But, what about TSLA ? - Kuvera

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There is not a single dabbler in scrip who does not steadfastly believe

first, that a crash sooner or later, is inevitable;

and, secondly, that he himself will escape it.

: Edward Chancellor, Devil Take the Hindmost

Our last note hit a chord! If you have not read it yet, you can do it here.

We showed using our data that while $GME was pushed as a retail trading revolution most retail traders likely lost money in the volatility that ensued its dramatic rise and fall. It is well known that investors buy after good returns and sell after bad returns and thus underperform the buy and hold return of the underlying stock or fund. Still, some argued that $GME is small, it is an exception, the Redditt driven rally was not real and that larger company stocks that are well followed won’t see the same pattern. Btw, $GME closed recently at $220 so a lot of traders, if only they had held on, would have made money. But that’s hindsight is 2020 speaking 😉

So, we decided to take a look at TSLA – iconic CEO, widely followed and a mega-cap to boot.

As before, the green dotted line is the intra-day high for TSLA. The blue bars mean that investors net bought TSLA on Kuvera while the red bars means that investors net sold TSLA on Kuvera. The length of the bars is normalized to the highest inflow day to make them easy to compare.

While not as pronounced as we saw for GME, we do see that the biggest inflow came as the intra-day high crept close to $800. The behaviour gap is smaller for TSLA as opposed to $GME, but it is still there. And that is to be expected. In general, the behaviour gap is a function of stock or fund volatility.

If we look at realized PnL of TSLA trades this is what we find. 60% of traders have made money on TSLA while 40% have lost money. The average gain is +27% and the average loss is -21%. So in the last 7 months or so while TSLA stock doubled, the average trader had a realized return of 8%.

Still not convinced.

In his book, Heads I Win, Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Favor, Spencer Jakab revisits Peter Lynch’s track record. Lynch, btw is regarded as one of the greatest money managers ever. Spencer writes –

During his tenure Lynch trounced the market overall and beat it in most years, racking up a 29 percent annualized return. But Lynch himself pointed out a fly in the ointment. He calculated that the average investor in his fund made only around 7 percent during the same period. When he would have a setback, for example, the money would flow out of the fund through redemptions. Then when he got back on track it would flow back in, having missed the recovery.

There you have it. So much activity and so little to show for it!

Happy investing,
Gaurav
CEO | kuvera.in | @rustapharian

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