TSLA Market Action: 2018 Investor Roundtable

[Analyst007]

You assign your maximal probability that the stock will remain almost precisely where it is today, after having a second profitable quarter and the death of the "Q3 was a one-time engineered profit" bear thesis? That's... curious. You must be extremely pessimistic about the macro environment. Why would you even own TSLA if you felt it wasn't going to move meaningfully positive this quarter?

I think most people here are well more bullish than I am, with all of the talk about huge short squeezes and the like. But I could be wrong about that; perhaps the uber-bulls are just more vocal.

I guess you do not understand the concept of probabilities. We are speaking about February 2019 expiry. What happens between February and today - the stock could easily go above 400$ but then come back. If you want to calculate the probability that the stock might be ONCE above 400$ - that is a total different calculation. My probability-adjusted calculations are based on both the probability of positive and bad news and you are stating "after having a second profitable quarter" - How are you sure about that?

I agree with you that there is a high probability that Tesla will be profitable and the factories will keep running and nothing else with a huge negative impact will happen - but there is always a risk that it might be differently. If no, everybody would make money on the stock market my friend.

 

[KarenRei]

the stock could easily go above 400$ but then come back. If you want to calculate the probability that the stock might be ONCE above 400$ - that is a total different calculation.

And not what's being discussed. I'm talking about probabilities at expiry. You seem to feel that the maximum probability is that the value of TSLA at expiry would be practically unchanged from today. I find that an odd concept.

I find the odds of a second profitable quarter overwhelmingly probable, as does almost everyone who invests in this stock. Not certain (hence the long negative tail), but highly probable.

You didn't answer the question, though: why are you invested in a volatile stock that you believe is unlikely to meaningfully go up in value this quarter?

 

[Analyst007]

And not what's being discussed. I'm talking about probabilities at expiry. You seem to feel that the maximum probability is that the value of TSLA at expiry would be practically unchanged from today. I find that an odd concept.

I find the odds of a second profitable quarter overwhelmingly probable, as does almost everyone who invests in this stock. Not certain (hence the long negative tail), but highly probable.

You didn't answer the question, though: why are you invested in a volatile stock that you believe is unlikely to meaningfully go up in value this quarter?

I am invested in TESLA for the second type of probability that I've explained to you - the probability that the stock might be ONCE (on ONE SINGLE DAY) go up to 400$. Then I will sell my shares.

I agree with you that the probability is quite high that there is a second profitable quarter. Nevertheless, there is also the probability of a further crash of NASDAQ as well as of further competition as well as legal actions regarding the tweeting from Elon Musk (from shareholders), of which the BoD and therefore Tesla might be responsible as well.

Therefore, I am holding the stock and trying to sell above 400$ in the upcoming 3 months and I'll try to buy back at around 320-340$ levels as I see this level to be the new 260-300$ level.

Long-term, aka 2022, I feel also bullish about Tesla and I see a high probability for the stock reaching 500$ over the next 2-4 years or even higher.

 

[vigleik]

I am not sure how to respond to this.

For years I have followed institutional ownership of stocks. Principally this is through the easily layed out NASDAQ website. I posted a snip from this site suggesting that FIDO sold a *sugar* ton of stock last quarter. Someone suggested this was not accurate. It is based upon the 13F filings and can be seen here: https://www.nasdaq.com/symbol/tsla/institutional-holdings

So, if they doubted that, I then posted showing what the June holdings were based upon a different site, yahoo. To suggest that I"keep quoting yahoo" after people have "splained" this to me is factually innacurate and ineffectively distracts from the fact that one of the largest institutions involved in the market sold off a major portion of their longstanding holdings.

You can choose to ignore this if you wish.

If you want a third source: Shareholder Overview for TSLA Tesla Inc including Fund Owner Activity, Style, Equity & Debt Ownership, and Enterprise Value

I apologise for my tone. I am sure you have thought much more about institutional ownership of TSLA than me, and without digging deeper your evidence does look convincing. What I am trying to say is that these secondary sources all get their data from the 13F’s, and that the only way to determine if they made a mistake is to read the 13F’s yourself.

