Anchors Aweigh – The High Cost of Irrational Expectations:
- Anchoring, or the act of placing too much emphasis on an arbitrary number is a well understood human error in the field of behavioral finance
- Headlines today are full of stories about Tesla’s sharp sell-off yesterday and Kailash believes this is classic anchoring
- The chart below has Tesla’s share price over the last two years and we have annotated at what price per share it is worth Toyota, Volkswagen and Honda respectively
- Kailash believes it worth noting that HONDA is ~400% larger and over 500% more profitable than Tesla
- Said differently: if Tesla was 4x bigger and 5x more profitable than it is today it could be valued at $53 per share.
Kailash hopes speculators in Tesla’s stock understand that even after yesterday’s “decline” Tesla is worth 15x as much as Honda – might be time to pull up your anchors!!
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