Like a Lithium-Ion Battery

Image Credit: Universal Pictures

The second quarter of 2020 ended yesterday.

I was a bit blindsided because I had lost track of the days in June and also because I was busy watching FC Barcelona play mediocre soccer on television.

But I received and read the same email from The Wall Street Journal as others:

Stocks wrapped up their best quarter in more than two decades, despite the coronavirus. Now the presidential election looms as another risk to the market. Link

I haven’t been an investor for two decades.

Almost, but not quite yet.

Still, I did sharpen my interest in stocks in the 2010s, which helped me achieve a +68% return over these last three tumultuous months. Link

Yes, that’s my best quarter.

Today alone, I’m up another +5% though I do not expect to write about a similar overperformance in early October.

Last month, I wrote about how I missed out on buying shares in Sea Limited ($SE) at an attractive price. Link

Cushioned between the emotions of a historic second quarter and a missed opportunity was the memory of liquidating my position in Tesla ($TSLA) late last year.

I first bought shares in Tesla in March 2013 at $35.75 per share.

Two months later, my 19th-ever post on Instagram ($FB) 373 weeks ago illustrated my optimism for Tesla. Link

The total sunk cost of that first trade wasn’t a lot of money.

Even less was the money in capital gains I earned from selling my shares less than one month later.

Tesla now trades around $1,119 per share.

Had I kept those original shares, the return would’ve been over +3,000%.

That’s one example of why I have slowly, and painfully, transitioned to a long-term investor.

David Gardner of The Motley Fool taught me on his Rule Breaker Investing podcast that the term long-term investor is a tautology. Link

From Googling the definition of “tautology”:

the saying of the same thing twice in different words, generally considered to be a fault of style (e.g., they arrived one after the other in succession).

Somewhere between buying and selling shares in Tesla between 2013 and 2016, I read Tim Urban’s four-part series of blog posts on Elon Musk, Tesla, SpaceX, and eventually Neuralink.

From Part 2 on Tesla:

Change doesn’t happen on a familiar landscape — change has to construct the landscape itself. This is part of the reason the challenges Tesla has taken on are so enormous. Henry Ford didn’t just build a car — he built a landscape, defining what a car was. Since then, car companies have worked within Ford’s landscape. Bringing back what Musk said about Ford — He was the kind of guy that when something was in the way, he found a way around it, he just got it done. He was really focused on what the customer needed, even when the customer didn’t know what they needed — it’s clear that this is exactly what Musk and Tesla are doing right now. If there aren’t enough charging stations for long-trips, build an energy network of Superchargers. If scalability is held back by the high price of lithium-ion batteries, build a factory that doubles the world supply of them to bring the price down. Just get it done.

But with a goal as ambitious as “accelerating the advent of sustainable transport” and a victory condition as far-reaching as “half of all new cars being electric,” building one great car company isn’t enough. To bring Musk’s original idea to the next level, Tesla would need to scale itself. To do that, Tesla is building a line of cars so stellar that it’s going to change the public’s expectations of what a car should be, and the whole industry will have to adjust to that new expectation. Link

Even my optimism on Tesla was met with surprise when today the company overtook Toyota ($TM) as the world’s most valuable automobile company:

Tesla became the world’s second-most valuable automaker in January, when it surpassed Volkswagen AG. It’s now worth more than twice the German giant.

After pioneering gas-electric vehicles with the Prius hybrid, Toyota was late to shift to fully electric autos and has wagered heavily on hydrogen fuel cells. The company is now making a series of high-profile investments in EVs and self-driving cars. The manufacturer has forecast an 80% plunge in profit this year and expects it could take until the first half of next year before the auto market recovers to pre-pandemic levels.

Toyota’s market valuation includes the 14.3% of shares that Toyota itself holds as treasury stock, worth around $30 billion. Tesla doesn’t hold any treasury shares, according to data compiled by Bloomberg. Link

Without me doing any math, it’s possible that all that time and energy buying and selling Tesla shares over seven years has netted out to zero.

So, how did I do so well in the stock market so far in the year 2020, you ask?

  1. Buy shares in exceptional companies.
  2. Do not sell any shares in exceptional companies.
  3. Distract attention by watching sports teams play unexceptionally.

Is Tesla’s new Model Y crossover the world’s best car, as The Wall Street Journal asked and answered in the affirmative last month? Link

I don’t know.

The Model Y is the only Tesla I haven’t ridden in aside from the original Roadster.

My current Tesla holdings have cost an average of $488.32, which isn’t terrible.

At some point this year, I’ll presumably end up buying more Tesla shares.

Only time will tell if I’ll be stupid enough to find a reason to sell again.

If my name were Sisyphus, this would be my penalty to pay.




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John Bonini

John Bonini

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