TSLA: investing and emotions

This is not a suggestion to buy a stock nor is it financial advice this is an article that I use to polish my own thought process and serves as a reference for me in the future. I do not suggest you follow my investments without doing your own research. I am not a financial adviser, or an attorney make your own decision and understand the previous performance is not an indicator of future performance, and you can make or LOSE money as long as you are investing in anything. I may or may not hold positions in the stock or stocks mentioned.

Emotions lose money… Ignorance loses more.

Earlier in the month, I took a position in TSLA due to an itchy trigger finger and my respect for Mr. Musk, which was promptly sold due to my risk tolerance of <2.5% (I bought way too high). The position today, would have earned a cool eight percent if I sold at open, the lowest point in trading today. This was following an earnings report where TSLA is still losing money, but has higher revenue than projected… and Mr. Musk apologizing for his past criticisms of short sellers, question askers on conference calls, and one diver who was called a ‘pedophile’. This is a series of apologies that earned him 1.8B on his 19% share of TSLA.

What I knew

TSLA is a stock price that almost directly reflects the amount of confidence that investors have in Mr. Musk. The company currently trades at a 153.3 P/E ratio. Compared to AAPL’s 18.79, GOOGL’s 52.55, and FB’s 29.2, it is clear TSLA is drastically overvalued in regards to current earnings.

TSLA had been burning cash in order to keep running, shipping, and scaling production. However, should TSLA’s ideal’s be fulfilled, it has potential to completely take over this relatively new market that it had helped to popularize. Add up the future growth of the company, current brand ‘luxury status’ and throw in a (dare I say) charismatic leader, that has a respectable track record, and it is easy to see how the price of the stock is valued far above its earnings and assets.

When people enter into positions, whether in investing or argument, they are extremely defensive even if they are wrong, and will cling onto any shred of evidence for their position. Hence, should any good news come from TSLA the bulls will drive the prices up fast.

Where I was ignorant

In a stock built on sentiment, a weak stomach for risk means lost money. Just because there is potential for good news on the earnings report (weeks away from when I entered my position) does not mean no bad news will occur before then. Not changing my tolerance for loss when entering such a volatile stock results in a quick loss of money. losing 3% after just 24 hours in the stock, and not seeing my original plan to fruition is what lost me 3% of my capital and 16% of upside in the markets today.

Even in an established company, one with a proven record of consistent earnings and consistent appreciation of prices a fall of 3% is relatively common. In a more volatile stock like TSLA a stop loss should have been either a larger percentage, a flat sum of money that I would be willing to lose, or held until a clear downtrend is present for longer than a month (or any other moderately long period of time).

Next time

I will refrain from entering TSLA which is just starting to hit previous highs, or refrain until the uptrend is clear and present for at least ten trading days, and a correction occurs. Looking back, it was clear that the price was always headed toward 300, a previous support level, or even lower at 280. Buying when the hourly chart reached a oversold position is only justifiable for very very short positions and/or sideways markets. Assuming that TSLA tests its previous high at 358 and does not break it, and does not fall below 300 on the correction, I will try to buy in around 305 and hold to 350, there I will exit the position and wait until the stock breaks the previous high, or once again falls.

August 1st AAPL

This is not a suggestion to buy a stock nor is it financial advice this is an article that I use to polish my own thought process and serves as a reference for me in the future. I do not suggest you follow my investments without doing your own research. I am not a financial adviser, or an attorney make your own decision and understand the previous performance is not an indicator of future performance, and you can make or LOSE money as long as you are investing in anything. I may or may not hold positions in the stock or stocks mentioned.

Post Earnings July 31st

Apple is a company close to my heart. With my first hand held device being a first generation iPod Touch that I was gifted following stellar accomplishments in competitive swimming. I currently use a iPhone X and I was more than a little tempted to get an iPad for school rather than trade up my broken Microsoft Surface Pro (microsoft also has shit service in stores). AAPL was thus one of the first stocks I bought (not to mention first to earn me more than 1000 in a trade). A company that is surrounded by a deep deep deeeeep moat, a company sitting approximately 245 Billion of cash, and a branding so prolific that can be slapped on a pile of shit and the fan-boys would still buy and defend (2018 macbook pro???).