I dug into this some more, and here is what I found. The original 13F for end of 2Q 2018, filed on 08/10, has 5 entries for Tesla stock which add up to about 11M shares. The largest of these numbers is 9,873,586. The amended form, filed on 09/07, has only 1 entry for Tesla stock with 9,872,686 shares.

Now I guess there are two reasonable interpretations.

1. They forgot about almost 10M shares in the original report, so we should add this number to the total. Or
2. They revised the original number down by 900 shares.

I believe the sources you are quoting all went with option 1 (or one of them went with option 1 and the others are pulling their data from that source) but I think common sense dictates that option 2 is correct.

One way to try to determine which interpretation is correct is to look at the corrected data for other stocks. I picked 3 other stocks in the amended report at random with a large number of shares, and in each case I found a corresponding entry in the original report with a number that was very close.

I am not an expert on 13F’s. In fact I’ve never read one before in my life. So please let me know what I’m doing wrong.

 

[Jayjs20]

I've been pulling out some of my profit in TSLA recently, having been somewhat bearish about the November prospects (I'm more sanguine about December, at least how things look at present). Now that prices are down again, and particularly if they go lower, I'm thinking about using some of that money to buy February call options, to capture the effect of the Q4 earnings report. I've only been in stock previously; for all of you experienced options traders, do you have any tips to suggest?

I'm thinking about building a spreadsheet to represent my view on the probabilities of the company being worth varying amounts at expiry, and then mapping that up against the projected profits (or losses) relative to the current strike prices.

Here's my 2cents.

Timing the market is stupid, you can't do it without insider information so don't try. And that IS what you're trying to do. Look at the SP all this year. Trying to link the SP to the company's performance is, to put it kindly, unwise. Market manipulators are going to make a ton of money crashing this stock, then turn around and make a ton of money rocketing this stock to the moon. As a small time investor, why fight it.

I would wait for the SP to be in the area of the lower BB and RSI, then buy LEAPs calls, then go back to sleep. Short term options are akin to a lottery ticket. LEAPs are much safer if you truly believe the company will do well in the future.

That is, unless someone decides to take the company private at 420, which makes all of your Jan20 400 call options go off a cliff, losing you 40k in the span of 5 minutes, but that's another story.

 

[Carl Raymond]

I agree with you that there is a high probability that Tesla will be profitable and the factories will keep running and nothing else with a huge negative impact will happen - but there is always a risk that it might be differently. If no, everybody would make money on the stock market my friend.

As somebody who purchased shares first time in March this year, that has been the most startling discovery for me - the level of general ignorance about Tesla and about basic financials among people who put real cash on the line.

I mean *everybody* here saw the profitable Q3 report coming, yet on the day before the earnings call, stock sold for $258. How did the so called professionals not see that coming??

And *everybody* here sees a blockbuster Q4 report coming in early February. Will the professionals see that coming? I don't believe they will. Easy money to be made on a buy just prior.

It's like they have their heads stuck so far up their charts, they can't see the Teslas and their delighted owners in the streets, nor have they ever bothered to read a high school commerce textbook.

The old saying that you don't have to be that good to be above average comes to mind.

Note: *everybody* does not include the planted trolls among us. I do feel I've spotted a couple.

 

[Causalien]

"rather pessimistic" and you are allocating half probabilities at 465$ and 325$? The current SP sits at 330$. I would call that scenario rather optimistic, even very optimistic. I would allocate the probability for expiry in February like follows:

7.5% probability 250$
12.5% probability 290$
17.5% probability 315$
25% probability 337.5$
17.5% probability 370$
12.5% probability 400$
7.5% probability 440$

Assumptions
- With a probabiliy of 62.5%, the price will be over 337.5$.
- With a probability of 37.5%, the price will be below 337.5$.
- With a probability of 20%, the price will be over 400$.

What price does this distribution lead to "probability-adjusted" for end of February (expiry)?

342.25$

I call that scenario realistic. You have to consider potential negative and positive news as well as the overall market sentiment.

