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

[ggr]

I was just looking at the DJIA (Dow-Jones Industrial Average), the thing that is always reported before the S&P 500, even though it's generally agreed that it is less useful. Top 30 companies of the US in the DOW JONES index 2020 - Disfold.

There is no auto manufacturer there any more, GM got dropped years ago. The closest stock to that category would be Caterpillar (CAT).

TSLA would fit in pretty much in the middle by market cap (although that's not how the Dow is organized), right around Cisco (CSCO) and Chevron (CVX). There are a couple of oil producers. Very few of the companies actually make anything... the aforementioned CAT, Aerospace represented by United Technologies and Boeing, Nike, Coca-Cola (I guess you can call that making something), McDonalds, IBM (although they are mostly a service company now, they do still make some legacy hardware).

No conclusion drawn, just interesting...

 

[Quesder]

As of today Exxon Mobil is worth $186.38B

Royal Dutch Shell is worth $124.86B

Does that mean Tesla can kick their butts as much as it wants, or they will pay for lobbyists even more to counter attack?

 

[RobStark]

You don't have to be old to retire.

Not everyone is compelled to save humanity.

 

[RobStark]

Does that mean Tesla can kick their butts as much as it wants, or they will pay for lobbyists even more to counter attack?

It means Tesla can afford their own Army of lobbyist now.

 

[Artful Dodger]

Tesla Q2 2020 Earnings Preview | Solving The Money Problem (13:09)

 

[jerry33]

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.

Most other stocks don't have the short interest that TSLA has. It could react very differently to the normal behaviour.

 

[Prunesquallor]

As of today Exxon Mobil is worth $186.38B

Royal Dutch Shell is worth $124.86B

Ouch! So all else being equal they aren’t within shouting distance of the top 20 anymore.

Wouldn’t it be nice to imaging that financing the shorts help put them in this situation.

 

[Intl Professor]

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

Also, the days go by much faster with slower metabolism so getting rid of the baggage of the past and no more goals to achieve it is easier to "be in the present" as Buddha urges us to do. It helps the growth of our wealth is on "autopilot" with over 80% in TSLA.

The Mad quote of Alfred E. Newman goes here.

 

[StealthP3D]

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:

It looks like they only counted gains after the actual inclusion.

I expect most of the gains TSLA experiences as a result of S&P 500 inclusion will be in anticipation of index entry. Probably about 50% of those gains will be before inclusion is even announced and the other 50% between announcement and actual inclusion.

It could actually drop after inclusion (which is all the study looked at).

 

[MC3OZ]

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

Yes, if I make the claim that Tesla succeeds in its mission, that is uncontroversial.

If I repeat a claim I've seen that 50 Trillion Dollars of Fossil Fuel assets will become stranded, that seems controversial, but both claims are the same thing.

In the GFC I had a conventional retirement fund set up, financial advisior, Blackrock, Vanguard lots of other funds a set up recommend by a school friend. The long run result of that was I think it may have halved the amount of funds, I would have had for retirement, but the financial advisor and the funds made money on the fees.

This time around with COVID-19, I'm doing much better. and I have zero on going exposure to any Fossil Fuel investments.

On the other hand Blackrock still has a lot of oil stocks, dig deeper and the in conventional investor ecosystem, most funds have exposure to Fossil Fuel stocks and in particular Oil stocks..And in the previous set up, I found out one of the funds was shorting Tesla, via a media report. I raised it and the fund manager and financial advisor both thought I was wrong, and the fund manager knew best.

So those unlucky enough to have money invested in conventional funds, have had a hit with COVID-19. Oil campaniles have had a drop, but this is merely a small taste of the future.

Yes, oil companies can diversify, and chemical processing of battery materials is a great opportunity, however as investments they are very likely to under perform for the next decade. Any funds with heavy investments in oil stocks are as a consequence also likely to under perform.

