Avoiding the Disrupted

Overcomplicating things is seldom on the path to investment success. The stunning ascension of Tesla has confounded, in a manner no less than stupefying, the investment thesis of many. We don’t profess to know the value of Tesla, but suspect sales and profitability forecasts commensurate with a near $200 billion capitalization are more than optimistic.

Source: Bloomberg, Holger Zschaepitz

Readers of our previous notes know that we have not been a fan of the automotive industry. Rather than trying to value industry disruptors such as Tesla and Amazon, a simpler approach might be to use caution when selecting investments within industries undergoing rapid change. The charts below suggest caution has been long warranted for investors in the automotive and retail sectors.

Source: Stockcharts.com, Mark Ungewitter