Great bell curve. Just be aware of the other probability distribution truths of the market.

50% of the time something will 100% become true.

 

[Ellec]

I am invested in TESLA for the second type of probability that I've explained to you - the probability that the stock might be ONCE (on ONE SINGLE DAY) go up to 400$. Then I will sell my shares.

I agree with you that the probability is quite high that there is a second profitable quarter. Nevertheless, there is also the probability of a further crash of NASDAQ as well as of further competition as well as legal actions regarding the tweeting from Elon Musk (from shareholders), of which the BoD and therefore Tesla might be responsible as well.

Therefore, I am holding the stock and trying to sell above 400$ in the upcoming 3 months and I'll try to buy back at around 320-340$ levels as I see this level to be the new 260-300$ level.

Long-term, aka 2022, I feel also bullish about Tesla and I see a high probability for the stock reaching 500$ over the next 2-4 years or even higher.

Tesla has been in a range for years as the market waits for the results of the Model 3 ramp. After 2-3 quarters of profits, it could move to a higher range ($600-$900 for example).


No one really knows what going to happen short term but long term as revenue and profits increase there the SP will appreciate.

 

[Fact Checking]

You're going to be paying a hefty premium though, I've rolled all my options to June 19's which expire on 21st of June.

It's a compromise between lower premium/higher leverage but enough time to absorb the following positive outcomes

• Three sequential profitable quarters
• Possible announcement of inclusion into S&P
• Model Y unveiling (possible Pickup too)
• Reservation figures for Y/P could be included in Q1 2019 letter (Usually start of May)
• March 2019 $900M debt resolved
• Model 3 becoming the best selling car in the US
• Progress on China GF
• The announcement of European GF
• Further announcements at the Shareholders meeting.
• Because of the above a partial or full unwinding of the short interest

Also the following positive events:

• The long overdue Moody's upgrade of Tesla,
• removal of the BRExit uncertainty one way or another,
• potential trade deal between China and the U.S., reducing tariffs,
• potential trade deal between Europe and the U.S., removing tariff uncertainty.

 

[shlokavica22]

Maximal probability-weighted. I've laid out a table of what I personally feel the probabilities of TSLA ending up at a given price at expiry in February would be (rather pessimistic due to the macro environment, and with a lot of uncertainty - highest probability at $395, half probabilities at $465 and $325... 1% "black swan" chance of being under $140, 1% chance of being over $580)

Here are some possibilities (to clarify what I meant by asking about your expectations), assuming you put on the table $20K and taking your model as a base (stock reaches $395 by middle of February):

• 5 x 340Mar19 - making ~$10K profit. Add at least~$400 for every 1$ above your target price of $395 (at $465 you add ~$495/$1 increase).
• 10 x 395Mar19 - breaking even. Add at least ~$500 for every 1$ above your target price of $395 (at $465 you add ~$890/$1 increase).
  
• 28 x 460Mar19 - loss of ~15K. Add at least ~$390 for every 1$ above your target price of $395 (at $465 you add ~$1400/$1 increase).
• 5 x 440Jan20 - making ~$10K profit. Add at least~$250 for every 1$ above your target price of $395 (at $465 you add ~$320/$1 increase).
  
• 10 x 520Jan20 - making ~$4K profit. Add at least~$360 for every 1$ above your target price of $395 (at $465 you add ~$500/$1 increase).
  
• 40 x 700Jan20 - making ~$20K profit. Add at least~$550 for every 1$ above your target price of $395 (Edit: at $465 you add ~$960/$1 increase).

Please note:
- the numbers are approximate. For some cases IV can almost double the numbers (or half them, if you bought the original position when the IV was too high).
- The first group of cases (Mar19) have higher return rate if your estimation was correct, but also bigger risk that you lose almost everything, if the price went in the other direction. If you replace Mar19 with Feb19, you get increase in both return/risk. I chose Mar19, because you will have time to react, if the stock price didn't move much after Q4 ER.
- Delta is very important. You can see that it accelerates differently between the positions. I gave an example with constant number just to make the calculation easier, but in fact the number changes for each $1 increase in the stock price (see more here Gamma).

