This makes sense of Tesla's dramatic stock rise.

What makes Tesla's dramatic rice today even more amazing is that Tesla's never had AH 100 point jump like this.

In fact, this is by numbers alone, not percentage basis, but by members alone.

This is the biggest Tesla's stock price increase ever, I believe, and it comes without major news.

Sure, last week was quart of the earnings, but today, over the weekend, there wasn't any major news.

There was some news that cattle C.

A.

T L.

A Chinese battery manufacturing company, has signed a contract with Tesla's.

There was some news at Panasonic. 00:00:58.080 --> 00:01:0.790 A reporter profits off of their relationship with Tesla. 00:01:1.200 --> 00:01:5.350 And then there's this upgrade by this company named Argus, which is not a very bold known firm. 00:01:5.640 --> 00:01:10.190 And so there is nothing major in terms of news to drive 100 point increase in the stock.

But also amazing or significant is that Tesla has been on a ramp patients past eight months.

In fact, starting in June 3rd of 2019 just eight months ago, Tessa was at $178.97 sets.

October 25th.

Tesla close at $328.13.

December 19th.

Testicles at $404 generate 13 Tesla, close at $524.

Generate 30th.

Tesla closed at $640 February 3rd test lows over $700 in the mid $700 at the time.

This recording just 18 month period.

Tessa has basically four ext.

In that time period, which is amazing. 00:01:53.190 --> 00:02:0.230 Now, if you haven't watched videos before, make sure you watch the Tesla Exit Plan video where I go through my overall strategy on Tessa stock. 00:02:0.240 --> 00:02:26.280 If you are invested in a generational company that you think has a clear and probable path for a 10 X evaluation within 5 to 10 years, my personal take used to hold on to that company as long as they're executing strongly toward their goal in 2018 tests reveal that Elon Musk CEO incentive plan, which shows a clear path to a $650 billion valuation by 2028 at a $650 evaluation.

I'm estimating stock price to be about 2500 to $3000.

If Tesla can reach that goal now, on that path toward that goal, there's gonna be lots of ups and lots of downs.

In fact, things would be very volatile times.

Sometimes they'll just go up, up, up like you could never imagine.

Sometimes it might go down further than you can imagine.

And I want to share an important concept today that I think is gonna help you make sense of a lot of volatility.

But also, it might help you make sense of how you could hold on and keep the big winners in the long term.

The concept today I'm gonna introduce it's called Dispersion of Beliefs. 00:02:59.160 --> 00:03:4.910 Dispersion of believes means it's the range of the different beliefs that people have regarding our company. 00:03:5.420 --> 00:03:20.820 Now, high growth companies are gonna have a rather large dispersion of police because the present value of the company is based upon the discounted future cash flows of the company, meaning it's all based on the future, how much a company can grow and how much the company can earn in the future.

Now a lot of the future is unknown.

And that's why, for a lot of high growth companies, there's a wide range of belief.

Some people think certain high growth companies we're gonna continue to grow, continue that valuation on their severely undervalued.

Today, other people think with high growth companies that they're overvalued, that they're never going to reach their so called market value potential.

So by default, when you have a high growth company, its values mostly in its future and because the features unknown, there's gonna be a wide range of how people view that company.

Some people are going to view The company is a big winner in the future.

Some people are gonna look at it as a loser. 00:03:56.350 --> 00:04:4.760 Now, of all the high growth companies in the stock market, there are always a few that are just super super controversial, and Tesla is one of those stocks. 00:04:4.890 --> 00:04:17.620 So if you take all of these high growth companies, Tesla is actually an extremely controversial high growth company, so it makes the dispersion of belief surrounding Tesla even larger than a typical high growth company.

In other words, with Tesla, you have an extreme diversion of belief surrounding Tesla.

Some people think Tessa is a fraud.

It's gonna go bankrupt.

It's a complete loser.

Company can't stand against other auto companies While other people believe Tessler is going to the moon.

