By: Dividend Sensei
Diversifying by alpha factors is a proven way to outperform the market over time. A multi-factor approach has beaten the market by 1.6% annually since 1996.
Hyper-growth blue-chip investing, when done correctly, can make for a rich retirement. When done poorly, ignoring valuations, it can crush your retirement dreams.
Tesla is a speculative 9/12 hyper-growth blue-chip run by one of the most innovative minds in the world. Analysts expect Tesla to grow at 40% over time.
Tesla’s market-determined fair value is $361 in 2021. Buying at fair value offers a consensus return potential through 2026 of 202% or 22% CAGR, almost 5.5x that of the S&P 500.
Tesla’s complex risk profile means that a 25% margin of safety, $271 in 2021, makes it a potentially good but speculative buy. One that offers 303% consensus return potential through 2026, or 28% CAGR (17% risk-adjusted expected returns).
I’ve placed a limit to buy a starter position in Tesla at fair value for my retirement portfolio, and a 2.5% or smaller position at that price may be appropriate for anyone comfortable with Tesla’s complex risk profile.