 

[KarenRei]

Timing the market is stupid, you can't do it without insider information so don't try.

The fact is that different people will have different viewpoints about how a company's fortunes will evolve over time. The market is the average of these differing viewpoints. And with Tesla they differ greatly. Only one side can be correct. We have a series of dates and date ranges across which the various factors which clarify which side is correct will come to light.

The bears think that they're the ones who will be proven correct. We (bulls) think we're the ones who will be proven correct. Does the fact that opinions differ mean that we should just throw up our hands and say, "See, nobody knows?" and not invest in stock? Of course not. We do our research, decide what information we think is correct, and are rewarded or punished based on the accuracy of our assessment.

Look at the SP all this year. Trying to link the SP to the company's performance is, to put it kindly, unwise.

For the record: I entered the stock this year. My average buying price on TSLA was around $265. I had a couple bad buys (although no "funding secured" buys, I wasn't that stupid ), but a lot of really good buys.

It's not the company's "performance" that determines the value, but the balance of the opinions of the broader investment community over the long-term fate of the company, and thus the time-weighted rate of return. The Model 3 launch problems led to a stark division in views on this subject, and a major, if not predominant, view that major dilution and possible bankruptcy was in the cards. The death of this thesis was critical to profit on TSLA. Hence my investment window was from when prices first dropped low - my first buy was $262 - until when I expected this thesis to die or be severely injured (after the Q4 or Q1 reports). My profits or losses would be based around the accuracy of my views on this subject.

I expected a Q3 profit to weaken, but not kill, the hypothesis, and I feel I've been proven correct in this regard. The obvious reason being that they would automatically declare it a one-time engineered profit. Two profits in a row are required to kill off this excuse.

 

[KarenRei]

Here are some possibilities (to clarify what I meant by asking about your expectations), assuming you put on the table $20K and taking your model as a base (stock reaches $395 by middle of February):

• 5 x 340Mar19 - making ~$10K profit. Add at least~$400 for every 1$ above your target price of $395 (at $465 you add ~$495/$1 increase).
• 10 x 395Mar19 - breaking even. Add at least ~$500 for every 1$ above your target price of $395 (at $465 you add ~$890/$1 increase).
  
• 28 x 460Mar19 - loss of ~15K. Add at least ~$390 for every 1$ above your target price of $395 (at $465 you add ~$1400/$1 increase).
• 5 x 440Jan20 - making ~$10K profit. Add at least~$250 for every 1$ above your target price of $395 (at $465 you add ~$320/$1 increase).
  
• 10 x 520Jan20 - making ~$4K profit. Add at least~$360 for every 1$ above your target price of $395 (at $465 you add ~$500/$1 increase).
  
• 40 x 700Jan20 - making ~$20K profit. Add at least~$550 for every 1$ above your target price of $395 (Edit: at $465 you add ~$960/$1 increase).

Please note:
- the numbers are approximate. For some cases IV can almost double the numbers (or half them, if you bought the original position when the IV was too high).
- The first group of cases (Mar19) have higher return rate if your estimation was correct, but also bigger risk that you lose almost everything, if the price went in the other direction. If you replace Mar19 with Feb19, you get increase in both return/risk. I chose Mar19, because you will have time to react, if the stock price didn't move much after Q4 ER.
- Delta is very important. You can see that it accelerates differently between the positions. I gave an example with constant number just to make the calculation easier, but in fact the number changes for each $1 increase in the stock price (see more here Gamma).

Interesting suggestion about considering Jan20s with high strike prices. A profitable Q4 could set in motion some of that relentless "Finally, we've broken free - now nothing can stop TSLA!" optimism we sometimes see among major bulls.

 

[jbih]

Here are some possibilities (to clarify what I meant by asking about your expectations), assuming you put on the table $20K and taking your model as a base (stock reaches $395 by middle of February):

• 5 x 340Mar19 - making ~$10K profit. Add at least~$400 for every 1$ above your target price of $395 (at $465 you add ~$495/$1 increase).
• 10 x 395Mar19 - breaking even. Add at least ~$500 for every 1$ above your target price of $395 (at $465 you add ~$890/$1 increase).
  
