

[RobStark]

Tesla doesn’t advertise, because it gets all kinds of free advertising like this one:

Just about every OEM gets that kind of free advertising.

Omaze Garage

 

[dl003]

Upon mulling over the calculation further, I found what appears to be a bit controversial: the higher TSLA gets before the inclusion, the less TSLA shares index funds will buy. Before you folks take out the pitchforks, let me pre-empt that by saying the effect should be very miniscule.

The % of float of each company held by the SP 500 index funds is determined by the amount of asset under their management which can be roughly expressed as:

SP 500 Index Funds' AUM/SP 500 Market Cap.

When Tesla is added, assuming that's the only change made, the SP 500 Market Cap will increase by the market cap of Tesla, which means suddenly the % of the SP 500 Market Cap under management of SP 500 Index Funds will decrease. This will manifest in these funds having to sell a small portion of their funds to acquire TSLA. Of course there might be net inflow that can coincide with this event but we're looking at this as if there'll be none. So in order to own TSLA, the SP 500 index funds will have to own a little bit less of the other 505 companies. That means they'll sell a bit of Apple, Netflix, Facebook, etc... in order to afford TSLA. The formula now becomes:

SP 500 Index Funds' AUM/(SP 500 Market Cap + TSLA market cap)

So, the more TSLA market cap goes up before inclusion, the larger the denominator becomes and the less of the market these index funds will end up owning. So, the number of TSLA shares they buy will go down while the value of TSLA shares they buy will go up. The decrease in number of share is miniscule because if you look at our denominator, the increase in TSLA market cap is greatly diluted by the existing SP 500 market cap (TSLA is only ~1% of the existing SP 500 market cap, so maybe for every 10% TSLA goes up, these funds will buy 0.1% less of TSLA in term of shares).

Of course, there are many other factors such as some SP 500 index funds might become more attractive with TSLA as a component and, as such, might attract new inflow, as mentioned above, which pushes up their asset under management. Another factor is the market as a whole might go up as much as TSLA in the interim which pushes up the numerator. Also some index funds hold cash just for events like this which render this entire write up a colossal waste of time.

 

[RobStark]

As of today Exxon Mobil is worth $186.38B

Royal Dutch Shell is worth $124.86B

 

[ggr]

Here's a fun read about a company being included in a stock index:
https://www.nber.org/digest/nov13/w19290.html

Seems counter-intuitive, doesn't it? That doesn't mean it is wrong, just that externalities play more of a role than people necessarily thought, in this case that reduced activity in the stock (from going into a higher rated index) actually hurt the stock's performance. Whether that would/will affect TSLA is yet to be seen.