The Market is Wrong About Tesla
Cathie Wood of ARK Invest is defending Tesla stock and provides a useful perspective for those trying to understand Tesla, Elon Musk, and his other companies. She also talks about why Elon Musk is buying Twitter.
Cathie Wood and ARK invest haven't been doing very well this year, down 50% or more in the last 18 months. One could draw a conclusion that their thoughts and ideas about disruptive innovation are way off the mark and they will soon close their doors and go out of business.
However, every time Tesla has had a meaningful pull back of 30% or more, it's important to see what has happened on average over the long term. First off, since the company IPO'd back in 2010, the company is up 22,576%. That's a 225 times your money return on your investment when the company came into existence.
From 2013-2019, Tesla did not move much, but around November, 2019, the stock began to go very high and generate some outsized returns. The writing is on the wall - Tesla is going to disrupt the internal combustion engine and legacy auto makers are going to be in trouble.
Split adjusted, Tesla was $3.80 in IPO day. It's all-time high is around $1,230. The period from March 2014 - May 2019, Tesla stock went up and down, but overall, it was down 25%. As an investor, you would probably be unhappy with a 25% loss over 5 years and perhaps many people would doubt your decision.
If you had simply hung on to your shares, you would be up 1,700%. That's the discipline and conviction needed to hold through an investment that is disruptive. Disruptive innovation like Tesla is very volatile. In the short term, emotions, feelings, and opinions drive price. Overall the long term, the truth will win out with fundamentals.
This makes for huge buying opportunities. I see Tesla as a tremendous buying opportunity today. When you look at EV's, FSD, Tesla Bot, and the huge potential, there is another 20x run possible in the next decade, but the stock won't move until we start to see FSD take root and by that time, it will be too late for those who wanted to get in.
Cathie Wood of ARK Invest are taking a lot of flack right now for the performance of their funds. For instance, the ARKW fund has a lifetime return of 200% since 2014. For the ARKG fund, you have a lifetime return of 70%, over about 7 years. The ARKQ fund has lifetime returns of 185% over 5 years. The ARKK fund has a return of 131% over 7 years. You must ask the question if ARK Invest knows what they are doing, despite the volatility of recent years...
Cathie also thinks Elon Musk can do some amazing things with Twitter by making it private, open sourcing its algorithms, and improving it in many ways.
The biggest question is will disruptive innovation win out the day. It's inherently volatile, but you must understand their investment horizon. It is always over 5 years. I believe for Tesla, disruptive innovation will win. If the other companies in this space can succeed, then I think they will have Tesla-like results as well.
Do you think the market is wrong about Tesla? Where will Tesla's market cap be in 10 years? Are there opportunities for disruptive innovation?
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.