• 28 x 460Mar19 - loss of ~15K. Add at least ~$390 for every 1$ above your target price of $395 (at $465 you add ~$1400/$1 increase).
• 5 x 440Jan20 - making ~$10K profit. Add at least~$250 for every 1$ above your target price of $395 (at $465 you add ~$320/$1 increase).
  
• 10 x 520Jan20 - making ~$4K profit. Add at least~$360 for every 1$ above your target price of $395 (at $465 you add ~$500/$1 increase).
  
• 40 x 700Jan20 - making ~$20K profit. Add at least~$550 for every 1$ above your target price of $395 (Edit: at $465 you add ~$960/$1 increase).

For comparison: Make ~$3800 profit when buying stock, and add $60 for every 1$ above your price target.

 

[Ellec]

Also the following positive events:

• The long overdue Moody's upgrade of Tesla,
• removal of the BRExit uncertainty one way or another,
• potential trade deal between China and the U.S., reducing tariffs,
• potential trade deal between Europe and the U.S., removing tariff uncertainty.

Another one, Elon having his twitter somewhat managed

 

[shlokavica22]

Interesting suggestion about considering Jan20s with high strike prices. A profitable Q4 could set in motion some of that relentless "Finally, we've broken free - now nothing can stop TSLA!" optimism we sometimes see among major bulls.

Indeed. The more bullish you are, the better it becomes.
The total Delta of this position will still be growing once the other positions already reached their max Delta.
IMHO, if you don't feel too confident with options, this is a good position, because of the low risk (which also leads to lower stress level) and the very good return rate (considering your bullishness). In fact- you are going to get much better return with this option position, than with the stock position you hold ( I assume ~300 stock = 300 Delta)

 

[nursebee]

I apologise for my tone. I am sure you have thought much more about institutional ownership of TSLA than me, and without digging deeper your evidence does look convincing. What I am trying to say is that these secondary sources all get their data from the 13F’s, and that the only way to determine if they made a mistake is to read the 13F’s yourself.

I dug into this some more, and here is what I found. The original 13F for end of 2Q 2018, filed on 08/10, has 5 entries for Tesla stock which add up to about 11M shares. The largest of these numbers is 9,873,586. The amended form, filed on 09/07, has only 1 entry for Tesla stock with 9,872,686 shares.

Now I guess there are two reasonable interpretations.

1. They forgot about almost 10M shares in the original report, so we should add this number to the total. Or
2. They revised the original number down by 900 shares.

I believe the sources you are quoting all went with option 1 (or one of them went with option 1 and the others are pulling their data from that source) but I think common sense dictates that option 2 is correct.

One way to try to determine which interpretation is correct is to look at the corrected data for other stocks. I picked 3 other stocks in the amended report at random with a large number of shares, and in each case I found a corresponding entry in the original report with a number that was very close.

I am not an expert on 13F’s. In fact I’ve never read one before in my life. So please let me know what I’m doing wrong.

You posted a liink to edgar filings.
I clicked that link.
More links appeared.
I clicked the first link: SEC FORM 13F-HR/A

It says something about a value of 21,749,000. Sure looks like number of shares owned via 21 funds and 5 managers. Similar to yahoo numbers.
The date is from June. Pay attention and I expect that number gets a lot smaller, along the lines of what nasdaq says now.

 

[uselesslogin]

I apologise for my tone. I am sure you have thought much more about institutional ownership of TSLA than me, and without digging deeper your evidence does look convincing. What I am trying to say is that these secondary sources all get their data from the 13F’s, and that the only way to determine if they made a mistake is to read the 13F’s yourself.

I dug into this some more, and here is what I found. The original 13F for end of 2Q 2018, filed on 08/10, has 5 entries for Tesla stock which add up to about 11M shares. The largest of these numbers is 9,873,586. The amended form, filed on 09/07, has only 1 entry for Tesla stock with 9,872,686 shares.

