Day 10: Avoid Being Stupid
365 Days of Learning Investing: I tried, Tesla is a pass for me and Weekly cool-headed review of the markets and macro with charts.
Note: I posted my first 14 Days of the 365 Days of Investing series when I had less than 300 readers. Since my newsletter is education first, I thought it might be useful for you to read my early posts.
Key Takeaways Today:
How to avoid making stupid mistakes in investing.
Tesla is a pass for me.
Weekly cool-headed review of the markets and macro with charts.
Recap of Day 9:
Financial Statements are not that hard to learn. Just needs more practice, like any new skill.
Alphabet is #1 in digital ads, #1 in search, #1 in video platform, #3 in cloud and a buy.
Since I asked, Bill Ackmann is breaking down financial statements for you.
Micro Learning - Avoid Being Stupid
"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." - Charlie Munger
How do I avoid being stupid?
Investing in familiar companies: this saves lots of time in understanding their products/services. For instance, I went through Adobe’s Digital Media (Photoshop etc) segment in a breeze, while it took me some time to understand the Digital Experience (marketing etc) segment. Reading the latest 10-K, 10-Q, transcripts is a must regardless. Search SEC Edgar or google “Ticker IR”. Example: ADBE ir
Highly covered companies: I invest in highly covered companies, usually covered by 30+ analysts. This almost eliminates the need for financial modeling, as you can use the consensus model. Also, I don’t have access to the unit, industry level data and contacts that they probably have. I doubt my model would be better than a group of analysts that eat and breathe the company for a living. My job is to understand the why and how behind the modeling. Use Koyfin.
Earnings surprises data: usually 80 quarters (20 years) if available. Companies I invest almost never miss the consensus, especially annually. I think this shows the predictability or “modelability” more than the analyst skill. Use Koyfin.
Keep valuation simple: historical multiples with context and reverse DCF, it just has to be reasonable. Use Koyfin for free, google reverse DCF template. FASTgraphs is paid.
Position sizing: I usually start with a small position, 2-3% of my portfolio. Conviction usually comes with time as I dig deeper and/or once I read up more from other people for more insights.
Have some balls: Also, I’m good at “f*ck it money” once I’m invested. I don’t panic sell unless it becomes clearly obvious that I made a mistake.
How do you avoid being stupid? Comment below, let’s discuss.
2. Company Profile - Tesla (TSLA)
Important: There might be some terms which are new to you, no worries, keep reading anyway. I will explain them in time, or you will just figure them out before I do, as they will keep repeating on every post.
1. History
Founded: 2003 by Martin Eberhard and Marc Tarpenning. Elon Musk joined in 2004, leading the initial funding round.
Key Milestones:
2008: Launch of Tesla Roadster, Tesla's first EV.
2012: Launch of Model S sedan.
2021: Model 3 surpasses 1 million global sales, becoming the first EV to do so.
2023: Model Y becomes the best-selling vehicle globally.
Headquarters: Austin, Texas, USA.
2. Products and Services
Electric Vehicles (EVs):
Models: Roadster, Model S, Model 3, Model X, Model Y, Cybertruck (2023 launch), and Tesla Semi (2022).
Vehicle Deliveries (2023): 1.37 million units globally, a 47% YoY growth.
Energy Solutions:
Powerwall, Megapack, Solar Panels, and Solar Roof.
Energy Revenue (2023): $3.5 billion (10% of total revenue).
Supercharger Network:
50,000+ Superchargers in over 5,000 locations worldwide.
3. Business Segments
Automotive: 81% of revenue ($82 billion in 2023).
Energy Generation & Storage: 19% of revenue ($14 billion in 2023).
Tesla is internationally diversified but still highly dependent on China:
4. TAM (Total Addressable Market) and SAM (Serviceable Addressable Market)
EV Market TAM: Estimated $1 trillion by 2030.
Renewable Energy Market TAM: Projected at $1.9 trillion by 2030.
Tesla's SAM:
EV penetration expected to grow from 15% in 2023 to 50% by 2035 globally.
Increasing adoption of renewable energy and grid storage solutions.
5. Competitors
EV Manufacturers:
BYD: Delivered 1.9 million EVs in 2023.
Volkswagen Group: Delivered 572,000 EVs in 2023.
Ford: 61,575 EV deliveries in 2023.
Autonomous Technology:
Waymo, Cruise, and other tech-focused companies.
Renewable Energy:
Enphase Energy, SunPower, and traditional utilities.
6. Market Share
Global EV Market Share: Tesla holds 19% (2023).
U.S. EV Market Share: Tesla accounts for 61% of EV sales (2023).
7. Moat
Brand Leadership: Iconic reputation in EVs and energy innovation.
Supercharger Network: Largest global fast-charging network with 50,000+ chargers.
Battery Technology: Leading in battery density, range, and cost reduction.
Software Edge: Advanced self-driving (FSD) and over-the-air updates.
8. Management and Ownership
CEO: Elon Musk, CEO since 2008.
Elon Musk's Ownership:
Percentage: 13% of shares.
Value: ~$182 billion (at $418/share, market cap $1.4 trillion).
Insider Ownership: ~20% of total shares.
9. Valuation
Tesla has become more predictable recently, especially if we look at the data annually. This is usually a good sign.
Analysts are projecting about 20% revenue and 25% EPS growth in the next 5 years. I would take any projections beyond 5 years with a grain of salt because the number of analysts making estimates drops from 45 to 3 for year 7.
I couldn’t get to any meaningful valuation with 20-25% growth and 30 P/E multiple, which I believe is ridiculous because that is very generous. In this case, total return would be around 14% total or 2.3% annual in the next 5 years. Not enough margin of safety for me. Pass. Too hard. Tesla might achieve all its promises in the future, but I can’t invest based on that.
3. Useful stuff
Cool-headed review of the markets and macro with charts, taking the long view. Charlie posts weekly videos. Probably the only source you need.
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