Sold My Tesla Stock

What's a Pilon? It's Musk here. So, I don't usually make these kinds of videos, but given the recent and unprecedented price surge of Tesla stock over these last few days, I felt like this would be worth addressing. We could talk about exactly what's going on, why the price of Tesla stock has surged about 40 percent in the last few weeks, and the reason why I sold half of my Tesla holdings at 912 dollars a share. Because, at least for me, it's a pretty big deal considering that I'm normally the type of investor who never sells anything. I'm a very firm believer in the buy and hold investment strategy; not trying to time the market.

And it's not often that I have an investment to this magnitude within one specific company. Although given the recent few days of unparalleled gains, reaching a high of one thousand sixty-nine dollars a share, nice, it's worth talking about further. Because I could tell you already this is one of my biggest investing regrets, and I urge you to listen to what I have to say so you don't make the same mistake that I did. Honestly, if just one person learns from what's happened to me, this entire video will have been worth it.

I know everyone says that kind of stuff, but seriously hear me out and then come to the conclusion for yourself. But before we start, if you find this video helpful or maybe it ends up saving you money in one way or another, just do me a quick favor and go ludicrous on the like button for the YouTube algorithm. And if you want my notifications to be on autopilot, just feel free to subscribe and hit the notification bell.

Alright, so all of this started when I bought my Tesla Model 3 in the beginning of 2019. The moment I drove the car, I was obsessed. I'll admit, even though I thought Teslas were cool, I never really understood the true appeal of the car until I got behind the wheel. It was like the equivalent of driving an iPhone. It was quick, it was futuristic, it was relatively affordable after EV subsidies. And after a few minutes of driving it home, I realized that this was leagues beyond anything else that was on the market.

So, as soon as I got home, I invested in Tesla stock because I felt that if I enjoyed the car this much, other people would too, and that would bode well for the future price. Now, just for some context, when I made that initial investment, the price was trading at a split-adjusted 52 dollars a share in March of 2019. And even though I didn't invest my life savings into the stock, I did invest enough that if it paid for the sales tax of the car, I would have been happy. My intention initially was to hold on to it and never sell.

Now, even though 52 dollars back then was an incredible deal in hindsight, right after I bought into it, the stock just tanked. It was quite literally like that meme where as soon as you buy into something, it drops, and then as soon as you sell, it goes back up. Because my timing was just absolutely awful, especially for being one of the first individual stocks that I had purchased since high school that wasn't an S&P 500 index fund. I'm not even exaggerating, but in the first few months, I don't think I even had a single day of profit with Tesla.

I just bought in, and then every day after that, it went down. At the time, it dropped all the way down to a split-adjusted 35 dollars a share, meaning I had lost one third of my entire Tesla investment in 60 days. There was just article after article about bad news for Tesla, issues coming out from everywhere, and I was quickly reminded of why I tend to stick with index funds instead. But since this was meant to be a long-term investment, I just held it out and let it ride to see what happens.

But thankfully, I didn't invest an amount that I wasn't comfortable with losing, even though I hate losing money, so that made holding onto the stock that much easier without feeling the pressure of it going down in value. However, that was two and a half years ago, and now today, the stock I originally paid 52 dollars for is trading at above a thousand dollars a share.

But in terms of having sold Tesla stock, here's where we start to draw some pretty creepy parallels to what's happening now. Today, see, throughout the beginning of 2020, the price of Tesla stock followed a very similar path before their five-to-one stock split. Like, on January 6, it was 451 dollars a share. A week later, it was 537. Overnight, it jumped from 580 to 640. And then a few days after that, it went from 780 to 917, at which point it became clear that that momentum was driven by a few temporary factors.

First, throughout early 2020, Tesla was the number one most shorted stock in the stock market. If you're not familiar with what that is, shorting a stock is basically a bet that the price of the stock is going to go down. And if that happens, you make money. But on the other hand, if the stock price goes up, you lose money. Simple, right?