That test is gonna dominate the auto market's gonna dominate autonomous driving market, dominate energy markets and has growth potential like no other.

Now these two extreme views in one company is kind of rare to have, you know, like I said before, Typically, high growth companies have a strong diversion of beliefs, occasionally have a company that comes along where you have an extreme amount of diversion of police.

And that is the case of Tesla's. 00:04:58.620 --> 00:05:2.780 With Tessler is hard to predict the future because the future is unknown. 00:05:3.100 --> 00:05:24.990 Rule tests will sell one million cars and 2030 or will test the cell 20 million cars in 2030 Will Tesla's Robot Taxi network get off the ground in a couple of years and become dominant and decimate uber and lift and autonomous right, healing networks across the globe or, well, the Robot Taxi network never get started, Or will it take a decade before it really gets started?

And will there be enough type of competitors to come in and catch up to Tesla?

You see, there's so much up in the air, and a lot of it depends on Tesla's execution.

How well they can execute.

It also depends on the demand for their products.

It also depends on the technology, whether or not they can release autonomous driving a certain date.

There's so much up in the air and that in a way it justifies this extreme diversion of beliefs.

A few more reasons for the extreme diversion of belief surrounding Tesla's first is you have a big, entrenched market in the auto market that is also connected to the oil markets and energy markets. 00:05:58.880 --> 00:06:7.320 And this type of in trench market and entrench industry is not one that's easily moved or they're not embracing change. 00:06:7.330 --> 00:06:9.490 And there's a lot of reputation. 00:06:9.490 --> 00:06:10.970 Also, with automakers.

For example, take the brand Lexus or BMW or Mercedes or Toyota.

Thes brands have been around for many, many decades, and so many people have been attached to them.

Think about the tens of billions of dollars are spent every year on advertising by these automakers.

This is all brand recognition, and trust in those brands is difficult for people to accept that Tesla is going to disrupt the auto market and all of these trusted brands and become an iconic generational brand and become one of the most valuable companies in the world.

Because of this extreme diversion of belief surrounding a company like Tesla, you have people that are betting against the stock.

You have a good amount of people that are putting billions and billions of dollars of money betting that Tesla's gonna fail and those people are shorting the stock are betting against the stock price, and then you have a good amount. 00:06:58.710 --> 00:07:6.910 People that are betting long that are strong supporters of the company in the future of the company and believe that Tesla's valuation is going to rise dramatically over the years. 00:07:6.930 --> 00:07:9.240 Now this makes sense in certain ways. 00:07:9.240 --> 00:07:19.980 For example, with Tesler, if Tessa's executing poorly and the demand is shaky, the future becomes Maur uncertain and the number of cars that they sell 10 years on the road.

Those projections might go lower.

But if Tesla's executing well and the demand is strong than the projections, 10 years out of how many cars they're going to sell is going to be much higher.

And it's not just cars.

But if their execution is well right now, they're gonna execute well and Tesla energy with autonomous driving with other markets and their market cap, where their valuation, the company is going to seem a lot larger in the present because it's accounting for the projected earnings and Castro's of the company in the future.

Let's go back to 2013.

This was a major historical turning point for Tesla, where there was a huge dispersion of beliefs. 00:07:54.260 --> 00:08:1.080 I'm gonna share with you what I think happened with that dispersion of police and why test the stock skyrocketed in May 2013. 00:08:1.480 --> 00:08:10.510 You said the narrative around Tessa during that time was there was extreme diversion of whether Tesla was gonna go bankrupt or whether Tessa was going to become a major automaker.

And within that dispersion of beliefs, a lot of the force or momentum was going toward Tesla going bankrupt, and it was all in the media, and Tessa was having a hard time wrapping the car, even though their product with solid need just one.

The motor trend car of the year.

He still had some issues and challenges ahead and with that dispersion and believes you had test the stock in the low thirties.

In the beginning of 2013.

In May 2013 Tesler reported a surprise profit in a ship.

