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

[MC3OZ]

I’ve watched all of Seba’s prior presentations. If anybody is in the same boat and has also watched this one, please let us know if it contains anything new.

The concept is much the same, but this talk is more focused transport and less on the electrcity grid.
It is updated and has some new ideas, IMO different enough to be worth watching, but the key points are mainly the same...

 

[Fact Checking]

Very little percentage wise. Money is being transferred from dying 85 year olds to their 65 year old children, who tend to be conservative and traditional with their investments.

I'm not so sure about that: the younger generations are more concerned about the environment and about global warming - so I'd at minimum expect those portfolios to shift away from oil companies and ICE carmakers. If you want a green portfolio, Tesla is one of the top choices.

Note that this effect is measurable even between 65 to and 85 yo people:

See how the third column "rank" of global warming has more and more importance as age drops. As we go from 85yo's to 65yo's the rank improves by 5 positions.

Another factor is that the Big Three carmakers (which should now be the Big Four with Tesla ...) each are paying dividends, which practice is bleeding cash but is keeping shareholders on board.

I think they'll soon have to stop paying dividends to finance the EV transition - which might further erode the share price and cause income oriented portfolios to shift away.

S&P 500 inclusion of Tesla and sustained profitability would seal the deal IMO.

 

[Prunesquallor]

Earlier this morning I asked if you could explain what you were getting at in a nutshell. I don't think that it's unreasonable that what you are explaining is over someone's head. Are you saying ARK's analysis is bogus, or reasonable? What exactly are you getting at.

I must have missed your earlier question.

ARK's methodology is fine IMHO, I recognize what they are doing. There are two real questions for people: do we agree with their input assumptions (I have no particular problem with them) and are we interpreting their results correctly?

Their main assumptions are the values associated with the upper and lower bounds of the input variables (gross margin, capital efficiency and autonomy - Cathie Wood's three talking points) and the associated probabilities. For example, do we believe a 30% probability that Tesla will achieve vehicle autonomy by 2024 is reasonable (and do the associated revenues look reasonable)?

The key thing about the results is that they are probabilistic. They are statistical calculations using the output from the eight scenarios. The results say there is a 25% likelihood that SP will be $15,000 or higher in 2024 ("bull case", they can give an SP value for any likelihood we want). What we can't do is try to unravel arbitrary values of the input variables that give that result. For example, from ARK's results we can't say $15,000 requires vehicle autonomy by 2024 (implies 100% probable).

Hope that helps.
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Can’t. Stop. Typing.

The only quibble I might have with ARK's methodology is the small number of scenarios used. It would be pretty easy to assign continuous probability distributions to gross margins and capital efficiency (autonomy is more of a discrete). Then you could generate as many scenarios as you wanted, get a smoother resulting cumulative distribution and potentially more valid statistics.

 

[CorneliusXX]

For long timers it’s quite interesting to think back to how things were when Tesla was lower scale and then consider the paradigm shifts the company forced, in order to reach the next level. Big bold moves that are now taken utterly for granted.

To take two cases:

1) Sept 2012: Road trips were tricky and seemed to place a practical limit on demand for EVs. And then along came the blog post on vertically integrated superchargers. Seemed so obvious once it was announced. And before you knew it, superchargers were everywhere.

2) Feb 2014: Tesla was using a large portion of global Li Ion production for a statistically insignificant share of auto production. And then the Gigafactory was formally announced, and a realistic pathway to the mass market Model 3 programme opened up (or Model E as it was then known). This seemed to many off the scale nuts. “You’re gonna build the world’s largest building in the Nevada desert to make batteries?”. And yet before you knew it, the Gigafactory was churning out cells “like a machine gun” and Tesla was profitably selling hundreds of thousands of EVs per year.

Other quite sudden paradigm shifting announcements which might compare very positively in the future include:

• Oct 2014: the installation of FSD hardware in every vehicle
• Oct 2016: solar glass roof
  
• Apr 2019: proprietary chip for FSD
• Nov 2019: the exo-skeletal form factor of the cyber truck

Add or pick your favourite.

