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

[pnungesser]

Hmm, would you mind selling your stake then? I could use a bump as I'm about a $20 SP increase from being back in black.

Hell, I need close to $100 Increase!

 

[defc0n]

Seeing Teslas all over the place today in a small-medium city in Southern Indiana. Granted it’s a progressive city though, but still surprising me today just how many compared to prior days.

 

[CorneliusXX]

Let’s be real. Most of us will be dead by the time Elon Musk’s Tesla stops being able to come up with ways to spend money on humanity. Seriously.

Many more GFs to go.
Bajillion more energy and solar projects.
Many believe FSD is a hundred years out, so lots more R&D and hardware investment there.
Long way to go before every parking spot in the world has a V22 Supercharger that some think needs to happen, never mind just a reasonable continued expansion of the SuperCharger Network.
1,000 mile battery pack to achieve for the off-roaders and Alaskians.
Semi, Roadster2.0, pickup, normal pickup, heavy duty pickup, off road pickup, minivan, minibus, mini, station wagon, El Camino, and 526 other vehicle types people seem to think Tesla has to make.

I’m not even trying to be imaginative and I know there’s not even a remote chance I’ll be alive to see a dividend - and yes, I plan on seeing 2030 and beyond. So get the dividends are coming idea right out of your pretty little heads.

Edit: How could I have forgotten, a SC every 50 miles plus one next door to @neroden.

Boats, planes, agricultural equipment, lawn mowers, chainsaws, submarines, moon habitats, etc.

 

[AudubonB]

Moderator:

Far too many of you are emplacing posts that are nothing but a link to an article.

It must have been too long since the last alert: DO NOT DO IT.

If there is something of substance in an article, summarize it and add your commentary as to why it’s important. Don’t be lazy.

 

[doug703]

Love Cathie Woods!!! Not selling my shares until 6000.
Tesla, Bitcoin, and the Inverted Yield Curve Herald a New Era of Growth

 

[Doggydogworld]

What about companies that never pay dividends, but generates boatloads of cash and continuing growing their cash pile?

"Never" means for all eternity. No company will survive for all eternity. A company which will literally never pay a dividend* has zero financial value. That's just a fact. You may profit by selling such shares to a greater fool, but that doesn't mean they have value.

Shares with zero financial value may still have emotional value. The Green Bay Packers will never pay a dividend, yet people eagerly bought shares in their secondary offering a while back. They hang their certificates on the wall, much like a Monet or a signed Farve jersey. Which also don't pay dividends, but have emotional value for people who appreciate art or QBs. Or just want to impress others.

What about Berkshire Hathaway then?

Berkshire will pay dividends. Buffett greatly increased Berkshire's intrinsic value by reinvesting profits at high ROI for 50+ years instead of paying dividends. But it's mathematically impossible to do that for all eternity.

------------------
*Dividends in this case include:
1. Dividends paid in some distant year to an acquiring company or individual
2. Liquidating dividends upon dissolution
3. Net buybacks which enable people to sell shares back to the company while retaining the same ownership percentage
4. Spinoffs to shareholders of entities which will pay dividends
5. Other ways of returning cash to shareholders that escape me at the moment​

 

[CorneliusXX]

There's a reason they're called "shares". It is because you own a piece of an asset. Assets can change in value, because of (in the case of companies) extra cash on the balance sheet. (In the case of real estate, desirable location and market pressure, for example. The market in art, for another.) So if the asset increases in value, your piece of it increases in value. This is economics and pretty much the opposite of a ponzi scheme. The entire purpose of the stock market is to have a place to trade pieces of companies, which would be much harder if you had to sell the entire company, or liquidate it, for every trade.

Yes, it makes perfect sense to hold stock purely for appreciation.

As someone else pointed out, if a company borrows money to issue dividends, the balance sheet suffers, and the value of the company decreases. Now that is a ponzi scheme.

What is even crazier is a momentum strategy where people buy a share of a company not based on their expectations of the value going up but their expectation that other people's expectations of the company's value will go up.

 

[Antares Nebula]

"Never" means for all eternity. No company will survive for all eternity. A company which will literally never pay a dividend* has zero financial value. That's just a fact. You may profit by selling such shares to a greater fool, but that doesn't mean they have value.

Shares with zero financial value may still have emotional value. The Green Bay Packers will never pay a dividend, yet people eagerly bought shares in their secondary offering a while back. They hang their certificates on the wall, much like a Monet or a signed Farve jersey. Which also don't pay dividends, but have emotional value for people who appreciate art or QBs. Or just want to impress others.

