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The Simple Secret To Tesla-Like Gains

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The year 2020 has been an unusually fruitful one for clean energy investors thanks to incredible momentum behind ESG investing. One corner of the market--EV sector--has been shooting the lights out, and few companies have outdone the kingpin of the space, Tesla Inc. (NASDAQ:TSLA). TSLA shares have skyrocketed 723% in the year-to-date, and in the process created an army of ‘Teslanaires’--Tesla investors who have seen their holdings balloon into the millions of dollars.

It’s also put Elon Musk in touching distance of becoming the world’s richest man.

It’s been a big redemption for the legions of retail investors who flocked to Tesla’s clean-energy mission and rode out its numerous storms--Elon’s tweets, production misses, several brushes with bankruptcy, oil price crash and even the pandemic market crash all in the mix.

That’s certainly saying something for one of Wall Street’s most polarising stocks, with Tesla having been labeled a ‘cult stock’ and lambasted for being ‘grossly overvalued’ for several years now.

However, not all who dabble in Tesla stock have been able to realize those incredible gains.

The holding game

The big secret to making money in Tesla has also been Warren Buffett’s famous mantra: Buy on the cheap and hold...forever.

There’s no denying that Tesla is unusually volatile for a company it’s size, with big spikes frequently followed by sickening crashes. On a Tesla chart, the highs are very high, and the lows are quite low relative to those highs.The company has frequently shed billions of its market cap without batting an eye, including times when none other than Elon Musk himself has declared TSLA as being overvalued.

Heck, Musk recently even disclosed that he offered up the company for a takeover by Apple Inc. (NASDAQ:AAPL) during Model 3 ‘production hell’ in 2017, but Tim Cook wouldn’t bite--never mind that Tesla was 10x cheaper back then.

Yet for seasoned and long-term investors, a clear pattern has emerged--the trick appears to be buying on the titanic dips and holding on during the sinking phase, then simply waiting for the inevitable bonkers recovery.

In other words, Tesla stock is built for investors who believe in its mission and can withstand its stomach-churning volatility.

Unlike your average cult stock that has frequently proved to be a put owner’s dream, Tesla shorts have been experiencing ‘the short burn of the century’ as Elon Musk warned two years ago.

The funny thing is that that playbook has hardly changed, and Tesla continues to behave like a startup more than a decade after its IPO.

Source: Business Insider

Tesla momentum

Tesla clearly has momentum on its side, and is likely to continue rewarding long-term investors for years to come.

Tesla has been riding the electrification and ESG megatrend that’s likely to dominate for years to come.

At a time when oil prices remain stuck in limbo, Tesla Inc. (NASDAQ:TSLA) has continued defying bearish expectations that low oil prices would put a damper on its core business of selling electric vehicles. For the fourth consecutive quarter, the EV maker posted yet another blowout that beat top-and bottom line expectations but, more importantly, exceeded Wall Street delivery estimates and reported record profits to boot.

Tesla reported Q3 revenue that it produced 145,036 vehicles in Q3 (+51% Y/Y) and delivered 139,593 vehicles (+44%),  beating Wall Street’s consensus delivery estimate of 137,000.

Tesla also maintained its 500K delivery target for the full year, well above the Wall Street consensus of 476K.

More importantly, Tesla is not only likely to beat its delivery estimate this year but also appears to have a clear road to deliver 1M EVs in 2021.

Wedbush analyst Dan Ives says Tesla could achieve its goal of 500K deliveries for 2020, thanks to strength in China and a late push in Europe and the U.S. and has set $1,000 (44% upside) potential bull case for the shares.

"Based on our initial analysis of demand and the delivery trajectory globally for Tesla in 4Q, it appears Musk & Co. will likely handily exceed Street and internal expectations. Heading into year-end and 2021, we are seeing a major inflection of EV demand globally with our expectations that EV vehicles ramp from 3% of total auto sales today to 10% by 2025.’’

Tesla’s undertaking though doesn't have much to do with market fundamentals. Unlike Amazon Inc. (NASDAQ:AMZN) which lost money for years on the assumption that expanding would lead to market dominance, Tesla doesn't stand much of a chance at knocking off the traditional auto industry leaders.

In fact, Tesla could quadruple sales over the next 2-3 years yet the carmaker would still be light years away from knocking the likes of General Motors (NYSEGM), Ford Motor Co. (NYSE:F) and Fiat Chrysler (NYSE:FCAU) off their pedestal.

Rather, Tesla’s Model 3 is all about realizing Musk's vision of accelerating humanity's departure from the fossil-fuel era.

With ambition like that, investors appear not to be too hung up on profits.

By Alex Kimani for Safehaven.com

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