The beliefs of people who thought Tesla was going bankrupt.

And now this dispersion of beliefs where people thought that test it was going bankrupt.

It kind of was broken. 00:08:49.810 --> 00:09:3.790 The Mo mentum shifted to the Longs who were thinking that Tessa was going to become a major automaker and therefore you saw this dramatic rise from pre earnings from about $50 all the way, and it made a multi month run $290. 00:09:3.860 --> 00:09:10.990 It was a good tripling or quadrupling within several months, and this major run was because there was in the dispersion of beliefs.

There was a shift of O mentum where the belief that test was going bankrupt was no longer holding true and that mo mentum shifted to Tessa becoming a major automaker.

Now, over the years since 2013 this idea, that test is gonna become a major automaker.

It's still held belief, but there's still large diversion or dispersion of beliefs.

In other words, people who still were betting against Tesla's still bedded heavily against Tesla.

And there was a huge amount of people that were shorting the stock and saw the future of Tesla's dismal and bleak and as failing up until 2018.

Yet this battle between these two extreme diversions of beliefs you know, Tess the becoming not just the automaker, a major automaker, but becoming press one of the leading automakers are even going beyond making cars into autonomous driving, etcetera. 00:09:58.990 --> 00:10:4.100 Yeah, this other camp of people thinking Tessa's gonna become backer or test is gonna lose to the competition. 00:10:4.200 --> 00:10:6.370 And then 2018 happened. 00:10:6.500 --> 00:10:11.880 Tessa was going through some production hell with the Model three, and it was ramping slower than expected.

And in 2018 toward the second half of the year, you not had a few treats that weren't very appropriate, and the SEC started to clamp down eventually that there was a settlement and also There was some guidance that testimony given regarding profitability for future quarters that in to one of 2019 it's a price.

A lot of investors investors weren't expecting a $700 million loss in Q one, and there was a lot of factors involved.

The model s and ex demand had decreased, and largely you is because Ellen had pulled the standard range model s an extra in that quarter and the man had decreased significantly.

But there was also seasonality where first quarter sales were lower than expected after having a super strong Q four. 00:10:55.130 --> 00:11:5.490 So there was a lot of factors involved, and that kind of shook the confidence investors and always and in this dispersion of beliefs that Tess is gonna become a say, the most valuable automaker. 00:11:5.500 --> 00:11:6.700 It started to shift. 00:11:6.710 --> 00:11:11.630 Where's the momentum of beliefs shifted to more of a bearish view on Tesla work.

People were thinking, We'll test is having such a hard time executing right now.

How can they really become a 500 $1,000,000,000 company in the future?

People started to think maybe test is this gonna become an average automaker and they're gonna have a hard time with competition if they're gonna execute like this.

So you saw some major shareholders sell their stock.

During this time, T.

Rowe Price was one of the biggest shareholders and backers of Tesla.

And during this time, during a few quarters the end of 2018 and beginning of 2019 they liquidated practically all of their shares, which is over 10 million Tesla's shares now think about that.

You have over 10 million tested shares and liquidate that in the period of, you know, just maybe six months or so, and the stock price is gonna go down.

And this whole situation that's going on is dramatically impacting the stock price of Tesla. 00:11:57.160 --> 00:12:6.180 And that's why Tesla broke $200 at that point is because the Mo mentum shifted toward a more bearish view of the long term picture of Tesla's. 00:12:6.360 --> 00:12:10.760 Now let's fast forward to cute three of 2019 earnings were testes.

Post surprise earnings beat.

Now, all of a sudden, people are shocked and they're thinking, Wait a minute, Tesla's executing better than we thought, and maybe we were too harsh on Tesla.

And now the momentum starts.

His shift toward this enthusiastic, often mystic view of Tesla, where people are thinking, Wait, maybe Tessler is going to become not just the largest automaker, but maybe they are gonna reach a $500.6 $700 billion market cap within, you know, five or 10 years.