Berkshire will pay dividends. Buffett greatly increased Berkshire's intrinsic value by reinvesting profits at high ROI for 50+ years instead of paying dividends. But it's mathematically impossible to do that for all eternity.

------------------
*Dividends in this case include:
1. Dividends paid in some distant year to an acquiring company or individual
2. Liquidating dividends upon dissolution
3. Net buybacks which enable people to sell shares back to the company while retaining the same ownership percentage
4. Spinoffs to shareholders of entities which will pay dividends
5. Other ways of returning cash to shareholders that escape me at the moment​

Okay, well you redefined the argument by introducing (a) infinite time and (b) redefining (broadening the notion of) dividends. When you frame it like that, yes I agree with you, as I think most people would. But that was not the context of the original discussion. Most investors (including myself) would disagree with the original argument that companies that don't pay (or don't plan to pay) *traditional dividends* have no value.

 

[CorneliusXX]

"Never" means for all eternity. No company will survive for all eternity. A company which will literally never pay a dividend* has zero financial value. That's just a fact. You may profit by selling such shares to a greater fool, but that doesn't mean they have value.

Shares with zero financial value may still have emotional value. The Green Bay Packers will never pay a dividend, yet people eagerly bought shares in their secondary offering a while back. They hang their certificates on the wall, much like a Monet or a signed Farve jersey. Which also don't pay dividends, but have emotional value for people who appreciate art or QBs. Or just want to impress others.

Berkshire will pay dividends. Buffett greatly increased Berkshire's intrinsic value by reinvesting profits at high ROI for 50+ years instead of paying dividends. But it's mathematically impossible to do that for all eternity.

------------------
*Dividends in this case include:
1. Dividends paid in some distant year to an acquiring company or individual
2. Liquidating dividends upon dissolution
3. Net buybacks which enable people to sell shares back to the company while retaining the same ownership percentage
4. Spinoffs to shareholders of entities which will pay dividends
5. Other ways of returning cash to shareholders that escape me at the moment​

Unless they get acquired.

 

[ReflexFunds]

"Never" means for all eternity. No company will survive for all eternity. A company which will literally never pay a dividend* has zero financial value. That's just a fact. You may profit by selling such shares to a greater fool, but that doesn't mean they have value.

Shares with zero financial value may still have emotional value. The Green Bay Packers will never pay a dividend, yet people eagerly bought shares in their secondary offering a while back. They hang their certificates on the wall, much like a Monet or a signed Farve jersey. Which also don't pay dividends, but have emotional value for people who appreciate art or QBs. Or just want to impress others.

Berkshire will pay dividends. Buffett greatly increased Berkshire's intrinsic value by reinvesting profits at high ROI for 50+ years instead of paying dividends. But it's mathematically impossible to do that for all eternity.

------------------
*Dividends in this case include:
1. Dividends paid in some distant year to an acquiring company or individual
2. Liquidating dividends upon dissolution
3. Net buybacks which enable people to sell shares back to the company while retaining the same ownership percentage
4. Spinoffs to shareholders of entities which will pay dividends
5. Other ways of returning cash to shareholders that escape me at the moment​

This is not a fact, even with your greatly expanded definition of dividends.
There is no fundamental limit to growth. A company can expand into new products, new industries, new regions, new planets, new galaxies - the universe is infinite. But if your theory criteria is only valid if you extrapolate growth hundreds or thousands of years in the future it's hardly relevant to valuing a company today. Distant cash flows are almost irrelevant once they have been discounted. The next 5, 10, 20 years are what matter to valuation - and here for certain there is no limit to growth, so there is no fundamental reason to have to pay dividends to have value.

Myron Gordon's DDM theory has a lots of assumptions and massive oversimplifications - but the main fault is not with the theory itself but with investors regularly applying it to situations where it is not valid.
A necessary requirement of the DDM is that the Growth rate cannot be close to or exceed the company's cost of equity - if this is not the case the formula breaks - it simply doesn't work. The model just does not apply to growth companies. There is no fundamental reason why a company's growth rate should ever fall below its cost of equity, so there is no fundamental reason why the DDM should ever become relevant for every company.

 

[ggr]

What is even crazier is a momentum strategy where people buy a share of a company not based on their expectations of the value going up but their expectation that other people's expectations of the company's value will go up.

