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I do worry for the non-tracker retail investors who are only now piling in from FOMO. This could end in tears.
The US has had lots of companies doing share buybacks for years
Buybacks are the ‘dominant’ source of stock-market demand, and they are fading fast: Goldman Sachs - MarketWatch
this is largely why the price of US shares rose so much faster than in comparable countries, even though production did not increase much at all
Now, in response to covid we have massive financial stimulus for the US govt/central bank
Then on top of this, we now have retail investors using leveraged derivatives to buy shares that are already massively higher than company earnings or prospects can justify
So, a lot of new retail investors a using "Robin Hood", which allows leverage margined trading
Margin Maintenance | Robinhood
Others use CFDs or spreadbetting
The principle is that you set a stop-loss at 5% or 10% below the price you buy in at
The risk is that if the price falls fast, it will trigger everyone's stop losses, and everyone will sell "at any price" at the same time - hence the price plummets. If you have leveraged, you could lose more than you own even though the stock price only dropped 25%
Here's the story of a 20 year old student allowed to borrow $1m to invest, and thought he had lost it all, and then committed suicide: 20-Year-Old Robinhood Customer Dies By Suicide After Seeing A $730,000 Negative Balance (forbes.com)
The lockdown death of a 20-year-old day trader | Free to read | Financial Times (ft.com)
You can see all the ingredients in the US tech market
speculation drove the value .... to extremes
everybody appeared to be making money
the price could only go up
People began buying ...with leverage - using margined derivatives contracts to buy more than they could afford
what could possibly happen next?
it's a good example because we can work through the business model more easily
at IPO, initial share prices were very high, and nearly doubled instantly
DoorDash shares jump 86% amid IPO frenzy | Financial Times (ft.com)
At peak this valued the company at $60b
At the IPO price (before the near-doubling), here's someone explaining how it was overvalued: DoorDash’s New Valuation Is Even More Ridiculous (forbes.com)
How likely do those things sound, but they were based on a share price of $95
How much cash can you make per pizza delivery? it's clearly finite
Even if automation reduces costs, competitors will automate too
At the peak on IPO day, the stock market's valuation of Doordash, which is basically a website and some delivery vehicles was $60b
This would make it worth more than all but the top 8 of the FTSE 100
Table - FTSE 100 FTSE constituents | London Stock Exchange
Does that sound realistic?
A website and some bikes worth more than the 2 largest UK banks (Lloyds and Barclays) combined?
It's clear to me that buying these Doordash shares can only be classed as speculation, there is no realistic chance of the company ever being worth the current market cap, or delivering significant earnings to shareholders as dividends.
There are only so many pizzas to deliver in the world, There is no infinite demand
I assume everyone knows how much cash Apple holds?
Branding
Not many people with 6-figure salaries think Tesla is cool or stylish
Car branding is still dominated by the classy top-notch German firms, amongst others
These firms have huge brand loyalty, and image, with formula one teams, etc.
Who is going to buy a Tesla when you can get a Merc, BMW or Audi for the same spec and same price?
Look at how Mercedes (Daimler) are pushing these buttons in this advert
Personally, those Merc ads do nothing for me, in fact the opposite, it makes we want one less and a Tesla or a VW ID3 more. Tesla don't do any advertising yet are still selling a lot of cars which is increasing quarter on quarter.
How many other cars allow you turn on the AC to pre warm the inside of the car from your phone before you go out the house and have driver profiles that allow you to set seat height and recline, mirror positioning, and steering height/rake, drive modes, audio preferences and a host of other car settings, that can be saved and set with one press of the display? The software and control updates delivered over the air to constantly improve their cars is a completely different strategy than traditional manufacturers.
with regards Apple, I would say they are the only company with the imagination that could threaten Tesla, it's risky territory for Apple though, do they buy someone like Nissan to deliver an Apple EV or build their own factories? Either way they are years behind Tesla, unless they have been road testing extensively in complete secrecy. I wonder what charging port Apple will use and what national infrastructure can they roll out to rival what Tesla already has in place?
Tesla will expand out of luxury vehicles with lower cost higher volume consumer models in next couple of years built out of the new China, Berlin and Texas factories. The Model 3 is mid range and not exactly a luxury model but there will be something around $25K released and a smaller European hatchback type model.
The six figure salary crowd may have launched Tesla but it will be the 'every day Joe's' that guarantee Tesla's future...or otherwise.
I dd read a rumour that Berkshire Hathaway is building a large position in TSLA. Obviously not Warren Buffett doing the buying, but his successors. Did Baillie Gifford (SMT) sell their TSLA to Berkshire? time will tell
The Baillie Gifford American fund is up 132% this year, I was only expecting around 15% based on last 20 years annualised performance. I thought about top slicing profits when it was 50% up in June but held on. I may do some rebalancing at year end as this exceptional performance has no right to continue....or will it?
I know without looking that it's the same for BMW for 7 series
Let's check
BMW: 29% of sales are in China, 15% in US, 13% in Germany, 9% UK, 3% Italy
Merc: similar
market in China
wikipedia
the features you mention have been available for years in ICE cars, and are available now in other brand electric cars, nothing new, nothing "special". I had the option to install remote pre-warming on my Jag in the mid-1990s
I can see Tesla measured against many mature car brands who will be offering products at more price points, more cheaply at the bottom end, and higher-quality at the top end, I think they will struggle.
I test drove the top notch Tesla. It was £100k, and looked like a Mondeo, interior was at best below mid-range BMW
Handling? I doubt Tesla's lack of pedigree in fine tuning suspensions over 100 years will be an advantage
Anyway, I really can't see why we'd assume that Tesla will be the global market leader in car manufacture, which is what the share price implies.
The market "values" Tesla at $610b
Compare that with Business - NYTimes.com
GM $60b
Honda $52b
Toyota $245b
Merc $75b
Ford $35b
Nissan $23b
and
BMW €46b
VW €80
etc
Current Tesla car sales market share is
386k cars in 2019
world sales were 65m
so Tesla has 0.6% of world car sales
What rationale would be needed to conclude that Tesla is worth more than pretty much something like the total of all of the "old" car makers in the world put together? It has less than 1% of car sales
Amongst Electric cars, Tesla sells just 18% of EV cars Tesla has 18% market share in global EV sales. But rivals are hoping to catch up (hindustantimes.com)
Tesla (TSLA) still holds impressive 18% market share of global EV sales, but that's about to change - Electrek
I can't see any reason to assume that Tesla market share of the car market will ever get near to 18% Therefore, I can't see that Tesla shares can be considered an "investment", it's pure speculation at present
Berkshire Hathaway does Value investing, Tesla is the opposite of that, Buffet and the VP have both said in interviews that they would never buy Tesla
For your US fund
well, it seems far more likely to "return to the mean"
I'd cash in
Nah, not my style. At best I would rebalance back to 50% of my ISA alongside Polar Capital Global Tech. I'm in it for the long run, I don't need jam today.
Buy Supply@Me... massive potential there. I expect a 100-bagger over 3-5 years.
My YouTube Channel
Tesla stock is hugely over valued based on all traditional measures and there are plenty of people on both bear and bull sides calling for it to plummet or continue exponential growth. It's up 75% over the last 6 months even with the 20% drop over the last month.
Even though Tesla is held as part of the portfolio in a couple of funds I invest in, which are managed, I wouldn't be looking to invest directly in Tesla either as a short sell or a long buy, it's way too unpredictable.
Tesla is 33% down in 5 weeks, that's pretty serious