I wrote this post mostly for myself. Writing about stuff helps me think through it. Don’t take any of this as investment advice. You’d be silly to listen to a grown human who plays with plastic dinosaurs anyway. Do your own research!
Sometimes you get lucky.
I bought some Tesla stock back in 2012 on a whim. Here was my reasoning:
I liked the Model S and admired Elon Musk.
No in-depth stock analysis here; just investments made off the cuff because I had a little extra cash in my account.
However, sometimes you get lucky. In this case, I got really lucky. I followed up my initial investment with more shares. Here are most of them:
The shares I purchased in 2012 for a split-adjusted $5.7994 are up 19,108%. Yowsers. And a lot of the appreciation happened in the past month:
Where do I go from here?
How Do You Value A Growth Company?
In the case of a growth company like Tesla, the stock price is usually a poor reflection of the business. You aren’t buying the stock for the profit that the company is generating now, but for what you expect it to generate in 10 years.
Consider Amazon which had a P/E ratio of over 3,000 back in 2012. Despite the P/E now being in the 50s, the stock has gone from $200 to $3,300.
Tesla stock is expensive for what the current business does. However, the stock is cheap if Tesla accomplishes what it has planned. Since I can’t predict how the stock price will reflect the business in the short term, I hold on for the long term.
Betting on Tesla is betting on this vision of the future:
- The world is moving away from energy generated by hydrocarbons in favor of renewables. This applies not just to cars, but the electrical grid.
- The main problem with wind and solar energy generation is that sometimes there is no wind or sun.
- Battery storage will help smooth out power generation and will play a huge role in the future of energy.
I believe in Tesla because:
- It has a huge lead in electric cars and with innovations like 4680 dry-electrode battery production and megacasting, the gap is growing.
- It has the largest charging network and continues to aggressively grow it. It is also opening up to other cars. It’s like if Ford or GM also owned the oil companies and gas stations.
- Its energy business (residential and grid level energy production and storage) is tiny, but I believe it will eclipse the auto business someday.
I don’t think of Tesla as an auto company, but an energy storage company that happens to sell cars as part of its business.
There is execution risk:
- Someone could come out with solid-state battery tech with twice the mileage at half the cost.
- A nimble Chinese competitor could outmaneuver Tesla.
- Scientists could finally figure out nuclear fusion which would make energy mostly free and batteries lose relevance.
- Waymo (Google subsidiary) could solve Level-5 autonomy, rendering auto ownership mostly moot.
I think that the last one is the most likely, but I hold Google stock as well, so I’m hedged.
Again, I have to acknowledge that I got very lucky. I bought the stock for fun and I never thought it would do this. Perhaps the best evidence is the Warren Buffett bet that I have with Dividend Growth Investor (DGI). DGI asked this:
Could I beat the S&P 500 over a 10 year period with a stock portfolio?
I agreed to take the bet and didn’t pick Tesla. While I bought $TSLA in 2012, apparently I didn’t believe in it in 2017 when the bet started because I didn’t include it in my “Beat Buffett” portfolio.
Note: If you’re curious to see how I’m doing, I’m beating the S&P 500 by about 30%:
Back to Tesla.
Despite the crazy stock price, Tesla has mostly disappointed me in 2021:
- Dojo, Tesla’s AI training supercomputer was supposed to be out this year and is now delayed until 2022.
- The Berlin factory is delayed at least 6 months.
- Cybertruck and Hardware 4.0 were supposed to be out at the end of 2021. They are both delayed until the end of 2022 at the earliest. I think it will actually be 2023.
- And then there is autonomy:
I remain confident that we will have the basic functionality for level five autonomy complete this year.-Elon Musk (7/9/2020)
Delays aside, I also continue to be disappointed in Tesla’s build quality. Get the body gaps consistent or at least fix them before shipment.
But, Tesla is also doing a lot of things right, especially in an environment of supply chain difficulties.
I’m Holding, But…
I’m holding my shares for the long-term. I believe that the world will look a lot different in 2030 as electric cars take over and the world pivots hard to green energy. Tesla stands to benefit most from this change.
But, I’m a big believer in index funds now. Before Tesla’s October run-up, VTSAX and VTI were my biggest holdings. Two of our syndication deals are about to sell. When they do and the $200,000 hits our bank account, I’ll immediately put the money into VTSAX.
But, I’m also thankful to have held on to $TSLA.
Sometimes you get lucky.
More 1500 Days!!!
You can also find me (and the dinosaurs) at:
Mile High FI podcast:
- EconoMe: Hey look, I’m speaking at EconoMe later this year!
- Facebook: Facebook group and page
- YouTube: My channel is mostly devoted to home improvement, but I have some other material coming up soon too.
- Instagram: Pretty pictures of dinosaurs, sunsets, and nail guns!
- Twitter: Spontaneous, often insane, ramblings
- Coworking space: On the surface, MMM HQ is a coworking space. Look a little deeper and you’ll see that we’re really building community. The members of MMM HQ are some of the finest people I know.
Other resources I like:
- Camp FIs are amazingly fun! I hope to attend Rocky Mountain and Joshua Tree this year. See you there?
- Need to learn how to invest? The Simple Path to Wealth is all you need.
- New to FIRE? Need some FIREy guidance? Check out Fiology and the accompanying workbook!
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