However, for Tesla, the stock price didn't go down. Oh no, instead they reported a quarter of profit. So, as you would expect, the stock price goes up, and that resulted in short sellers leaving their positions, causing the price of the stock to go up even higher, causing other short sellers to exit their positions, causing the stock price to go up even higher than that.

The second, around the same time, several analysts raised their price expectations for Tesla from 556 dollars to 808 dollars a share. And another projected that it would reach seven thousand dollars by 2024, which would be the equivalent of fourteen hundred dollars today after their five-to-one stock split.

And third, let's be honest, there's something to be said about the euphoria of making money. When it happened so quickly, I realized I might get some backlash for saying this, but back then, there wasn't much of a justification for this stock moving up 40 percent in a few weeks. From my perspective, I became concerned that excitement was driving the market more than logic, and at that point, I had to question the valuation.

Because hysteria can only drive prices so, so long until things simmer down, people take profits, and the price eventually returns to a reasonable level. So, given all of that, in February of 2020, I sold off half of my Tesla holdings at 912 dollars a share. Because I felt like I was up a significant amount of money that I would otherwise be flushing down the toilet if I didn't take a level-headed approach and cash in on some of this irrational excitement.

At the time, I felt like it could still be a completely sane and reasonable investor who wasn't afraid to take profits off the table when the time is right. Especially since I had more than tripled my initial investment, with most of that happening in just a few weeks for really not that much reason at all.

Now, I'll admit, even though I sold off half of those holdings, I didn't need the extra money, and it was purely a logical move because I felt the price wasn't justified to continue skyrocketing indefinitely. And guess what? In the short term, right after I sold, I was right. I mean, I pretty much timed the peak perfectly because right afterward, the stock fell badly over the following month. Tesla dropped about 50 percent as the excitement wound down, making its way through the U.S.

For a moment, I thought that I could see through the market. I thought I knew it all and that I was right because at the time I was. However, as some of you might be following along, 912 dollars in February was pre-split, meaning today that would be the equivalent of 162 dollars a share. So did I actually end up buying in when it dropped 50 percent? No. Instead, I invested everywhere else throughout the broad market, and even though those investments did well, it paled in comparison to what Tesla has done.

Soon after, when Tesla approached back to what would now be 182 dollars a share, right to where I had previously sold, I was too stubborn to admit the defeat that I was wrong. I felt bad about buying back in at the same price that I had sold because I'm an idiot. Of course, that meant that I patiently watched Tesla on the sidelines, seeing the remaining 50 percent of my portfolio just skyrocket.

Once it reached what would now be 280 a share, I accepted defeat and bought back in 50 higher. Mind you, from where I sold. You know, at that time, I did invest substantially more money in Tesla stock at 280 than I did back in 2019. But the point was still the same. I sold half of my original position thinking I had done the right thing during an unjustified run-up. In the short term, I was right, but I couldn't time the bottom, and I wound up missing out on a few hundred thousand dollars of extra profit because I wanted to be a logical, level-headed investor.

Although today, with the stock price up another 40 percent on a much larger valuation, I could very well see the same situation repeating itself again, where the price has risen beyond what many people could fundamentally justify. Except the reasons today are quite unique.

Alright, so in terms of why Tesla's going up so much in price today, a lot of that has to do with the announcement that Hertz placed an order to purchase a hundred thousand Teslas for their fleet. And that is very big news. Now, even though some people might look at this scratching their heads wondering, "But Graham, how can the price of a four billion dollar market cap company raise the price of Tesla by a hundred billion dollars? That doesn't make any sense." Well, there is some logic to the situation.

In this case, the market cap of Hertz is not the factor in question, but instead, it's their order size and subsequent profitability for Tesla, of which is estimated to be a whopping 13 percent of earnings. In addition to that, Tesla has never received a fleet order like this, so it could be symbolic that other fleet orders could follow, and that would provide them with more consistent revenue.