So where does this leave us with respect to Apr 2020 and Battery Day? What will be the announcement that will come to quickly be seen as obvious and taken for granted, but could barely be conceived by the masses beforehand?

I don’t know but it’s quite exciting isn’t it?

This timeline makes it really clear just how much of a resource hog scaling M3 was. In the early years, there were quite phenomenal announcements a couple of times a year....then a dead zone from early 2017 through to early 2019 (excl the semi& roadster launch event). Then last year we got FSD chip, Cybertruck, a couple of GFs amongst others.

 

[CorneliusXX]

One area where Cramer is important is in educating the type of investor that is easily swayed by the typical CNBC/Seeking Alpha FUD. There is a yuge swath of middle to late age investors that still get their information directly from those venues.

I prefer to have him on the side of Tesla than not, despite his many shortcomings. He is a decent salesman and is great free advertising for the product.

Agreed, Tesla needs to be a broad church to accelerate the EV transition. Creamer is paying a penance for his sins.

Or a Lyndon Johnson said:
It’s probably better to have him inside the tent pissing out, than outside the tent pissing in.

 

[dakh]

I must have missed your earlier question.

ARK's methodology is fine IMHO, I recognize what they are doing. There are two real questions for people: do we agree with their input assumptions (I have no particular problem with them) and are we interpreting their results correctly?

Their main assumptions are the values associated with the upper and lower bounds of the input variables (gross margin, capital efficiency and autonomy - Cathie Wood's three talking points) and the associated probabilities. For example, do we believe a 30% probability that Tesla will achieve vehicle autonomy by 2024 is reasonable (and do the associated revenues look reasonable)?

The key thing about the results is that they are probabilistic. They are statistical calculations using the output from the eight scenarios. The results say there is a 25% likelihood that SP will be $15,000 or higher in 2024 ("bull case", they can give an SP value for any likelihood we want). What we can't do is try to unravel arbitrary values of the input variables that give that result. For example, from ARK's results we can't say $15,000 requires vehicle autonomy by 2024 (implies 100% probable).

Hope that helps.
————————————————————————

Can’t. Stop. Typing.

The only quibble I might have with ARK's methodology is the small number of scenarios used. It would be pretty easy to assign continuous probability distributions to gross margins and capital efficiency (autonomy is more of a discrete). Then you could generate as many scenarios as you wanted, get a smoother resulting cumulative distribution and potentially more valid statistics.

All this mumbo jumbo... To try to answer the original question, how to simplify the estimate etc. They make some assumptions which in turn spouts out the number. In reality nobody got any flippin clue how exactly this whole thing is gonna go down, but there's a fat chance that it's gonna be real good if you own Tesla stock so just go long and watch it unfold. That's the basic investment thesis.

 

[dakh]

Agreed, Tesla needs to be a broad church to accelerate the EV transition. Creamer is paying a penance for his sins.

Or a Lyndon Johnson said:
It’s probably better to have him inside the tent pissing out, than outside the tent pissing in.

Cramer needs to not be wrong about stock moves. He's the analyst that will have his feet to the fire if his calls are off the mark, unlike all these mostly guys spouting out garbage and getting paid for it despite their demonstrable lack of credibility. Cramer can't afford that so he's got to do the work that the analysts were supposed to do.

 

[Fact Checking]

All this mumbo jumbo... To try to answer the original question, how to simplify the estimate etc. They make some assumptions which in turn spouts out the number. In reality nobody got any flippin clue how exactly this whole thing is gonna go down, but there's a fat chance that it's gonna be real good if you own Tesla stock so just go long and watch it unfold. That's the basic investment thesis.

While it's true that we don't know how it's gonna go down, "mumbo jumbo" scenario analysis like ARK's still matters a lot, because it allows us to estimate TSLA fair value and growth potential, and we can key them to particular events.

Even if we don't know when exactly trigger events happen, we can, after a trigger events happen, decide whether the resulting move was under or overestimating the relevance of the event.

I'd also like to note that for example ARK probably didn't re-balance their portfolio and didn't sell TSLA shares across the Q4 earnings report AFAIK, probably based on their scenario analysis - knowing how much upside Tesla's increased growth guidance could create. "Let your winners run".

