Sure, Ben Felix might be a clever guy and offer great insights into investing but…
In the end, does it matter? Would, should you base a decision on risk - rather than expected return?
I think you should take risk into consideration. If I offered you a ticket in a lottery, where you get a 50% chance of getting 4x your bet, and 50% getting 0, how much would you bet? you surely would not bet everything you have, even if this game has an expected return of +100%.
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Of course.
But the thing is: I can easily calculate the chances and odds of your proposed lottery. Perfectly accurately in fact, regarding its potential outcome.
You can not do this for financial markets or so-called idiosyncratic risk. So what do they do instead? Compare variance against a superset against historical numbers.
It’s a somewhat sensible idea to do this for individual stocks. But pretty pointless when you do it…
- as a comparison between two different indices
- whereas have a great deal of overlap (geographically, sectors, even in individual stocks)
- where both index are quite diversified in themselves, yet one basically a superset of the other
- do this based on historic numbers
- and then base long-term decisions on it
Don’t get me wrong, I’m not saying that, for instance, S&P 500 and Nasdaq-100 the same or have had the same performance. In fact, one has outperformed the other significantly over the mid- to longterm.
But… the movements, the ups and downs, if you will, have been so similar that you could call NASDAQ-100 basically an “amplified version” of S&P 500 (though admittedly more volatile). And that’s been true for decades.
Consequently, Cortana - if and as long as he’s being and deciding as a longterm investor - shouldn’t worry about “idiosyncratic risk” or pretend that he does this to reduce his idiosyncratic risk.
Does Cortana want to make a short-term play (maybe based on valuation?) that “Big Tech” is going to underperform the broader U.S. market soon? Well then,…
…yes, why not do this?
In my opinion this basically amounts to market timing though - something that he repeatedly said he would not want to do.
Will he reduce his “idiosyncratic risk” (of QQQ vs. the broader market) in doing so? Yes, pretty surely, if you stick to the definition. But I doubt that this is his underlying reason to do so.
And I also don’t think this “idiosyncratic risk” of sector overweighting is the only risk one should focus on. The concentration risk of investing 50+ per cent of assets in U.S. companies might not be “idiosyncratic” compared to the market-cap based world stock market (since the U.S. accounts for more than half of the world’s market-cap). But it’s a risk I’d rather give some thought - and maybe mitigate - than just switching from US-based index to another (quite similar) index.
(PS: I’m a bit tired any maybe could phrase all of this more pointedly, but I’m giving up for today)
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I might cave in on this.
Am I happy with my earlier call on short this? Absolutely - including the timing.
Should I have happily walked away with a 50% or 100% return from what was arguably a short-term bet? Probably.
Could this go higher short-term now? Likely.
Am tempted to wait for the quarterly earnings though.
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There will always be something around the corner to justify waiting more. In the end, this is a bet, single stocks don’t always follow fundamentals (for short or longer periods of time). I’m not giving any specific advice, because it’s your money and it’s important that whatever you do is fully your choice, but don’t get too attached to your strategy (which you don’t seem to but this is just your friendly reminder).
I hope this doesn’t feel like unsollicited advice, it’s interesting following your choices and I really enjoy your grasp of fundamentals.
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Wait, I thought you’re generally bearish on Tesla? Don’t you think, like Julianek, that the stock price will eventually set at $30?
By the way, I’ve been watching some videos with crazy valuations that people make. They just pull these numbers out of their a**, but some of the more believable scenarios include Tesla making 10 million cars annually by 2030, with a large chunk of that production going into their own robotaxi fleet. So, with 10 million robotaxis, each making $30’000 profit, you get $300 billion profit. Then with a P/E of 30 they get a $9 trillion valuation. And that’s just one of the more bearish models 
Here’s some funny “bearish” calculation:
And here for the whole business, not only cars:
I paste it just for fun, as I believe you can’t really predict how fast they can scale, how big will the demand & margins be, how the competition evolves. Lots of variables to plan 10 years ahead.
I am - but a leveraged ETF is obviously not the right vehicle for long-term bets.
I‘m not predicting a price for TSLA - however I do believe that there’s very limited (and/or very unlikely) upside from its current stock price, from a fundamental point of view.
2‘692‘500‘000 $ profit projected for their solar and energy storage segment in 2021.
1‘994‘000‘000 $ revenue is what they had last year in the segment - at a gross margin of 1%.
Can someone smarter than me show or come up with a valuation where Tesla does not reach full autonomy / robotaxis in the next 20 years? I just dont believe that will happen based on the Technology and laws
a quick test with the ARK model shows 100 per share with this, which cant be right
Maybe margin will increase? Tesla is burning its solar roof customers with a huge price increase - The Verge
Here’s his full breakdown for megapacks:
Don’t know how realistic 10 GWh is for 2021. I know that we recently heard about Apple purchasing 85 Megapacks. One Megapack has 3 MWh, so we’re looking at 250 MWh. Tesla would need 40x this to achieve 10 GWh sales. Somehow it doesn’t seem realistic to me. 
Well, you can take the data from this guy and scratch robotaxi or even megapack. You get $100 billion gross profit in 2030. Net profit is then $50 billion. And with a P/E of 40 you get a market cap of $2 trillion, so a share price of $2000.
Why not?
Seems like a reasonable figure.
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Nice to see Tesla back over 750 
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@San_Francisco did you close your short position already? It was not clear from your post.
I did. Pretty sure this will surpass 800 soon, and might run up till they release their quarterly report. So no point to bet against this movement in this way.
As I said, I‘m not unhappy about the call made - I just should have had more self-discipline to then realise higher gains and walk away with them.
While we‘re at it: I‘m having a hunch though that their next quarterly earnings may be somewhat underwhelming and pale in light of the lofty expectations created by their recently reported unit sales.
Though maybe I should rather look into longer-term oom options now.
And just to get a grip on the size of that bet, how much was your profit in absolute terms?
Some fresh news from today.
Will this have any effect on Tesla, more specifically on the stock price?
Not much, according to the article:
Once they’re fully self-driving later this year, there is no need for a driver anymore:
Quote: “What Tesla calls Autopilot is in fact a semi-autonomous driving system that can guide a car under limited circumstances. A more sophisticated version, called “full self-driving” is due to be released later this year*.”
* …just like every year for the last 5 years that it was supposed to happen (if we are to believe Elon)
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Which is the same that the term means in aviation:
Autopilots do not replace human operators. Instead, the autopilot assists the operator’s control of the vehicle
I will risk sounding insensitive, but I think Darwin’s forces are at play here. You might as well put a brick on the gas pedal to show the car can drive itself. There are measures meant to prevent this, but irresponsible people will always try to trick them, by putting weight on the seat or the wheel.
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Typical FUD prior to earnings: without any proof the car had Autopilot on, or was even equipped with it, the media has jumped to the conclusion that Autopilot is at fault.
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