I can see a scenario where some retirement funds take a hit with COVID-19 and never recover, I'm lucky enough to not be in that category, but most of the population do fairly conventional investing and follow professional advice.

 

[jerry33]

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.

The long term difference is that Twitter is a one-trick pony where Tesla is a whole stable.

 

[Krugerrand]

So what I have gathered is that S&P inclusion is going to be a lot like *the* Short Squeeze; discussed for years and then never really materializes as anticipated. Got it. I'm now prepared for disappointment.

 

[MC3OZ]

So what I have gathered is that S&P inclusion is going to be a lot like *the* Short Squeeze; discussed for years and then never really materializes as anticipated. Got it. I'm now prepared for disappointment.

Are we there yet?

The road to the short squeeze, via Navigate on Autopilot, is the longest road trip I've been on...

But I can see something in the near distance, it is either the Short Squeeze or Wally World

 

[Prunesquallor]

So what I have gathered is that S&P inclusion is going to be a lot like *the* Short Squeeze; discussed for years and then never really materializes as anticipated. Got it. I'm now prepared for disappointment.

Nope. Don’t give in to dispair. It will be transformational. SP will balloon, shorts will implode, FUD will vaporize, CNBC clowns will fade into a richly deserved oblivion.

R-E-S-P-E-C-T.

 

[Tim S]

Nice gains these last few days, but no reason for dancing unless you sell. A large correction is coming across the entire market. The share price will go below 700 again. We’ll probably see 1500 before that happens, but in a few months, everything will come crashing down. There’s a lot of money being injected, but that won’t go on into eternity. Please be careful.

Disagree with "The share price will go below 700 again."

That ship has sailed. We are over $1000 for good.

Not advice.

 

[mongo]

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 total % 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 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.

500 companies, 505 stocks.
Adding TSLA will require removing another stock.

Correction to my earlier post (reply to @Artful Dodger) the index divisor is not the denominator for the % of a stock, it is only used to calculate the final index value after all the (total_shares*IWF)*share_price values are summed.

The % of each stock is based on stock float market cap / total float market cap.
(I think)

 

[vwman111]

If I had to guess at stock price movements:

Today - $1208
Pre ER (20th July) - $1300
Post ER (30th July) - $1400
Pre S&P announcement (14th August) - $1500
Post S&P announcement (~16 August) - $1600
6 days later (22 August) - Spike to $10k (could last seconds or days) - market cap>AMZN@$1.4Tn
7 days later (23 August) - $5000
15 days later (31 August) - $2500 (I don't expect funds to meet the 7 day requirement)
Pre battery day (14th Sep) - $2000
Post battery day (16th Sep) - $2200
Post P&D (3rd Oct) - $2500
Post ER (1st Nov) - $2700 ($500Bn market cap Vs Facebook at $665)

How are Bailie Gifford for example structured? Do they have limit orders in place where the traders are authorised to sell above? Or would they hold an emergency board meeting to authorise selling?

Who is ready for the rollercoaster of your lives?

I assume the post is full of exaggeration (especially the bumps to $5k and $10k) however are you also exaggerating on where you think we will land towards the end of the year? I couldn't tell if you had a basis for a $2500 price. Just seeing the prices in a post gets the heart pumping!

 

[AlMc]

Disagree with "The share price will go below 700 again."

That ship has sailed. We are over $1000 for good.

Not advice.

I have no idea the direction of the stock in the short term. I will say when we hit over $900 earlier in the year I thought we would not see $700 again, never mind sub $500.

 

[Ggusev]

That ship has sailed. We are over $1000 for good.

Not advice.

between 2014 and 2019 I witnessed SO many people to proclaim "this definitely was the very last time TSLA is above/below 300"

if you wait long enough, you will see any price, including 420 and 10000

 

[Mo City]

Disagree with "The share price will go below 700 again."

That ship has sailed. We are over $1000 for good.

Not advice.

Macro conditions will have the final say.