So these are valuable tools, if you know their limitations, and if you know how to use them.

 

[Singer3000]

While it's true that we don't know how it's gonna go down, "mumbo jumbo" scenario analysis like ARK's still matters a lot, because it allows us to estimate TSLA fair value and growth potential, and we can key them to particular events.

Even if we don't know when exactly trigger events happen, we can, after a trigger events happen, decide whether the resulting move was under or overestimating the relevance of the event.

I'd also like to note that for example ARK probably didn't re-balance their portfolio and didn't sell TSLA shares across the Q4 earnings report AFAIK, probably based on their scenario analysis - knowing how much upside Tesla's increased growth guidance could create. "Let your winners run".

So these are valuable tools, if you know their limitations, and if you know how to use them.

If TSLA grows as much as they forecast then Ark are going to have to continually sell more shares. Not for portfolio management reasons but commercial ones. If Tesla grows sufficiently that it became worth for example, more than half of Ark's AUM, why would anyone pay them a management fee when they could instead just buy TSLA with half their money and a NASDAQ tracker with the rest?

Following on from @DaveT 's video series, does anyone see a good bet for a 10 bagger in Ark's portfolio? Not saying there aren't any but is there a compelling and established case for any of the others? >

 

[dakh]

While it's true that we don't know how it's gonna go down, "mumbo jumbo" scenario analysis like ARK's still matters a lot, because it allows us to estimate TSLA fair value and growth potential, and we can key them to particular events.
.

@jhm had his chart like that a while back with a range of where TSLA should be based on discounted cash flows of various scenarios, similar idea. I personally think about this a bit differently. It is good to be honest about what you don't know. And that's the tactical stuff that just is too uncertain to both predict the events and predict the market reaction to them.

Overall though, I'm quite certain on some fundamentals and that's good enough to stay very long on TSLA.

- Best talent in the industry working in the most conducive environment for productivity and innovation
- There's a disruption happening and it's gonna be happening much faster than most people realize
- Big competitive advantage in key technology enablers, and the gap keeps getting wider (see #1)
- Effectively unlimited resource to implement whatever makes sense
- Almost all of the competition is on a short leash (dealers, current business model, etc.) and just can't get any pray due to structural limitations

I would love to hear a compelling story about how we should time the market and go in and out of exposure/leverage based on what we know about Tesla and all the rest of relevant data. But I personally straight up don't think that's feasible. Doesn't stop me from buying some short term calls there and there but that's just for fun.

 

[hacer]

Let's for a moment make the entirely hypothetical(*) assumption that market makers can manipulate the stock price at will.
Then, if for a given strike price there is an equal number of put and call contracts, then the market makers will have no incentive to bring the SP down below or up above that strike price, or no?

If this understanding is correct, then the large number of (recently bought) put contracts between 600$ and 650$ should significantly reduce the risk that during the remaining part of this trading session the SP magically drops to below e.g. 600$. (Which happens to be the strike price at which I hold a call option).

(*): /s

Actually there is incentive to swing it in both directions! Perhaps drop in throughout the morning to get call holders to sell for fear it goes even lower and their call expires worthless. Then in the afternoon, run it up to shake off the put holders in a similar fashion. Or something similar. There still of course are limits to how far they can swing it, but I think that's probably workable for 3 strikes ($15).

 

[Jack6591]

The On-Demand, Autonomous & Electric Disruption of Transportation

Tony Seba - January 8:

.

I read “Clean Disruption” some years back—at that time, I questioned some of his projections. Mr. Seba’s solid forecasting has defined the arc of my understanding. First principled foresight.

 

[jerry33]

Another factor is that the Big Three carmakers (which should now be the Big Four with Tesla ...) each are paying dividends, which practice is bleeding cash but is keeping shareholders on board.

I think they'll soon have to stop paying dividends to finance the EV transition - which might further erode the share price and cause income oriented portfolios to shift away.

If they stop paying dividends, watch them start to be shorted bit time.

