Anchors Aweigh: The High Cost of Irrational Expectations

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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    The information, data, analyses and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. 

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    Kailash Capital and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.