Published on 10 September 2020 |
by Frugal Moogal
September 10, 2020 of Frugal Moogal
Note: Nothing below is investment advice.
At the end of the day, on September 8, I checked my phone and learned that my stock portfolio had received the biggest one-day hit in my entire life. My card value dropped by five digits, greater than any one-day drop I had experienced even at the start of the pandemic.
Prior to this point, even though I have invested in the stock market for more than 20 years, I have generally focused my investments on incredibly stable companies that were focused on regular and large dividends and less on growth. I made ̵
Monday, September 8, however, was a five-figure card loss and I found myself questioning my investment.
In addition to investment advice
Before continuing, I seem to have an interesting following of commentators on my articles lately. After my last article, someone told me I really should add a clearer disclaimer – I guess that at the beginning and end of that article wasn’t enough, so why not add another mention? …
Let’s be clear. If you are an investor or are thinking of investing, come and read a single article on any website and then invest all your money in one investment, you’re doing it wrong. I’m actually teaching it right now to my 10 year old son, who has decided he wants to start investing. His method is to Google things like “best stock to buy today” before enthusiastically telling me that someone has a $ 1.77 stock that could go up 311% and can buy that company?
And seriously, if you Google it, you’ll find the exact company. The question, as I have already pointed out, is what could be the goal with writing such an article? If you look at the company being advertised, by the way, we find that the $ 1.77 stock has lost about 25% since then, so the investment push isn’t working. So why could they do it?
If it’s not clear, I’m not suing the company because I don’t want to give them any credibility. But any reasonable reader should ask the same question to every site they read that contains information about the shares. In theory, I might just be a puppet (I clearly am not a sock puppet) trying to raise the price of my shares to sell and download them.
In general, if you are a smart investor and are looking to invest in a particular company, you should actively seek both and negative points of view and weigh them.
In fact, when I proposed writing for CleanTechnica, I was already doing all this research, delving into FUD articles and trying to determine the forest through trees. I expected to find things about that Tesla that I liked and things that I didn’t like. In fact, I wrote an article on this and how surprised I was to find that I haven’t found much support for negative opinions. Your mileage can vary and you should definitely not read a single article expecting it to give you perfect investment advice. If you do, you are doing it wrong.
What has changed in Tesla?
That said, let’s move on to Tesla. At the end of March, I wrote an article about how I rated Tesla (or any company) that was impacted by COVID-19, and I specifically outlined eight points I use to decide whether or not I’m going to invest in companies.
Before checking out my view of Tesla today, I wanted to point out that this is literally what I do for every company. Many analysts worried about Tesla like to compare them with the P / E of the sector, or with the support levels and wedges in stock charts, or … many different things. With my first few investments, I learned that if a company has a higher premium than what people think the industry in which it operates, as long as it continues to function, it will continue to have that award. Conversely, no stock chart support level will hold up if the company has huge problems. Either way, feel free to disagree with this and create your own system, but it has worked very well for me for the past 20 years, ever since the dotcom bubble made me step back and figure out what I was about. doing.
Let’s look at these points:
Elon Musk may be polarizing for the general public, but his drive and determination have clearly created an environment of innovation and progress within Tesla’s engineering teams, and the rest of the management team seems to have ironed out a lot in the last few. years. The fact that I can see that the culture continues means that I am more than comfortable with the leadership of the company.
Remuneration of managers
Elon Musk’s stake is unique, but it is based almost entirely on the company’s performance. I have no problem with this kind of compensation, and it’s much better for me than the multimillion-dollar packages that aren’t business performance related that many other companies hand out to executives.
Related, this is where I feel there is a disconnect with relationships and the real world. I keep seeing articles evaluating how much more net worth Elon Musk has earned from a good day, but since it’s all in stock that Musk doesn’t sell, it’s not the actual value until that stock is sold. This is important, as Musk’s net worth is almost everything on paper and not the wealth he has in the bank. Additionally, Musk couldn’t sell all of his stock without causing a huge crater of value, meaning his assets are illiquid or not easily converted into cash.
