Timing Purchases of Ten Bagger Stocks

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.

10 thoughts on “Timing Purchases of Ten Bagger Stocks”

  1. You can lose 100% of the money you spend on options. People get scared but they need to realized is that you lose money when you buy stocks. And when the market drops even blue chips stocks take a beating.

    I believe that you should only buy stocks after a crash. And you should only hold it short term. A lot of people put their money at risk chasing small gains.

    But if you see a potential ten bagger then buy it like you buy a lottery ticket and that’s with your mad money.

    The market isn’t like dice. Any significant business expansion has termites eating holes. What I mean is that during an expansion there are bad businesses that are supported by the expansion. Eventually those bad businesses will crash the expansion. Also the stock market is currently supported by speculation and not by the robustness of the underlying businesses.

    There is one constant in the financial history of the world and that is booms are always followed by busts.

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  2. Yes, but with options you are on a timeline you don’t control and you can easily get stuck with a loss you can’t redeem by out-waiting it.

    And buying after a crash implies you were holding a lot of cash (granted, you want to hold some, but we are talking much more than that) out of the equity market. Which means you weren’t full invested. In 2019, my portfolio (invested in average risk or better investments) returned right at 30%. That would have been an expensive year to sit out of the market holding oodles of cash in T-Bills, CDs, or whatever, that are barely keeping up with inflation (if they even are). Yet there are people doing it, and that have been doing it for several years. Ouch.

    They are the folks that are convinced a major correction is overdue. The problem being is that it is like dice. The fact that you rolled 10 sevens in a row is unlikely, and getting 11 sevens in a row would be really unlikely. But if you have already had 10 sevens in a row, the odds of you getting a seven on the next roll are exactly what they would have been were it your very first throw. Hence, the expression: “The dice have no memory.” It’s a surprisingly hard concept to get people to accept as it feels counter-intuitive.

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  3. the corona virus could temporarily mess with tesla shanhai factory etc an oppertunity for a bounceback presents itself…not me tgough, i do the talking you do the trading…

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  4. You sound like someone who thinks he knows what he’s talking about but actually doesn’t. PEs, VCs and hedge funds tend to underperform index funds and have no secret formula that is worth knowing. Their biggest strength is charging fee for mediocre performance. Microsoft, Apple, Amazon were all publically available for anyone to buy at a fraction of the current price.

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  5. You want ten times your money then buy options on indices after a crash. Or even buy options after a good stock is beaten down for no obvious reason.

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  6. I don’t have the trust to put it all on one company.

    Instead, I look for game changers that (by virtue of my being fascinated with this kind of stuff and reading a lot) I believe are inevitably coming, and how fast they are coming (e.g. automation, radical life extension, narrow AI, off planet resource acquisition, high CO2 levels, cheaper energy, etc.) then I spread my bets. Social changes are on the table, too (don’t buy beer or tobacco stocks).

    Sure, the changes won’t all arrive on my timing, and not all the companies that bet on them will make it. The key is to make the ones that do more than make up for the rest.

    Also, I don’t sell short, or try or invest in things that try to leverage (borrow money to buy more). Then you are on a timeline you do not control and you are gambling.

    Market down? Don’t sell it then, although buy if you can. Buy cheaply, sell dearly? Unless you put it all down on Enron then, probably within a few years (say one to three), you will recover.

    If the market never recovers then the only investments that may still matter might be canned goods and guns, and we have to bet against that.

    Do keep in mind that your investments have to beat inflation or they aren’t really investments, just a leaky lockbox to hold your money. Also bear in mind that collectibles are usually bad investments (long-term capital gains rates on them is 28%). And, finally, keep in mind that the only direction taxes are likely to move in your lifetime is up.

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  7. Another thing. Looking for the 10x or 100x may not be the thing for you at all. Invest in a way that has risk you can sleep at night with.

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  8. The big payoffs start small. But there tend to be a lot of these small companies. Hundreds. Thousands even. Not the easiest thing in the world to pick good ones. They should do things differently than the others. But that is just the first step in finding them. It is often best to buy stock in companies doing something you already know a great deal about. So you can judge whether their approach makes sense.
    My problem is selling too quick. Something pops 5 or 10% and I sell, only to see it jump by 40% or something the next day/week. Not fun. And people tend to be much slower than I expect to react to news and such…which then makes me doubt myself…wonder if people are just stupid.
    How long did it take for people to figure out that AMD was good. I thought it was good when they had Jim Keller overseeing Zen. I was convinced it would be a good chip. I had several thousand shares. Took too long, couldn’t understand why people did not see what I saw. Hard to just hold, and hold. I had everything in AMD for well over a year and did nothing. And it did nothing. The next year it went crazy. And now $50.

    If it was easy…we would all be millionaires. Smart is not good enough. Patience. Faith even. But with eyes open. If your guys start to make really shaky decisions, you may need new guys. If stuff tumbles, don’t just jump ship. See if everyone else is just stupid. Check if the reasons you bought are still valid.

    I am not an expert. This is just one opinion.

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  9. The bit about “timing” runs counter to the thesis of the article – that there are companies which – if you can identify them and buy in reasonably early and just hold the stock – will eventually return you 10x or 100x your investment.

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  10. What a load of B.S. fantasy. People who can really time stocks don’t sell the information and system to others. They open hedge funds and charge excessive fees which diminish net returns and alpha, but not so much as to make the fees not worth it. VERY difficult to do, almost impossible long term. 10 baggers and 100x tend to be thinly traded and difficult to buy or sell anyway. Real 10x-100x tend to be private equity and private placement. These type of investments tend to have 3-5 year time horizons, sometimes longer. Almost never work out like the story said it would.

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