Tesla Investor Joseph: A Long-Term Vision
This article discusses Herbert's recent interview with Joseph, a long-term Tesla investor. Joseph owns 60,000 shares of Tesla, representing a significant investment of approximately $15 million based on a share price of $250. Joseph's story is inspiring to many retail investors.
Initial Investment and Concerns
In 2019, Joseph initially invested $250,000 in Tesla. He admitted that he previously lacked the courage to invest fully due to concerns about Model 3 production. Failure to achieve mass production of the Model 3 posed a significant risk of bankruptcy for Tesla.
Tesla's Current Financial Position
Tesla's financial situation today is very different from that of 2018. Unlike other electric vehicle companies that rely on financing to sustain their business, Tesla has sufficient cash flow from car sales to support its operations and research and development in areas like artificial intelligence. This significantly reduces its risk profile.
Increasing Investment and Future Potential
After his initial investment, Joseph added another $250,000, bringing his total investment to $500,000. However, he still felt uneasy, not due to concerns about Tesla's potential bankruptcy, but because he believed he hadn't invested enough. He fears missing out on further gains before a significant price surge. He ultimately increased his investment to $1 million in 2019.
Reasons for Investing
Joseph invested in Tesla because he believed the electric vehicle market had immense potential. At the time, electric vehicles only accounted for 3% of the US market. He anticipated this figure would rise to 90% within 10-15 years. He believes the potential market for Tesla's electric vehicles is even greater than the market for iPhones, and that emerging technologies like self-driving and robotics will enhance Tesla's intrinsic value and make it even safer.
Tesla's Competitive Advantages
Joseph considers Tesla a once-in-a-lifetime investment opportunity. He believes Tesla possesses a vast addressable market and a strong moat. Joseph identifies three key aspects of Tesla's competitive advantage:
- Innovation Speed: Tesla's rapid pace of innovation sets it apart.
- Vertical Integration: Tesla's vertical integration gives it better cost control and efficiency.
- Technological Advantages: Tesla's existing technological advantages solidify its position.
Vertical Integration and Company Culture
Joseph contrasted Tesla with other tech companies in the "Magnificent Seven." He stated that these companies often rely on outsourcing, leading to lower gross margins and hindering technological development due to internal bureaucracy. Conversely, Tesla fosters a culture of streamlined operations and a strong sense of mission, minimizing bureaucracy and maximizing efficiency.
Investing in Innovation
Joseph believes investing in Tesla is investing in its innovation, the efforts of its engineers, and its production processes. He emphasizes the importance of understanding what investors are buying instead of treating it as just speculation. Tesla's core values are unaffected by short-term stock price fluctuations.
Long-Term Investment Strategy
Joseph focuses on the percentage of ownership he holds in Tesla, rather than the stock price. He does not have a specific timeline for selling his shares.
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He buys stock when he believes a company's potential is undervalued.
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He only sells if the company's progress deviates from his initial investment thesis.
He sees parallels with Tesla's historical performance, where periods of stagnation were followed by significant growth.
Avoiding Market Timing and Focusing on the Fundamentals
Joseph advises against attempting to time the market precisely, stating that this often leads to missed opportunities. He highlights Peter Lynch's emphasis on ignoring market noise and focusing on the company's future earnings. According to Joseph, Tesla's potential earnings in the coming years are the most important factor.
Musk's Influence and Tesla's Future
Despite Elon Musk's controversial and sometimes unpredictable behavior, Joseph believes Tesla's core business remains strong. He also emphasized that short-term price drops due to Musk's actions can be good buying opportunities. He sees Tesla’s expansion into robotics as a key driver of future growth.
Innovation and Market Potential
Joseph sees Tesla's continuous innovation as a key factor in maintaining its global technological leadership. He believes Tesla's total addressable market is enormous, encompassing robotics, autonomous driving, and energy. He sees these technologies as the key sectors for future global development.
Parallels with Amazon and Investment Lessons
Joseph recognizes the similarities between Tesla and Amazon, another innovative company whose potential was initially underestimated due to its high price-to-earnings ratio. He acknowledges his past mistakes of selling Apple too early and not buying enough Nvidia. He is determined not to repeat those mistakes with Tesla, where he plans to hold a significant number of shares for the long term.
A Contrarian Investment Approach
Joseph's investment strategy involves buying shares of good companies and adding to his position during price dips, even if he believes the stock is overvalued. He believes that Tesla’s current share price may reach $450-$500. He is not concerned with these forecasts, as he believes the true value of Tesla lies in its long-term achievements.
The Importance of Independent Thinking
Joseph emphasizes that the value assigned to Tesla by most investors does not represent the value he attributes to it. He highlights the importance of independent thinking in the stock market. To have a significant amount of success in the market, one must have unique and individual insights.
Robotic Production and Key Takeaways
Joseph acknowledges concerns about Tesla's high price-to-earnings ratio but compares it to Amazon's early days. He underscores that those who see Tesla as "just a car company" miss its broader potential. He believes that every Tesla robot produced in the future will quickly be sold. The critical question, according to Joseph, is whether Tesla can achieve large-scale production of these robots in the coming years. Tesla is the best positioned company for this task. Even with price fluctuations, the key to profiting off a long-term stock is to maintain a vision of what the stock is supposed to be.
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