When it comes to Tesla’s value, the largest and most skinned shareholder in the game also appears to be the CEO, who is basically only compensated when the value of those shares increases for both himself and all shareholders.
If it’s not clear, me love Musk’s executive pay structure. The rest of the company is a little more standard, but it’s clearly performance-related as well, as Musk wouldn’t keep people who weren’t performing around.
No repurchase of shares
Even in established companies, I have stock repurchases as perhaps my biggest red flag. Theoretically, with a share buyback, I as a shareholder end up owning a slightly larger percentage of the company, but I feel that it is often done to support a share price that perhaps shouldn’t be what it is, while often at the same time finding excuses to give. higher cash bonuses to executives. I like none of this.
I would prefer an established company to return extra profits as dividends if they have nothing new to invest in. With a company like Tesla, I’d rather see it increase market share if it has a plan. In fact, Tesla has just sold another $ 5 billion in stock since the beginning of this month. I expect $ 5 billion in cash to be enough to fund the entire Giga Texas. I love this move and would be happy to know we will do it again.
Less than two weeks away from Battery Investor Day, but even without it, we see and feel a constant push into the future. I know of an expansion in China, a new plant in Texas, a new plant in Germany, the start of production for Cybertruck and Semi and Roadster, and we are starting to push towards power generation. While it’s clear that Tesla cares about its quarterly earnings, that too takes a back seat to its future plans.
Is the business future-proof?
One way or another, we will abandon fossil fuels. Tesla is at the forefront of companies making this transition for transportation and could make huge strides with network management.
Do I understand what they do?
Tesla’s goal is to accelerate the transition to sustainable energy. It does this by creating the most desirable vehicles of any kind, while also developing and implementing methods for creating and storing energy. Tesla has done this by encouraging a culture of innovation outside the norms of the industries in which it works.
Am I too close to them?
I admit, I’m pretty close to Tesla now, but I started investing in the company before I was. I’m also pretty good at compartmentalizing the things I like, while being able to admit the drawbacks of them. I think Tesla has a great product … but I can definitely say that I don’t invest the company just because I like the product.
Investing for the long haul?
This was my last point, but I want to highlight it, as it is what caused me to have some stress. Here’s exactly what I wrote in my March 24 article:
I originally titled this “don’t try to time the market”, but I think the real lesson is that you should never invest in a company you don’t intend to keep for at least three years.
None of my beliefs about Tesla have changed. I find myself a little cautious in telling anyone else whether they should invest in Tesla or not right now, as I didn’t think the seemingly regular double-digit percentage increases would last, but I didn’t think there would be huge withdrawals either.
And then yesterday, the combination of the $ 5 billion share sale announcement (which I love) and the news that Tesla hasn’t been added to the S&P 500 (which I honestly don’t care about at all) crushed the stock. And it stressed me out.
I read a book on investing when I was starting out – I honestly don’t remember which one, I read probably 100 or more – and it said that if you are invested in a stock and you believe it, when the price goes down, you should consider it “for sale” and a ‘ opportunity to invest.
On September 8, Tesla went “on sale” and it was a sale I wasn’t expecting, so I didn’t have the ability to mix up money to take advantage of that sale.
You may disagree. Perhaps Tesla is just a house of cards, ready to collapse in on itself as many of the FUDsters – who seem to be back in force suddenly – claim. My confidence in the company’s prospects got brighter (long live the stock sale!), So seeing the drop as a sale I might have missed – the stock recouped about half of its losses as I wrote this – is disappointing.
Tesla’s stock price is stressing me out … because I think I’ve lost a sale.
I am a Tesla [NASDAQ:TSLA] shareholder who has bought shares in the previous 12 months. The research I do for articles, including this article, may force me to increase or decrease positions in stocks. However, I will not do so within 48 hours of posting any article discussing issues that I believe may materially affect the share price. I don’t believe my voice can or should alone influence stock price and I warn anyone against using my work as the sole data point to choose to invest or divest in any company. My articles are my opinion, which was formulated using research based on publicly available data. However, my research or conclusions may not be correct.
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