Generational companies are investments where you can 10x or 100x your investment in 5-10 years, but you need to get in at the right time. Many investors underestimate the importance of timing.
There are ups and downs. There are certain times if you get in you can double or triple your investment than if you got in at a later time.
David Lee provides insight into his qualitative and quantitive approach to investing.
He describes anti-memetic FOMO (fear of missing out) that is derived from your own qualitative and qualitative analysis. You are able to forecast a stock can double within the next 1-2 years and then doing another 5x in 5-7 years.
Tesla is fully valued on near-term data. If Tesla shows that they have enough demand to move more cars even with expanded factories, then Tesla would justify another move up.
Currently, the market expectation is that Tesla will sell 550,000 to 650,000 cars in 2020. The main potential for positive surprises would be if Tesla reveals sustained weekly levels of production at nearly 3000 cars per week. This is the expected capacity of phase 1 of the Shanghai factory.
The Shanghai factory was made in ten months. There are high sales of electric cars in China. If Tesla can capture 20+% of market share in China for electric then this would be an upside surprise and would support sales of 300,000-500,000 cars per year in China.
The other way Tesla could surprise is if they can grow the profitability of their cars. Most analysts do not expect that Tesla can grow profitability much beyond current levels.
Ark Invest believes that Wright’s law will allow Tesla to grow its automotive profit margins to 40% from about 22-24% now. Nearly all stock analysts do not believe the Ark Invest thesis.
Tesla will improve profitability by improving the performance and cost for their batteries. Tesla is also improving major aspects of their factories.
Maxwell Technologies has dry cell battery technology. This technology can make battery factories ten times as productive in the same area of factory.
Tesla has a large form for injecting casting patent and system for creating the body frame of cars with only one part instead of sixty parts.
Potential Catalyst Events in 2020
In April, Tesla could have $156 million in profit where they would have profitability over 12 months. This would enable Tesla to join the S&P500. This would mean index funds would have to buy Tesla.
In April, Tesla will have a battery and drive train day. This will be the event where Tesla reveals how they will scale battery production to 2 terawatt-hours per year. This would support 10 million cars per year and a similar scale energy storage business. Tesla will also reveal how they will extend their lead in batteries.
Tesla will have various events where they reveal further progress in their self-driving. Improvements in self-driving means they can recognize a few hundred million dollars of prepaid purchases of autonomous driving. It also means they are progressing toward the vastly profitable goal of robo-taxis.
If Tesla can show it is succeeding with its insurance business then this can boost profitability by 30%.
If Tesla can show that they are vastly scaling the solar and home energy business then this could also provide some upside surprise.
If Tesla can announce deals and support for new factories or factory expansions then this can catalyze stock movement.
If Tesla is able to license its technology to other carmakers or make more large deals with battery companies and car companies, then Tesla could accelerate growth.