Investiv Daily Has Arrived

[Analysts Have It All Wrong On Tesla] By Sven Carlin on January 19, 2017 - In order to justify current market valuations, Tesla should increase car sales at least 12-fold, but there aren’t any sell recommendations for the company. - GM has a market capitalization per vehicle sold that is 79 times lower than Tesla’s. - Analysts are extremely exuberant about the market and are misleading investors. A better risk reward model is necessary in order to prevent tragic investment situations. Introduction As we are in the eighth year of this wonderful bull market, investors, analysts, and asset managers spend much more time analyzing potential rewards than analyzing risk because we easily forget to think about risk which is in opposition to Warren Buffet’s first and second rule of [investing]: “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” Not losing money means we should spend more time analyzing risk than we should on analyzing potential future investment rewards. Unfortunately, this is neither fun nor cool, and demands high levels of discipline, a very cyclical and long term perspective on investing with strong self-awareness, and confidence in what you’re doing so as to not just follow the crowd. Such personal characteristics are very rare in the investing world, and one of the reasons why so few consistently beat the market. This is logical as we prefer to read positive investment news that increases our hopes about the future and makes us feel better. We soon forget about the risks inherent to investing. On top of just feeling better, analysts—who create most of the investing content—are biased toward positivity as their employers require it. Imagine yourself as an analyst working for the likes of Goldman Sachs or J.P. Morgan and producing risk-focused investment analysis. This would scare off investors, and lower fees and commissions quickly leaving you without a job. Exuberance On Tesla, General Motors & The Market In General What’s troubling is that sometimes analysts’ positivity goes too far. A good example is Tesla (Nasdaq: [TSLA]). Of the 21 analysts that follow the company, not one has a sell rating on it while price targets go as high as $500 per share, which is double the current price. Figure 1: TSLA recommendations. Source: [Yahoo Finance]. TSLA is a great company with a charismatic leader, and it has done miracles for global technological improvements that will lower pollution, there is no denying that. However, from an investing perspective, there are many risks and the possibilities of success and positive long term returns are rather small. Let’s be uncool for a moment and do a small risk-focused analysis of TSLA. TSLA’s current stock price is $236, giving it a market capitalization of $38.3 billion. That’s a market capitalization of $457,376 per produced vehicle as [TSLA produced] 83,922 vehicles in 2016. [Rake in $86 Million in just 4.5 Years!] I'm about to reveal a simple investing blueprint that a small group of novice traders used to rake in $86 million in just 4.5 years! The best part … this simple blueprint is extremely easy to follow. It doesn’t matter what your background is or how much education you have. This blueprint can be duplicated by just about anyone and could make you an absolute fortune in the stock market starting today. [Click Here To Get The Blueprint!] [Easy-to-use Signal System Picks Stocks With Uncanny Accuracy] Here are several stocks our system said to buy: WNC shot up 288% after system said BUY VCI shot up 233% after system said BUY ETM shot up 953% after system said BUY Plus ... get over $398 worth of valuable books, videos, and reports just for trying this system risk-free for the next 30 days! [Click Here To Try It Risk-Free For The Next 30 Days!] I know TSLA is all about growth, but let’s be realistic for a moment and put things into perspective. General Motors Company (NYSE: [GM]) sold 9.8 million cars in 2015. Its current market capitalization of $56.9 billion gives us a market capitalization of $5,782 per sold car, thus 79 times less than TSLA. Many will say that TSLA is all about growth as it is a growth company in an exciting and growing market, and that the model 3 will be the first mass market electric car. However, if you go to GM’s Chevrolet website, you can see and buy this: Figure 2: First mass market electric car. Source: [Chevrolet]. The point of this example isn’t to criticize TSLA, it’s to show how positively skewed TSLA’s price targets are in relation to the general automotive industry. Perhaps GM’s example is too stretched, so let’s compare car manufacturers and their market capitalization per sold vehicle. Company Ticker Produced Vehicles (Millions) Market Cap (Billions) Market Cap Per Vehicle Toyota [TM] 10.15 $195.00 $19,212.00 Volkswagen — 9.93 $47.32 $4,765.00 GM [GM] 9.84 $56.90 $5,783.00 Mercedes — 2 $80.87 $40,435.00 BMW — 2.1 $56.62 $38.30 Tesla [TSLA] 0.0839 $38.30 $456,496.00 Figure 3: Market capitalization per sold vehicle. Source: Compiled by author. In order to reach Mercedes’s market capitalization per vehicle of about $40,000—which is the highest among manufacturers not including TSLA—TSLA would need to produce almost a million cars per year, thus 12 times more than they are currently producing. If everything goes well for TSLA, it will eventually reach such a milestone, but it will take many years to get there and probably many more capital raises which will dilute current shareholders. I repeat, if everything goes well. If everything does go well, the question will remain whether Elon Musk will use eventual profits for dividends or if he will jump into a new exiting, world changing project. I for one hope TSLA makes it, but my point here is that analysts should at least put a few sell recommendations on TSLA as it’s very unlikely that TSLA’s plans will develop smoothly enough to justify the current market capitalization. We can develop the analysts’ exuberance example further on GM. Analysts are even more positive about GM than they are about TSLA as only one analyst gives GM an underperform rating. Figure 4: GM recommendations. Source: Yahoo Finance. With GM, it’s easy. If the economy continues to grow, GM will do fine. However, if the economy enters a recession, GM will do terribly. According to analysts’ recommendations, we don’t have to fear a recession… Analysts’ positivity isn’t only surrounding the automotive industry. Of all the S&P 500 recommendations, only 6% are sell ratings with 45% hold ratings, and 48% buy ratings. Figure 5: S&P 500 recommendations. Source: [FactSet]. Conclusion I firmly believe that such a high level of positivity around companies