Tesla TSLA was the worst position Greenlight Capital made in 2020 as the well-known investor; David Einhorn has written over and over again about why he sees the stock as very short. Most of the loss of the fund in the first half of the year came as the company changed its position before Elon Musk was added to the S&P 500 index last month.
NEW YORK, NY – AUGUST 06: New York Mets expected owner David Einhorn (cap) looks batting … [+]
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Tesla stock ownership is long overdue
In its fourth-quarter letter to investors, Einhorn says that if Tesla owned cars long, the company would sell far more vehicles than they have. He said the move owns Tesla stock, reminding investors when he previously said that “twice the price of a stupid stock is twice as silly, it is still just silly.” David warned 20 times in a silly price and recalled that Cisco Systems CSCO peaked at revenue 29 times during the 2000 internet bubble, which would still be a discount where Tesla now trades.
He also wondered why stocks would trade at “20 times the price of stupidity,” adding that “it is possible that we are just wrong and bad at measuring silliness.” Putting that potential aside, he believes that some stocks are held solely by investors who do not deserve valuations.
David notes that market capitalization is one of the first concepts that investors learn about, and that is the price of shares going higher than the number of outstanding shares. Valuation Valuation involves comparing market share with different value indicators such as current and future income, earnings, cash flows and asset values.
When he talks about value-added investors, he means those who do not consider valuation as part of their investment process. They cannot, or cannot, choose not to include valuation as a factor.
No, you can’t or can’t go without
Einhorn says the index money is most likely to be volatile investors, noting that the more stocks are overvalued, the more money is needed buy an index. He said passive investment is so widespread that index investors are no longer “taking prices,” buying at the price set by active investors trying to find the right value. confirmation. Instead, demand from passive investors sets the price, which he argues “raises the question of the overall basis of passive investment.”
The large numbers of retail investors who have no training in valuation are investors who cannot consider valuation. In the past, stock traders or financial advisers limited their influence by providing advice and verifying suitability. However, the rise of platforms like Robinhood allows any investor to start trading without paying a commission. The founder of Greenlight said that many investors in this group believe that “expensive” stock is one that will change hands at $ 100, while “cheap” stock trades at $ 5.
In the latter group are professional investors who have decided that valuation is not part of the investment process. Einhorn draws attention from a comment from Howard Marks, who says the view of this investor is “to hold on while the dissertation is correct, and the move is up.” David explains that this group considers it infertile to consider whether the market cap exceeds even the best estimates of the present value of future earnings in order of magnitude.
Separated from median value
The main reasons Greenlight is when the last shareholder who introduces valuation as part of their stock investment process, leaving it held solely by value-added investors, will be on separated from fair value. He said valuation is no longer important, and the price of the stock “could be a random number as well.”
“The only point is to maintain that different companies that are losing money, without any property gain, are trading at values that mean they will once be business leaders. , is to reflect on just how speculative the bubble is in unrelated stocks, “Einhorn warns.
Will Tesla and other tech broadcasters continue to move away from mania from speculative investors who favor stories over foundations? That’s the million-dollar question, or in Tesla’s case (nearly) a trillion-dollar one.