An Anecdote about Investing in TSLA

· 362 words · 2 minute read

One of the key reasons for me to buy stocks is to apply my reasoning to the real world and get feedback in a real way. So, I’m sharing a recent story with a good lesson.

Bulls make money, bears make money, pigs get slaughtered.

The quote is an old saying in Wall Street, and I’m writing a reflection on how my greed got slaughtered.

On 2013-01-28, I bought a few shares of Tesla at $37.45 each (market cap being ~$4B). The company was founded only in 2003, went public in 2010-06, and never made net income positive, so the position was quite bullish. However, I believed in the vision and execution of Elon Musk, and I found the Model S very attractive with 0-100 kph of 4.4s and a range of 400km with one complete charging.

Model S

Even the most renowned investors cannot evaluate an entirely new business like the electric car, and the price tends to be volatile with contradicting opinions. That makes short-term trading enticing – you want to profit from the movement by buying low and selling high. As I knew it was tempting, I explicitly decided to avoid this strategy from the beginning. Why? It consumes too much time (the most precious resource of mine) and is more like gambling than investing. I kept my promise for the first few months.

Then, when the stock price hit $46 (>20% increase), I couldn’t resist the temptation. I initially thought Tesla could hit a market cap of $20 - $50B in the future but wanted to make a quick profit! I even had a reasonable justification that I needed to do the risk management on my portfolio.

I sold almost 40% of my position to neutralize the commission fee. After that transaction, Tesla reported its first net income positive quarter, and the stock is stronger than ever. Unfortunately, greed failed 40% of my position to materialize its potential. Pigs got slaughtered indeed!

I still think Tesla has a large room for growth. However, I won’t take more transactions for now. The stock price is growing too rapidly, and I don’t think I can make a sound judgment without greed. ∎