This is just a fundamental difference in investing styles. To say that a company is overvalued is to say you know what a company’s value is based on their future endeavors, so what is a fair value of it? You can definitely cite some “widely accepted metric” but it just doesn’t work for technology companies. The reality is that no one, especially us, know none these things. First rule in investing NKA, nobody knows anything.

To me, the internal combustion engine and fossil fuels are soon to be a footnote in history. As will auto manufactures as we know it. Some will remain in name only. No one is anywhere near Tesla in technological advancements. It’s a $650 billion company based on
market cap; you are saying it can’t or SHOULDNT be worth more than that. Why?

PE on a high growth company is useless; if a company is focused on growth there should be no “E” in PE as all of their money should be reinvested to pay for that growth. This is just one example of why traditional metrics don’t work on companies like Tesla.

I’ve heard these arguments many times for various companies; AMZN who was just a book seller, made no money, cash burn through the roof etc. Who would have thought they’d be what they are today?

Amazon, the online book retailer?
Apple, the Mac computer company?
Adobe the photo shop company?
Disney the theme park company?
Google the search engine company?
PayPal the eBay payment company?

Who would have thought these companies would have morphed into what they are today.

I do not dispute that highly valued companies don’t have a violent reaction to market movements and news; I live it several times a year. Hell I’ve lost more than 1/2 a years salary in one day. The point is if you continue to buy and hold, you reach a point where the chances of you giving all of that back are virtually nil. Time is the most valuable asset when investing. The possibility remains, but it’s remote.

Here’s the thing, I love that there are two sides to these investment theories; that’s what makes a market and that’s what has gotten to me to where I, financially speaking.

I thoroughly enjoy these discussions!

Indeed an excellent discussion about two different investing styles. I'm glad you mentioned companies like Apple and Amazon. Contrary to popular opinion, companies like Apple and Amazon didn't burn thru a staggering amount of cash in its early days:


It turns out the assumption that successful tech companies burned lots of cash in their youth isn’t merely wrong—it’s staggeringly wrong. Look closely at the early days of the giants—the Fab Four, as we’ll call Amazon, Apple, Facebook, and Google (now Alphabet), and you’ll see that they were models of frugality compared with the new wave (which we’ll dub the Breakneck Burners: Tesla, Uber, Lyft, and Snap).

It’s true that in the dotcom frenzy of the early 2000s, many tech companies posted losses while devouring new funding. But the ones that burned piles of cash were such failures as Webvan and eToys.com, not winners like Google. Today, says accounting expert Jack Ciesielski, “you’ve got these companies chewing through mountains of cash, and investors are comparing them not with the failures of the dotcom era but with the survivors.”


https://fortune.com/2019/06/20/cash-...ber-lyft-snap/

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One of the best APC threads ever.

I agree. I actually look forward to seeing if there are any new posts here from day to day. Great discussions, everyone. I hope it keeps up.

Enjoying this thread as well. Any direction for learning about crypto currency’s? Been wanting to understand it better. It’s a new enough topic that I didn’t want to read old advice on a new market.

My measly contribution: I subscribed to Barron's a few weeks ago.

I started my own "mutual fund" via a Brokerage link and transferred in some play money.

So far I have not even come close to the S&P, but it's only been 3 weeks.

I intend to sit on my hands and read more Baron's and free advice here.

As a personal preference, I don’t use accountants to guide my investing.

As for burning through cash; if that’s a concern at this phase in their growth, consider they expect to be FCF positive for all of 2020. Think about how quickly they came from their nearly fatal balance sheet to where they are now. They’re just getting started.

As for the reason for the cash burn; look at where that cash is going....the development of the S, X, 3, Y and Cybertruck? Battery development? Built out of
factories (both for autos and batteries)? Build out of supercharger network? Build out of mobile
support fleet? Self driving software? Software beyond self driving? Build out of salesforce?

They’re investing, it’s not as if Elon is just taking this cash and buying pot :-)

We are in a new era of companies; I’m not sure if I’ve said it yet (haha) but traditional metrics used by academia and talking heads are utterly useless.

Look at the gross margins of these SaaS companies. Who's had those types of margins
in the past? Nobody.

Look at how easy it is to scale now - compared to the past. Takes very little capital and very few boots on the ground. Was it like that in the past where everything was physical?

Look at subscriptions? That revenue and whatever you retain largely goes right to the bottom line. And it is repeatable.

With Tesla, what is the #1 car company, the #1 power company and tons of subscription possibilities (self driving taxi fleet, software updates, etc....) worth? Much more than looking at historical data ratios. It will take a lot to get there, but I can see that path.

What is Fiat-Chrysler spending their FCF on? Advertising? Auto manufactures as they exist are dead.

Keep the thoughts rolling! Lots of good things to reflect on in this thread. Ultimately we all want the same thing: $$$$$$$$ :-)

I'm a Barron's subscriber as well. Comparing returns after 3 weeks, heck even 1 year is like comparing football teams two plays into the game. With that said it's quite difficult for the individual investor to beat the S&P 500 using similar large cap picks from Barron's. Individual investor better off brushing up on basic financial statement analysis skills and going small cap and lower and/or Global(Foreign Developed and Emerging Markets, avoid Frontier Markets)

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If that statement was not bs’ing, I’d assume he or she uses the 2 and 20 model (which is a no-go for me) probably has the Bloomberg Terminal as a setup.

Here’s some advice. Since I’ve mentioned RMG in this thread a few times I will take you through what I do in my due diligence phase.
1. Find a company/industry/sector that I like.
2. Learn about the components of that sector or industry. In other words—what are the driving factors behind the successful companies and products in the industry.
3. Find the best in breed in that industry or sector.
4. I have an account on Stocktwits (free) and sometimes I will scour their message boards there. A lot of garbage on that app, but there is also some good info/perspective.
5. Invest.

Here is an example of my investing strategy. Say you have $10,000. Don’t shoot your wad all at once. Take DAL for example. On profit sharing day let’s say you had $10,000 to invest in DAL. If it were me and I wanted to invest in an airline I would have invested $5,000 of it on that day. Owning a whopping 83 shares for $5,000.

Then literally one week after I started that position the bottom fell out. 2-24-20 that was $45.03 at its low. Not a good look in my portfolio. But you realize the environment. Panic selling. The market. Pandemic. Then you get excited because there is starting to be some major value here but you need to wait until this thing finds support and isn’t in a total free fall. Then on March 30th you see $22 and you know that is a sale price. So you buy. $2500 worth. 113 shares + your original 83 = 196 shares.

Then on May 11th you buy your last $2500 worth at $19. 131 shares. Add this up to your already 196 shares and you have 327 shares of DAL with an average cost of $30.58.

In this example you just went to the depths of hell and back. But your strategy which mirrors Tegridys strategy is to be disciplined, split up investments leaving yourself the opportunity to average up—or average down. If you’re consistent and disciplined you can make even a bad situation like this example work out okay. Buying at the high, buying more on a dip, and buying the last allotment on another dip.

$10,000 invested in DAL. $30.58 average. 327 shares.

As of 12/18/20 at close—DAL is $40.68 and now you can start thinking about your exit strategy! Your $10,000 is $13,302.

So having said that I always start off with investor presentations. Read, educate, decipher, dig, and formulate an opinion. Good luck deltoids. Example: https://romeopower.com/RomeoPowerInvestorPresentation_November2020.pdf