"The value of a thing is what that thing will bring." I don't know the source of that, it's a pretty old saying. Real, emotional, anticipation, is there really any difference?

 

[StarFoxisDown!]

Love Cathie Woods!!! Not selling my shares until 6000.
Tesla, Bitcoin, and the Inverted Yield Curve Herald a New Era of Growth

For those of us without subscription, can you give a general summary of her comments that are tesla related? She upping her Tesla price target to 6,000 lol?

 

[KarenRei]

Please let us know when you plan to buy so we can take appropriate action...

Controlled exploitation of people's consistent misfortune... reminds me of XKCD:

Mouseover: "Excellent recovery: ... which we could try to use to somehow save your original brother!"

 

[ggr]

For those of us without subscription, can you give a general summary of her comments that are tesla related? She upping her Tesla price target to 6,000 lol?

Among other things, yes. Worth reading. My summary is that in times of disruption the yield curve often inverts, and that is exactly when you want to invest in the disruption.

Darnit, that was my one free article, and I closed the tab. I like her saying something like "We don't talk about Tesla much, because no-one believes us."

 

[Green Pete]

Love Cathie Woods!!! Not selling my shares until 6000.
Tesla, Bitcoin, and the Inverted Yield Curve Herald a New Era of Growth

Not gonna pay for a Barron's subscription. Anything more interesting than "disruptive is the future" and "tesla to 6000". Not that I don't like her, but at this point its a lot of rehashing the same old thing.

 

[Zero CO2]

Christ...people still claiming dividends are optional. This is just not correct economic theory. if you buy shares in a stock not because it will EVER (before the heat death of the universe) pay a dividend back to the stockholders, but PURELY because you think the value will go up and you can then sell it eventually to someone who will pay more...
thats a ponzi scheme. Literally. it *is* the absolute definition of it. Its like tulipmania,
Whats the rationale for the person who buys the stock from you when you want to 'cash in'? that they can offload it to another...and another... this is musical chairs, and not stock investment.

I think TSLA is an awesome investment and I don't want dividends before 2030, but I value the stock highly BECAUSE I believe they will be able to pay staggeringly high dividends in 2030. I'm an investor, not a 'trader' or a gambler.

I think some our "long" enthusiasts need to take an investments 101 course paying particular attention to the equity valuation model chapters...

I just realized my avatar is a bear that may be why i get so many subconscious dislikes.... i picked a bear for a green planet not market bear .. will need to change that

 

[Antares Nebula]

Trump about to drop da bomb on the market!

 

[jerry33]

This is not a fact, even with your greatly expanded definition of dividends.
There is no fundamental limit to growth. A company can expand into new products, new industries, new regions, new planets, new galaxies - the universe is infinite.

Kongo Gumi. 578. Nishiyama Onsen Keiunkan 705. Koman 707. Stiftskeller St. Peter 803. Hudson's Bay Company: 1670. Sumitomo 1691.

 

[Zero CO2]

I'm sorry but you are completely wrong. The dividend discount model was never an economic theory, its just a sometimes useful rule of thumb.
All methods of valuing stocks have fairly obvious flaws, but the shortcomings of the dividend discount model (which is just one of very many different models used by investors) are particularly obvious.
DDM is just a rule of thumb which can sometimes be useful as it can have some correlation to a company's real value, but this is just because there is some correlation between a company's cash generation ability and its level of dividends. The creators of the model didn't think that the only way anything in the world can have value is if it is paying dividends. Borrowing money to increase dividends on a cash burning company with no growth obviously shouldn't increase the value of that company. Similarly reducing dividends to invest in high return capex and R&D projects shouldn't lower a company's value.

You can even buy zero coupon bonds. These do not pay any interest or "dividend". They are sold at a discount and redeemed at par in several years time - investors profit from the capital appreciation, not from a dividend. If your economic theory values these bonds at zero you clearly need to consider where there's a flaw in your reasoning.
Similarly, your economic theory would value $s at zero. These do not pay a dividend. The value in $s is in people's trust in the future value of the USD and in the US government's ability to collect taxes. A company's value is in people's trust in the company's future cash generation ability - this is often correlated to the company's future level of dividends, but it doesn't have to be.

at some point you have to decide what to do with your cash when you are wildly successful

BTW i really love that this thread is now focusing on investing vs trading and other issues

 

[elasalle]

Trump about to drop da bomb on the market!

Is it Daily Now?