You’ve got to do what works for you. But you are taking someone else’s work, Morningstar in this case, and assuming their “model” is an accurate depiction of current and, more importantly, future value. They adjust those “fair value” numbers on a quarterly basis simply because that is what they are paid to do. Imagine if they picked a fair value for 2040 and didn’t change it or give updates, how much business would they get from subscriptions. Wall Street analysts are even worse. Consider Morningstars fair valuation is a split adjusted price of $1750/share. Go back 2-3 years and see what their fair value was then. How does their fair value keep going up? What happens if you keep waiting for it to “come back down to earth” and reach fair value (hint, you lose out) and Morningstar doesn’t care. Because they keep churning out numbers that people pay them to churn out since it makes them feel smart.

If you want to give Tesla the title of a “story” then I’ll read it all day long. You mention it’s “unhinged from reality” but how was launching rockets into space and landing them on a postage stamp in the ocean within a couple of years part of our reality.

You’ve limited your investing to looking at a number that is the result of dividing one number by another taken from a quarterly report. You cannot achieve outsized growth without understanding technology, how it advances society and believing in the story which becomes a new reality every day.

You often talk about how valuations are extreme and I keep saying that in order to say this you somehow know exactly what a company is worth. So I ask you, what is Shopify worth? How about Tesla? What is this based on?

I don’t pretend to know those nor focus energy on trying to know. I don’t care. I look at what they’re doing, how they’re doing it and how they’re investing their capital.

Again, The doomsday bear thesis always sounds smarter. If that’s what’s important to you, roll with it. I’ll be the idiot in the room day dreaming about the potential of space x landing on Mars while I write investing posts to this board in my cyber truck which is being up linked via starlink internet as I smoothly bypass traffic in the massive tunnel under Las Vegas.

EDIT- For fun I checked on the history of morning star fair valuations. Their lowest since 2014 was 34.20 adjusted all the way up to its current “nose bleed” fair value of $349. Since 2014, if you anchored the price of Tesla based on Morningstar models and never bought because of it, you’ve missed out on some incredible growth. Like 15,000% kind of growth. And yet, Morningstar continues to “adjust” fair value up. What does that tell you?

 

The Motley Fool.

 

This is my only source for investing ideas.

 

This entire post sounds errily like Tech investors in 2000, or Real Estate investors in 2007. Be careful out there.

"The key to investing is not how much an industry will affect society or even how much it will grow, but rather its ability to make and sustain profits. And history tells us that eventually all excessively exuberant markets succumb to the laws of gravity"

Burton Malkiel

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A couple things;

First-
Its very in vogue to compare the market today to the dot com bubble. So I’ll ask you this; is there a difference between Tesla and pets.com? That’s why this isn’t the dot com bubble. Tesla is launching more starlink satellites today.

Second-
I added this update to my previous post and I want to repost it here, because it’s important“EDIT- For fun I checked on the history of morning star fair valuations. Their lowest since 2014 was 34.20 adjusted all the way up to its current “nose bleed” fair value of $349. Since 2014, if you anchored the price of Tesla based on Morningstar models and never bought because of it, you’ve missed out on some incredible growth. Like 15,000% kind of growth. And yet, Morningstar continues to “adjust” fair value up. What does that tell you?”

Third-
Do you think because you’re investing in “value stocks” today that they’re immune to the burst of a bubble? Bubbles, when they pop are indiscriminate and typically take entire economies with it. Based on your thesis you should not invest at all, and perhaps stash cash under your mattress.

Fourth-
I challenge what Mr. Burton Malikel says (what makes him so smart, anyways?). My challenge is based on this chart of the S&P alone (link attached. Still don’t know how to paste images to this board);

https://ibb.co/whR5RKN


Fifth-
When you invest in a company, do you want them to slow growth (be it geographically or by investing less in new technology) in an effort to maintain less EBIT and higher EV/EBIT, or would you rather they expand and invest heavily so as to increase EV in the future at the expense of the ratio today?

 

First, you keep mentioning new things Tesla is going without even an utter of how much cash flow the company will make off these innovations. The Concorde was very innovative and did JFK to LHR in 3.5 Hrs, costing airlines millions instead of making money. Moreover, a better comparison for Tesla would be Cisco. Blue Chip company, still around, founder is still a Billionaire. Those that invested at irrational levels? Permanent Loss of Capital.

2nd, this is not a question for someone who understands fundamentals of investing should ask. A stock's intrinsic value is it's future cashflows discounted to the present value. Over time a stock's intrinsic value will grow relatively close to its return on invested capital. As far as missing out on "growth", an value investor will always miss out on substantial "growth" with bubble assets. Folks that didn't mindlessly jump into GME at $200-400 a share missed out on lots of growth. You know what they also missed out on? Permanent Loss of Capital

3rd, Value Investor Joel Greenblatt returned 140% the year the tech bubble burst after underperforming the market for 2 years. I'm not completely immune to loss during a downturn, but my risk of permanent loss of capital is significantly reduced as I invest in businesses at a reasonable price that generate significant cashflows now with ample cash reserves instead of paying exorbitant amounts for "Hopes & Dreams"

Apple is a once in a generation company and probably the best company in the history of the modern business world. Not once did it trade at the irrational levels TSLA and SHOP are trading at. Once again, be careful out there. Permanent Loss of Capital is real and the emotional effects on an investor can be devastating. The chart below is likely the future of Tesla and Shopify, Billionaire owners, great businesses but a significant amount of investors facing permanent loss of capital due to buying the stock at irrational prices.



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You said “permanent loss of capital” a lot in that post. Your investing seems to be fear driven which is very institutional in nature. “Investing is scary and risky” says Wall Street. “Let us take care of it for you; we are smart” they say.

Im not sure the relevance of GME to this discussion. It’s a typical case of a brick and mortar company not innovating and keeping up with the times. Hardly a SHOP, TSLA or AMZN. Their fate was sealed when the internet was invented and they failed to move beyond physical game sales. It’s current movements are irrelevant to this discussion.

Since you’re cherry picking time horizons with CSCO to justify your theory I’ll do the same. Here is CSCO from 2004–Present. How is this a permanent loss of capital? A great investment? Meh. Not really. But if I bought a share in 2004, for $18 and it’s worth $50 today....I’m not sure I’m following the point you’re trying to make. See image.

https://ibb.co/0GdNq2S

Now “this is not a question for someone who understands fundamentals of investing should ask.” You say. But if you understand fundamentals why are you relying on fair value estimates from morning star. Compare that to any other analyst firm out there and their fair value is different. So does everybody NOT understand fundamentals? Don’t forget, the market is future looking, not backward. All of your data you’re using to inform your decisions for investing are using historical data that cannot harness the future of innovation and technology.

All that being said, you’re still in the 1% of people who even care to invest time to learning some sort of investing acumen. You’ve done your research and while our methods are very different, you’ll still come out ahead than those that don’t. I have no doubt about that. I’ve got my data, let’s reconvene in 5 years when you have yours. I recommend creating a simple spreadsheets that tracks cash in flow and out flow with dates. From there it’s very simple to run an XIRR calculation to compare your performance to an index. Good luck!

 

You are confusing Tesla with SpaceX. The two have the same CEO, but are financially independent.

 

Right click on the image you want to post. A menu will appear. Left click on the menu item; copy image. Come back here place the cursor where you want the image to appear press cntrl/v together and presto:

 

No confusion. What you’re saying is true, the common thread (Elon) is the investment. When SpaceX IPOs I’ll be first in line for that stock too, hoping to get a crack at it in MicroVentures before IPO, actually.