I have looked for a place to get back into AAPL after selling it off when it reached 191 earlier in the month, while i wish it dropped further below the price I sold for, 100B of buy backs as well as buyers who bought and held in anticipation of the earnings report (kudos for having more confidence/foresight than me) kept the price hovering around $190. Following the 3% gain in aftermarket trading following the earnings report, and the establishment and 3x testing of a support line at 199 earlier this morning (10:30 – 11:30 am ET) there was no reason to not buy in.

Confidence to buy

The volume today was 60M shares (a common volume for large price movements in the past month), with regular days being around 30-40M giving me more confidence in the upward movement of the stock. That combined with the ‘magical’ $1T evaulation sitting at 203.252 (1T / 4.92B shares outstanding) or 214.133 (1T/4.67B float) will likely lead many investors to follow into the stock, driving the prices up. Although it would be short sighted of me to sell with just 2.25% growth, for the worst case scenario I can sell after the 1T evaluation. AAPL is also a FAANG stock, with the 20% drop in FB and new highs spooking investors to sell AMZN AAPL is a pretty easy buy for investors right now, beating on revenue and earnings, while showing steady growth in services, as well as growth in old and new products.

Conditions

To limit my loss, if the stock drops below 190 i should sell, however i’m expecting upsides up to at least 215 in the short run, with the confidence allowing for great upside potential into Q4, despite that i will sell if the stock moves past 250 unless adequate support is shown.

The End Goal

“Formal education will make you a living; self education will make you a fortune”
-Jim Rohn

10 Years from now

Ten years from now the goal are: to be doing whatever I please, while having the passive income to sustain my living expenses and hobbies, to have a net asset value of 10,000,000 Canadian dollars, and to be consistently gaining value.

The way

The only way to get there is to keep learning, living below my means and exploring new streams of income. The current methods of income I employ, aside from working, are investments in stocks, real estate (referred to from here on as RE), peer-to-peer lending (referred to from here on as p2p lending ), and cryptocurrency (referred to as crypto from here on).

By diversifying into different fields the reliance on any individual field is decreased while being exposed to market movements that may or may not be correlated. The continued investment of earned income into stocks are done to earn a 25% growth per year, with a variety of speculative, growth, and dividend stocks. Real estate investments are used for appreciation of real estate prices, as well as generation of cashflow through rental properties to further expand my real estate portfolio. Crypto and p2p lending are explorations into new and promising fields which pose more risk and offer higher rewards.

To attain 25% growth per year in conventional stocks, the methods used will be the long term following of key companies, entering positions at lower-than-calculated prices, and exiting at uncomfortably high prices. To do this, stock knowledge, risk tolerance, and technical analysis needs to be cultivated. Under the right market conditions large gains can be made by just buying and holding, however, even in a bull market pull backs are common and the exiting of a position near the start of the pull back, with buying back of the stock during the pullback at lower and lower prices will effectively increase the amount of potential gain relative to starting capital.

Real estate investment growth can only be done in two ways, charging higher rent, or owning more properties. In order to charge higher rent, the market conditions have to be right, since no individual controls the market, the second method will be used to grow RE. Two conditions must be met in order to own more RE, available credit, and cash for down payment. Credit must be built through on time paying of bills, use of credit cards, and constant maintenance of credit score, while down payments must be saved through living below my means and by taking a portion of excess profits from other income streams if the situation allows for it (EX. if stocks return 60%).

Crypto, p2p lending, and future speculative investments will be done on a “can afford to lose” basis. The majority of capital will be allocated elsewhere while a small initial amount will be used for speculation. Like RE down payments, if the right situation allows, some profits from other income streams may be used to fuel further / faster speculative investment growth.