Let me first say that I think that Tesla is a great company.
It was at the top of my buying list during the March stock market crash. That’s how much I believe in its business.
However, the current valuation is starting to worry me.
And with many inexperienced investors rushing to buy the stock, disregarding the price altogether, I don’t want you to make the same mistake.
Here’s why.
If It Looks Like A Bubble, And People Behave Like It’s A Bubble, Then It’s A Bubble
First, you should understand that we are in a massive stock market bubble.
When you compare historical valuations, the last time stocks were that expensive was at the peak of the Dot-Com bubble.
It was the absolute worst time to be a buyer.
Back then, nothing could stop a handful of tech stocks from moving higher. Or so people thought.
Today, the situation is identical.
And while Pets.com might have been the darling of the Dot-com era, presently, that honor belongs to Tesla.
Since the March lows, the stock has gone up by almost 400%.
As an investor, I can’t help but ask myself—is Tesla really a 4-times better company than it was in March?
Or even if we take pre-crisis highs, for example, Tesla is up by 150% since. Are the prospects that much greater now that we’re in a recession compared to when the world was still normal?
I don’t see how that is so.
Of course, for the new breed of Tesla investors, the price doesn’t matter. This is a great company, so whatever you pay for, it is okay.
I’m now receiving multiple calls weekly of friends telling me that they’re thinking of putting all their savings into Tesla and if I think that’s a good idea.
What worries me is that when I advise against it, some suddenly turn into long-term investors, saying they don’t care if the stock falls since they’re in it for the long haul.
I’m glad when people become excited about long-term investing. However, that’s precisely the same behavior I noticed towards the end of the crypto bubble.
People with no investing experience were telling me how they’re getting into crypto because this is an asset class with a lot of future potential, so it doesn’t matter how much they pay for it.
And when I asked them if they understand the risk, no-one really cared since they were planning to hold for at least ten years. After suffering the eventual losses, most capitulated and sold near the bottom.
I’m convinced that when this bubble pops, we’ll see the same reaction. Technology may improve, but human psychology remains the same.
A Better EV Alternative To Tesla
Again, I think Tesla is a great company.
Moreover, if you bought it a fair price, and are a “true” long-term investor with the emotional capacity to handle the market swings, then by all means, hold on to the stock.
However, if you’re new to the market, don’t chase the price here. Tesla is too expensive.
Be patient. The opportunity will come, and you’ll be able to buy the stock at a lower price. I promise you that.
In the meantime, if you want to invest in the electrical vehicle market, then I have a perfect stock for you.
I found a company that has revolutionized the battery production process, making it the most sustainable in the business.
It’s one of the few stocks I’d be willing to buy in this market. That’s how much potential it has.
You can read more about it in tomorrow’s issue of my True Retirement Wealth.
Subscribe now to get your copy as soon as it comes out.
Good investing,
Leon Wilfan
For Cashflow For Retirement
