Alright, we just witnessed a lot of blood in the streets.
Tesla closed down 12% to $876.
This is a huge daily drop in Tesla's stock price.
Now if you are holding Tesla shares, and have a job that pays well enough for you to make
your mortgage payments, then you don't need to worry about this recent dip, despite the
$10s of thousands, or hundred thousand dollars or so you just lost.
Lost?
Lost is a strong word, you still own the exact same amount of Tesla shares as you did before,
and if you are not selling them now, then you are not locking in the loss.
HURTING In fact if you are hurting now, or feeling
down or like you have lost, then no offense, but it just means you are not yet a pro Tesla
investor.
Really, the longer you invest in Tesla, the more you get used to these experiences.
It's like a muscle, the more practice you get in crashes, the stronger your muscle becomes,
and this muscle is the will of you conviction in holding your position.
That does however go two ways.
When you dull out the pain of losing a ton of money in a day or over a week, then it
also affects your emotion on the highs.
The days Tesla rockets up, well you can't get too excited about those either.
The market is volatile enough all on its own.
Tesla is like pouring gasoline on that fire.
Tesla will challenge you as an investor, time and time again.
Tesla is not for the weak investor, or paper hands as they say.
However, look who I am talking to, the upper echelon of Tesla investors.
I am guessing that the vast majority of you are not concerned about how much your portfolio
has just dropped, I am guessing the questions on most of your minds are, is it time to be
buying?
And I am already getting inundated with DMs on Twitter about people asking me if I am
buying LEAPS now.
STRATEGY This is a major correction, or adjustment
either way, so I am going to adapt a strategy accordingly.
As usual I don't intend for you to copy mine, but just get an idea of what and why I am
doing, in order to help you with conviction into what strategy makes sense to you.
Now as I said in previous videos, that the outlook isn't looking great for Tesla right
now, by which I mean over the next quarter or so.
I talked about this, although the video was not well received, I warned people about how
the stock might not perform so well in the quarter.
I even sold about 3/4 of the value in my LEAPS as well.
As I was explaining I want to take profits at times too.
So I did.
REASON However, this is Tesla, the big stock moves
are usually random events, like Hertz ordering Teslas for their fleet.
And here again, I think most of what is going on with Tesla is Elon's Twitter activities.
As you know Elon has decided to buy Twitter, but he doesn't have enough cash for it.
It's likely it will be an LBO, which is a leveraged buy out, meaning that you can borrow
money against the company to buy it.
Whether Elon borrows against Tesla stock or Twitter stock, it doesn't make much difference.
But it's a lot to borrow, and he will likely also need to inject a reasonable amount of
cash too.
This cash is most likely going to come from Elon having to sell Tesla stock.
We saw the stock crash about 20% last time Elon started selling his Tesla stock.
This could be the market somewhat preempting another sell off.
Further exacerbated by a genuinely bad day in the market.
Will Elon have to give up more Tesla shares to purchase Twitter?
It's highly probable, but how many is the question.
He already owns almost 10% of Twitter, he may borrow 50%, so there might just be around
$15 billion or so he needs to find.
And it's highly possible that he is taking on other investors with the acquisition.
Anyway, I could do a whole video on the Twitter scenario.
But you get the point, there is a chance of another Elon sell off.
SMART Alright so I traded out of a lot of my options,
and have a reasonable amount of cash to buy back in again.
But I wanted to wait for the smart money to come in this time.
Last time I bought during Elon's sell off, near the bottom, only to be faced with inflation
issues, and then a war.
I was using short term options, which is always much riskier, and lost it all.
This time I am going to be more patient, and wait for it to dip a bit lower, perhaps not
buy again until it's on the trend reversal.
And this time I will be purchasing LEAPS, not short term call options.
That is me going for a bargain, not just a dip, if it dips below 800 then I am likely
going to buy back my position fully anyway.
I just don't want to be caught out.
Of course tomorrow Tesla could just open back up to $1000 again too, and I would have missed
the dip.
It's not that I don't think it's a good time to be buying now.
If you are looking at building up your position in Tesla still, then I think the stock being
below $900 is a good buy.
I am just trying to be a little bit more patient, and I may end up missing this dip as a result.
But if it does look like its starting to recover, then I will be buying a couple of LEAPS.
NUMBERS I have been doing a lot of valuations for
Tesla lately, since the Q1 report, and as far as I can tell the company should still
have a valuation above $1,000 even if 4680 cells have not hit volume production yet.
I mention 4680, as that is my belief as to what is required to seriously level the stock
price up, and I can't see too many other scenarios that can do that.
Kind of like buy as much stock as you can before Tesla prove how amazing the 4680 cells
are.
I think at the end of the year the stock price could still be sitting at around $1200, even
without 4680 progress, call that perhaps an intrinsic value based on currently technology,
at least that's how I look at it.
So yea, I don't believe the stock price had gotten too far ahead of itself, I mean at
the start of 2021 the stock price was higher.
Look what has happened since then?
We discovered that China could become an LFP power house, and we built these 2 new massive
factories, amongst other things.
And this is just in the last year.
What can we expect in the next year?
FUTURE In fact that's a great point, think of the
future of this company.
What's going to happen when they finally take control of their own in-house cell production,
the best manufacturing company in the world, finally not held back by other manufacturers
for their consumption of batteries, the most integral element of EVs.
So many incredible things on the horizon for this company.
We need to remind ourselves that despite the size Tesla is now, the company has barely
begun.
Sure, they've been working really hard for nearly 2 decades now, but that's what it takes,
the exponentials take sometime to really kick in.
But we are now close to the precipice of these exponentials finally building up, that the
numbers are about to get big, and we have these 2 new factories as proof.
BUYING THE DIP This drop in Tesla's stock price isn't even
a scary one.
It's not like we are faced with a potential 3rd world war, or a pandemic that will kill
1/3 of the population.
Usually on these sort of dips, it's something quite concerning, that would actually make
you think twice about buying in the first place.
That's not the case this time, we don't have the usual doom and gloom.
This is just a slight market adjustment, I mean the VIX was getting pretty high.
And even if Elon has to sell some Tesla shares, then it doesn't make the company any less
valuable, and the stock will bounce back after.
When Elon was selling last time, it was a gift, we were given a lower stock price, unfortunately
it kept going lower due to other circumstances.
SUMMARY So what I am saying is that Tesla's stock
price can still be reasonably more valuable than it is today, in their current state,
as in no 4680 cells.
But Elon is very confident about the 4680 cells, and it's just a matter of time.
Before then we might get the occasional dip, we can use as a buying opportunity to build
our position as much as possible for the next wave.
Probably when we hear something like 5,000 4680 units a week coming of the production
line in Austin.
But in the meantime, the market is probably going to be fairly brutal out there, but if
you can hang in long enough, then we should be rewarded.
Don't let my strategy dis-way you too much, if you think right now is a good time to buy
and accumulate your position, then it probably is.
We all have our different objectives and strategies on how to reach them.
Let me know what you plan to do on this dip.