and target prices is extremely biased and leads many less sophisticated investors into investing without fully understanding the risks. The problem is that such a biased general market attitude will lead to one or two years of lower profits for banks and investment managers if things turn south, but can easily wipe out many hard-earned average people’s nest eggs. With analysts from renowned and distinguished financial institutions so positive, this becomes a social issue as many will easily invest their retirement assets or savings in the market based on the positive outlook and 7 year long positive market performance. The trouble is that we’ve seen this pattern form again and again. In the 1990s, there was the dotcom bubble which ended miserably. In the 2000s, we had the subprime crisis which again, ended miserably for many investors, and now we have another exuberant bubble in the making. Analysts will say that in the long term, the market will go higher no matter current valuations and that we should invest for the long term. I agree with that, but if investors have to wait 10, 15, or even 20 years to reach positive returns while paying fees every year, I don’t think it’s fair. There should be a better, more transparent, fair, and honest way of presenting the risks of investing to the general public. Just for the record, I’d put a sell recommendation on TSLA if the investment is anyhow related to your retirement, child’s university fund, or any other future important investing target. Editors Note: In the near future, Sven Carlin—fund manager, Ph.D., and daily contributor to Investiv Daily— will be launching Global Growth Stocks, a paid newsletter focused on companies perfectly positioned to profit from the fastest growing emerging markets. Developed economies have matured and growth will be slow. Countries such as China, India, Brazil, and many others will be the global economic drivers. Sven has already written four in-depth issues featuring four companies that could hand early investors gains of 300% to 500% over the next several years. These issues will only be made available to paid subscribers. If you would like to be notified when Global Growth Stocks officially launches, [please click here to be automatically added to the list.] Beta subscribers will have the opportunity to subscribe for a deep discount off the regular annual subscription rate. [No Comments »] | Filed under: [View all posts in Auto Industry], [View all posts in GM], [View all posts in Investiv Daily], [View all posts in Tesla], [View all posts in Valuations] | Tags: No Tags --------------------------------------------------------------- If you are having trouble reading this email, you may [view the online version] This email was sent to {EMAIL} by Investiv, LLC 3400 North Ashton Blvd. | Suite 170 | Lehi | UT | 84043 [Forward to a friend] | [Unsubscribe] Disclaimers Investing is Inherently Risky There are risks inherent in all investments, which may make such investments unsuitable for certain persons. These include, for example, economic, political, currency exchange, rate fluctuations, and limited availability of information on international securities. You may lose all of your money trading and investing. Do NOT enter any trade without fully understanding the worst-case scenarios of that trade. And do NOT trade with money you cannot afford to lose. Past performance of an investment is not necessarily indicative of its future results. No assurance can be given that any implied recommendation will be profitable or will not be subject to losses. Hypothetical Results Are Reported Results and examples used in the Company’s advertisements, books, videos, websites, and other media—including on the Site and the Network—are, in some cases, based on hypothetical (simulated) trades. Plainly speaking, these trades were not actually executed. Hypothetical performance results have certain limitations. Unlike an actual performance record, hypothetical results do not represent actual trading. Also, since the trades have not been executed, the hypothetical results may have under-or-over compensation for the impact, if any, of certain market factors, such as lack of liquidity. Hypothetical trading programs generally are also subject to the fact that they are designed with the benefit of hindsight. Hypothetical results also do not account for commissions or slippage. The Company’s simulations assume purchase and sale prices believed to be attainable. Yet traders are going to be getting into trades at different times and using various exit approaches, which may result in different pricing and outcomes. You may or may not receive the best available price on the purchase or the sale of a position in actual trading. Information provided by the Company is not investment advice. The Company is not a registered investment adviser, stock broker, or brokerage. You agree that the Company does not represent, warrant, or take responsibility that any account will or is likely to achieve profit or losses similar to those shown. Examples published by the Company are selected for illustrative purposes only. They are not typical and do not represent the typical results of all stocks within the Company’s software or its individual scans and searches. No independent party has audited any hypothetical performance contained at this Web site, nor has any independent party undertaken to confirm that they reflect the trading method under the assumptions or conditions specified. Offers Disinterested Commentary and Analysis The Company does not receive any form of payment or other compensation for publishing information, news, research, or any other material concerning specific securities on the Network that is intended to affect or influence the value of securities. The Company, and its personnel, do not engage in front-running of recommendations and do not trade against one’s own recommendations. The Company and its management may benefit from an increase or decrease in the share prices of the profiled companies, and/or may have other actual or potential conflicts of interest. If a particular security featured in a newsletter publication is concurrently owned by the Company in its corporate brokerage account, or in any of the individual accounts of the Company’s principals or analysts / writers, that fact will be disclosed. The Company, its principals, analysts and writers may choose to purchase a security or derivative featured in one of its newsletter publications, but typically will wait three (3) trading days from the date of publication before initiating said purchase. [Disclaimers, Terms & Conditions] | [Privacy Policy] Copyright 2017