And now, with this momentum shifting now, the stock price starts to rebound after Q one.

And then you see a dramatic rise in stock price were tested, breaks through the $300 barriers shortened the actor breaks through the $400 barrier and breaks through the $500 barrier within a month or so after.

But what's happening during this time is the mo mentum of this dispersion of beliefs is shifting. 00:12:58.860 --> 00:13:5.690 Now to the believers were you're starting to believe in the future of Tesla more, and that's where the momentum is shifting toward. 00:13:5.700 --> 00:13:8.270 One example of this is Jim Cramer for Mad Money. 00:13:8.340 --> 00:13:31.050 He suddenly shifts is Yuan tussle after the Q three earnings, where he says he's like the strongest bull and he's a believer and Elon Musk and Tesla, after many, many years being bearish on the stock and in my view, Jim Cramer is the ultimate follower in the sense that he has connections and contacts in Wall Street, where he's hearing things from thes big large hedge funds and people who moved the trends and sentiment of the market.

And he hears that the sentiment has shifted on Tessa.

This is my speculation, and this is why he's confident to change his own sentiment and perception on Tessa to more of a bullish one.

What this is showing is there's a Momenta MME that's moving toward the bullish view of Tesla now, historically, oftentimes, this does happen over time when, AH, high growth company starts to actually produce profits on a sustainable basis.

One example is Take Amazon. 00:13:57.620 --> 00:14:2.960 For many years, they just kind of barely got by with breaking even and maybe showing a short loss. 00:14:2.960 --> 00:14:5.500 And people on Wall Street were just so confused about Amazon. 00:14:5.500 --> 00:14:9.250 They thought it was the worst company in the world that they would never make money. 00:14:9.260 --> 00:14:12.420 And then several years ago, Amazon started to post profits.

They started to turn on the switch, the profits, which where they said, OK, we're going to start making some money now, and they started to make money and this start to shift the perception on Wall Street toward Amazon, where it's no longer a controversial stock.

If you take Amazon today, they used to have a large extreme diversion of police, or people thought Amazon was gonna be the greatest company, and then other people thought Amazon was a fraud.

Now, when Amazon was starting to produce sustainable profits, this dispersion of believe started to shrink where people start to think.

Wait a minute.

This bear case of Amazon going bankrupt is not gonna happen.

An Amazon maybe is worth the market cap, the markets giving and perhaps even more.

That's when you saw a dramatic rise in Amazon stock price over the past few years, and I think something similar could be happening with Tesla's.

You've had such a extreme divergence of beliefs Tessa going bankrupt or Tesler going to the moon, and when Tesla has started to produce sustainable profits, What's going on is it's kind of short circuiting the reasoning of the shorts.

You think that's going to go bankrupt and they're starting to see Wait a minute.

This stock is not just gonna not go bankrupt, but this stock is headed to the S and P 500 this year.

Perhaps so now this kind of just mental tze the shorts and mental is the Bears, where they're thinking with all this story about Tessa and Banker, maybe it's not true.

And then we'll meant it starts to shift to Tesla as a growth story, and so this extreme diversion of belief starts to shrink.

Where's no longer this demonized view of Tesla and this, you know, deified.

You have tests up rather inserts to converge in a more positive view of Tesla's, where they're seeing Tesla as a legitimate growth company with the legitimate future. 00:15:50.300 --> 00:16:0.540 Here's a few more thoughts about this when the extreme dispersion of beliefs are to converge and it happens around that, say, a company starting to produce sustainable profits. 00:16:0.640 --> 00:16:6.560 What happens also is oftentimes a quantitative folks and the qualitative folks start to join together. 00:16:6.560 --> 00:16:7.250 Let me explain. 00:16:7.430 --> 00:16:10.510 Let's see up in disappointment a high growth companies bleeding a lot of money.

The quantitative folks look at the company very negatively.

They look at the balance sheet negatively.

They don't see when this company is gonna produce profits, and they're not really believers of the product or the company.