[Full Disclosure: At the time of this writing Jeff Macke is long shares of Tesla (TSLA)]
Momentum stories end in tears. Maybe not today or tomorrow, but eventually. That doesn't mean you can't be involved in momentum stocks, just that you don't want to be onboard when the ride comes to a halt. After a mind-blowing 260% rally in 2013, shares of Tesla are running out of juice. It's time to take profits before the air-bags get deployed.
By the end of this week I'll be booking profits in my Tesla (TSLA) position. I've got three decent reasons why:
1. 240% in 6 months, 140% in 3 months, 20% in 1-month
Tesla isn't "priced for perfection." It's price has little to nothing whatsoever to do with fundamentals as we know them. TSLA shares are a reflection of the belief that Elon Musk will come up with something no one can currently imagine.
Given Musk's track record there's a pretty good chance he will but it's not going to happen tomorrow. Even genius needs an occasional pause.
2. No reason to buy except momentum
No one believed Tesla could build a decent car. Instead it built great car with the Model S, 2013's car of the year. People doubted Tesla could create practical refueling stations. Not only do those plans now look plausible but Musk claims Tesla is going to roll out battery swapping locations that give drivers a charged battery faster than you can fill a gas-guzzler.
But those aren't fundamental catalysts anymore. Baked-in catalysts make for half-bake investment ideas.Read More »from The Trade: Book Profits on Tesla