Plus, the CEO of Gerber Wealth Management also believes that other rental car companies will pivot to EVs not only because they meet environmental goals and are cheaper to operate, but because they hold their value better than gasoline-powered cars. On top of that, as of this morning, Uber is now a part of that deal, saying that they have access to up to 50,000 of those cars for drivers to rent by 2023.

The second, the EV market is getting much, much bigger with no plans of slowing down. For example, California issued a mandate that all new cars must be zero emission by 2035. GM plans to build 30 new electric vehicles by 2025. Ferrari is even planning to come out with their first electric vehicle that year. And even though those have nothing to do with Tesla, the fact is EVs are going to become that much more common, especially with a White House mandate that half of all cars produced will be electric by 2030.

On the one hand, even though that does mean more competition for Tesla, it does mean that more people are going to be experiencing electric vehicles. And since some say that Tesla is 10 years ahead of their competition, that could bode very well for the company, especially when people expect to buy a new car on average every six years.

Third, Tesla's very quickly becoming much more than just an auto manufacturer. They're also collecting your data, running a solar company, creating battery technology, investing in Bitcoin, creating a supercharger network, and if everything goes correctly, a robo-taxi network that's pushing analysts to continue increasing their price targets over time.

And in the process, boosting up the stock price alongside with it. The fifth, since Tesla keeps a portion of their reserves in Bitcoin, when the price of Bitcoin goes up, so does their profitability as reflected on their balance sheet. In fact, some people even say that the price chart between Tesla and Bitcoin looks fairly similar throughout the last five years. And if Tesla keeps adding Bitcoin to their portfolio along with some other cryptocurrencies that maybe they have in mind, like Dogecoin, that could wind up helping out their stock at the very same time.

Now, obviously, I could continue to talk about every reason why Tesla could become the most valuable company in the entire world and Elon's plans to overtake the entirety of space. But today, with the price surpassing a thousand dollars a share, the question then becomes, could this follow the same path as 2020, with the price rising an exorbitant amount before then falling 30 to 50 percent? Or are we in a new normal where the price of everything continues to rise indefinitely?

Because, well, sure, CNN says that investors are getting very greedy, but then again, it's become apparent that Tesla has consistently deviated from their fundamentals and never trades where they should be, but instead where people expect them to be way, way, way, way, way in the future. It's become impossible to value them as an automaker worth more than every other car company combined because the truth is their value is in the battery technology and storage, solar, and a wealth of other opportunities that are at their disposal.

Because of that, I've learned that Tesla stock could remain irrational longer than you could remain solvent. And sometimes trading too logically on fundamentals does you a disservice when you're trying to plan your entry and exit points on a stock that doesn't follow the traditional path.

The problem is if you want to be successful timing a stock like Tesla or really any stock for that matter, you have to be right twice: once when you sell and then once again when you buy back in. And even though I was able to time the previous top in the short term, whether that be by luck or by recognizing irrational exuberance, I wasn't disciplined enough as an investor to actually buy back in when it bottomed out.

That, in my opinion, is the main issue. When you start getting in the mindset of trading and selling short-term positions that otherwise you plan to hold indefinitely, it just reinforces the belief that you could beat the market and that you know more than everyone else. And maybe you do, but in situations like mine, selling a long-term stock for the sole purpose of trying to buy back in at a lower price is a risky game, and it's very difficult to come out on top.

Not to mention once you sell, you're going to have to pay taxes on that profit, whether that be short-term capital gains at your highest possible bracket or long-term capital gains slightly lower than that. But that needs to be considered in your net return that you expect to make.

Now, of course, don't take this the wrong way and apply it to everything because there are definitely situations out there where it makes sense to sell. But just realize that properly timing very volatile momentum trading is next to impossible. And now, at least for myself, from this past experience, as long as I believe in the company long term, I will always, no matter what, smash the like button for the YouTube algorithm.

So, thank you guys so much. And also, big thank you to Jeremy at the Hungry Bowl for lending me his Tesla for filming some of this video. The link is down below in the description. If you want to sign up for my daily newsletter, it would mean a lot. Let me know what you think.

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