 

[DrKenneth]

I didn't quite understand the markets response to the Q4 numbers. YoY was flat. The price had gone up by alot which implied high expectations, yet the response implies that this was a better than expected report. So I don't quite understand how the expectations are high and low at the same time. What am I missing? What was the postive news that the market hadn't expected?

 

[EVMeister]

I didn't quite understand the markets response to the Q4 numbers. YoY was flat. The price had gone up by alot which implied high expectations, yet the response implies that this was a better than expected report. So I don't quite understand how the expectations are high and low at the same time. What am I missing? What was the postive news that the market hadn't expected?

You're trying to predict short-term movements. And perhaps you're frustrated that you're still on the sidelines waiting for a dip that might not come when it suits you, if at all? Maybe you should've listened to those warning you against sitting on the sidelines waiting for a dip. Tesla, TSLA & the Investment World: the 2019-2020 Investors' Roundtable

 

[kbM3]

I'm not sure if this was posted:-Tesla [TSLA] FUD: Warranty Claims | CleanTechnica

As mentioned by Elon one problem Tesla currently has is a high portion of the fleet under warranty, that is going to improve overtime...

If Tesla can rapidly scale battery production (which is my expectation) on financial opportunity is battery pack upgrades for older Model S/X cars especially those with the smallest or oldest batteries..

So far that has never made sense, but that was due to a lack of cells... with all cells needed for new cars...

More generally, upgrades and accessories are a way of making money from service, that in combination with the ageing of the fleet will help turn things around.

Better build quality and quality control can lower warranty costs, as can improved parts design..

If Tesla can get Supercharging and Service to be break-even from a financial point of view that is going to eliminate a major disadvantage compared to other car companies,

Tesla will always suffer the “problem” of having a much higher percentage of their fleet within warranty. I’m too lazy to look it up, but assume Tesla’s current fleet is 1M vehicles and assume 50% growth:

2020: 600k cars sold
2021: 900k
2022: 1.3M
2023: 2M

I.e. on Dec. 31st 2023, 4.8M vehicles will still be in warranty and only 1M out.

So whereas a non-growing auto company has an 80/20 ratio of cars out of warranty, Tesla will have a 20/80 ratio, and thus suffer this handicap, as long as the growth rate stays so strong.

 

[kbM3]

Nice SP500 inclusion speculation by one of the most informative Reddit posters (one of you?)

Guesstimated upside if TSLA joins S&P500? : teslainvestorsclub

 

[sparcs]

I didn't quite understand the markets response to the Q4 numbers. YoY was flat. The price had gone up by alot which implied high expectations, yet the response implies that this was a better than expected report. So I don't quite understand how the expectations are high and low at the same time. What am I missing? What was the postive news that the market hadn't expected?

The broader market realizing that years of FUD about Tesla were lies. We are heading into the strongest lineup Tesla has ever had for vehicles and growth. More investors believing in the long term story even if there is volatility in the short term. Weak longs are getting bought out. Investors realizing S&P 500 index coming soon.

Also a change in sentiment about climate from large entities like Blackrock. Where do you think all this capital flight away from fossil fuels is going to go?

 

[jerry33]

I didn't quite understand the markets response to the Q4 numbers. YoY was flat. The price had gone up by alot which implied high expectations, yet the response implies that this was a better than expected report. So I don't quite understand how the expectations are high and low at the same time. What am I missing? What was the postive news that the market hadn't expected?

In a growth company the important numbers are deliveries, new products, and cash flow. Profits (means GAAP/net profits, not gross profits) will be flat for some time because they are going to be plowed back into growth. Profits really only matter for a mature company that has little or no growth, because at that point there's nothing left but profits.

 

[Cattledog]

Following on from @DaveT 's video series, does anyone see a good bet for a 10 bagger in Ark's portfolio? Not saying there aren't any but is there a compelling and established case for any of the others? >

I have had a similar idea, so I bought a few shares of each of their funds so I would pay more attention to them and what they hold. I haven't done the deep dive yet, been too fun just watching the ticker here. I know you don't need to buy their funds to get to the holdings, but it's just my way of committing with more skin in the game. And I expect the funds to appreciate...