Now I guess there are two reasonable interpretations.

1. They forgot about almost 10M shares in the original report, so we should add this number to the total. Or
2. They revised the original number down by 900 shares.

I believe the sources you are quoting all went with option 1 (or one of them went with option 1 and the others are pulling their data from that source) but I think common sense dictates that option 2 is correct.

One way to try to determine which interpretation is correct is to look at the corrected data for other stocks. I picked 3 other stocks in the amended report at random with a large number of shares, and in each case I found a corresponding entry in the original report with a number that was very close.

I am not an expert on 13F’s. In fact I’ve never read one before in my life. So please let me know what I’m doing wrong.

In September when that amended form came out we didn't have some bull in here saying that everyone should pay attention because Fidelity bought 7 million shares in Q2. We looked at the forms and realized they actually sold 2 million or so and the automated web sites read the forms wrong. I think I remember a poster or two asking if Fidelity actually increased their stake by this huge amount and others explained what had happened and that made sense to everyone.

Now, from the other side you have someone who won't listen to reason and will just find several other secondary sources that got it wrong. In fairness this is only one poster (I think) but this kind of behavior really blows my mind. It certainly makes it a lot harder to listen to the bearish case and frankly there are valid points on the other side but they get buried in all this noise.

Short sellers have done more through their behavior to convince me I should be buying this stock than convince me I should be selling. If the arguments I've seen on Seeking Alpha and bearish posters here represent those 29 million shares sold short then I'm quite comfortable waiting around with my long shares.

 

[Tslynk67]

That's bullish imo. If tarrifs are slapped on Euro autos, that directly helps Tesla

Not if EU retaliates...

 

[aubreymcfato]

As somebody who purchased shares first time in March this year, that has been the most startling discovery for me - the level of general ignorance about Tesla and about basic financials among people who put real cash on the line.

I mean *everybody* here saw the profitable Q3 report coming, yet on the day before the earnings call, stock sold for $258. How did the so called professionals not see that coming??

And *everybody* here sees a blockbuster Q4 report coming in early February. Will the professionals see that coming? I don't believe they will. Easy money to be made on a buy just prior.

It's like they have their heads stuck so far up their charts, they can't see the Teslas and their delighted owners in the streets, nor have they ever bothered to read a high school commerce textbook.

The old saying that you don't have to be that good to be above average comes to mind.

Note: *everybody* does not include the planted trolls among us. I do feel I've spotted a couple.

THIS.
People forget quickly how powerful collective intelligence is when done properly.
I am kind of an expert in community projects that use "wisdom of the crowds" or other forms of "hive mind", and this forum is one of my favorite examples (Wikipedia, Stackoverflow are others).
With the accurate information and the invaluable insight from experts here, a *****total newbie****** like me has been able to make the investment of his life, *just reading a few threads*. I just *read*.
I would have flipped hundreds times if I were alone, eaten alive by my emotions checking the TSLA ticker and doom&gloom headlines.

I hope many other people will start reading this forum (this is an incentive for keeping a healthy signal/noise ratio).

 

[vigleik]

You posted a liink to edgar filings.
I clicked that link.
More links appeared.
I clicked the first link: SEC FORM 13F-HR/A

It says something about a value of 21,749,000. Sure looks like number of shares owned via 21 funds and 5 managers. Similar to yahoo numbers.
The date is from June. Pay attention and I expect that number gets a lot smaller, along the lines of what nasdaq says now.

Nowhere does it say that number describes the number of Tesla shares. Indeed, it’s a “value”, not a share count. It’s the cover page for the actual form which is located here: https://www.sec.gov/Archives/edgar/data/315066/000031506618002220/xslForm13F_X01/20180814_FMRLLC.xml

Indeed, there are 21 entries (one of them is Tesla). For completeness, here is the original 13F for the same period: https://www.sec.gov/Archives/edgar/data/315066/000031506618002174/xslForm13F_X01/20180814_FMRLLC.xml