We recently introduced the Apollo Investment Cycle in a recent Blog – “Investment Cycling” and although I have used this phrase a thousand times – “a picture paints a 1000 words.”
As the news wires (and not only the financial ones) are dominated by Elon Musk, mostly around Twitter, the value of Tesla and by extension Elon’s own fortune, is melting away as the market tries to assess what Tesla is worth and how to value it?
Ever since we launched the Apollo signals we have been intrigued by Tesla. It’s a stock that people will want to look at on our EDGE platform thinking the Apollo would fail to capture the investment dynamics and sentiment, but they have been consistently surprised / disappointed to see how moments of Value and Growth – positive and negative have been perfectly captured. You would have consistently made money using Apollo.
Now we can add the new perspective – the Investment Cycle and the picture is enhanced. Jan 2019 – Feb 2020 was the Value period, Feb ’20 – Aug ’20, the Re-rating period, Sept 20 – Oct ’21 was the Growth period and thereafter, Dec ’21 – Sept ’22 can be seen as the era of De-rating era and since then we have returned to the Value cycle – the period when the Implied Cost of Capital being priced into the stock is at an all time historic high.
So, what to do now you may ask? Value trends are falling, the stock is trading below the lower boundary of the Fair Value range (sentiment very poor) the Accelerator Red signal has been flashing since October (the expected return is decelerating against the longer term trend). It’s a car crash that you wouldn’t want to stand in front of…..unless the market has reason to reduce the discount rate (lower the cost of capital) being priced in. As and when that happens and only when that happens can we think about buying the stock once again.
