The past few months have been a crazy ride for Tesla (TSLA -3.55%) investors. That's true both for shareholders, and the short-sellers who've taken an absolute pounding as the share price has skyrocketed. At one point, Tesla's share price had more than doubled, rocketing past $950 per share in afternoon trading on February 4 before closing at $887.06.
That was easily the all-time high for the company's stock, which has fallen about 16% and trades closer to $740 at recent prices. Here's the rub: That's still an incredible 76% in gains since the beginning of the year, and more than 300% in gains since last summer. It's also got a lot of people thinking about buying.
For me? That $900-plus-per-share price led me to the conclusion that it was time to sell, at least for now. Considering that I paid $38.02 and $36.54 per share when I bought back in 2013, the $908 per share price I sold at is a pretty incredible rate of return. We're talking better than 2,200% in gains.
Image source: Getty Images.
To take it a step further, I bought 40 shares, investing about $1,500 in total with part of the proceeds from a 401(k) rollover. At the $908 per share price I sold at, that's a realized profit of almost $35,000! It's may not be life-changing money, but it's an incredible return nonetheless.
There's one catch: By the time Tesla's share price had gotten to $908, I had already sold off most of my investment in years before. Keep reading to revisit my Tesla investing journey, and the big lessons I've learned.
From bear to bull
Before I invested in Tesla back in 2013, I was very much a bear. My reasoning was simple: Tesla was trying to do what no American automaker had done so far: Develop and sell a mass-market electric vehicle. It was trying to do what no American company had done in nearly a century: Start up a successful new auto manufacturing business.
But then I decided to invest the time to learn more about the company and in particular its visionary -- and very controversial -- founder and CEO, Elon Musk. In short, I realized that Musk's plan to develop premium, luxury vehicles, not a low-cost econo-box, had a very good chance to be the differentiator that led to success. Mated with Musk's history as an entrepreneur, and what I came to see as being a generational visionary, I shifted to full-on bull and opened the small 40-share position described above.
Image source: Getty Images.
Take those profits!
Within months, Tesla's share price had skyrocketed. From the time I bought to early June, shares gained more than 180% at one point. So of course, I promptly sold half my shares at just under $100 per share, more than doubling the $800 I paid for those 20 shares.
My reasoning? The price had gone up, and I thought it had gotten "ahead of itself" and it would be smart to go ahead and "lighten my position" and "lock in some profits."
In hindsight, that was just plain dumb. Here's what Tesla's stock would do just in the 12 months after I sold:
That's right: It not only more than doubled, but Tesla's stock price never fell below the price I sold at. So much for "calling the top" for Tesla's short-term share price.
Was selling a mistake? Based on Tesla's price gains after, you could say that. However, that's not my mistake. I didn't buy Tesla as a short-term, quick-buck investment. I invested because I saw its potential to become a great automaker, and more specifically the potential that it would disrupt the status-quo and make electric cars fun, popular, and viable.
My mistake was selling a company I believed in entirely because the stock went up.
Rinse and repeat
Fast-forward to April of 2018. Tesla's stock price was over $300 per share, and once again, I was becoming convinced that the stock was -- you guessed it -- getting ahead of itself. Moreover, I was a little less convinced in its future; the business had become a little more complex. The acquisition of SolarCity a couple of years prior had been a bit of a disaster, and the expansion of battery manufacturing made Tesla a little less of just a car company, and I wasn't as convinced the market was valuing it appropriately. Moreover I wasn't sure how to really value it.
So I sold another chunk of shares. Sure, I made a huge profit, selling stock I paid less than $37 per share for more than $300 per share. Figuring I'd give things time to "cool" off and then revisit things.
Image source: Getty Images.
Cracks in the thesis?
In September of 2018 I liquidated nearly all of my Tesla shares at just under $300 per share. My reasoning this time was simple: Tesla is still an interesting company, and Musk is still a potential visionary. But I was growing concerned about his ability to continue running Tesla and SpaceX, and the somewhat erratic nature of his actions over the prior year (especially the "funding secured" tweet that cost him and Tesla investors millions in SEC fines.
But I held onto one share. A single Tesla share as a placeholder, and as a way to remain plugged into what was going on with the company and its stock.
Finally moving on (for now) and the big lessons
I sold that last share this past week, managing to get lucky with my timing and sell while the stock was above $900 per share. Sure, it looks like a smart move now, with the stock price having fallen more than 20% from the price I sold for.
So what lessons can I take from this experience? Here are three big ones.
Investing is about making money and I made money
Yes, a healthy dose of hindsight bias makes it clear I didn't make anywhere near as much money as I could have, if I'd held my shares. But every time I sold, I captured a substantial, market-beating return on my original capital investment.
But... don't think you're smarter than the market
Yes, hindsight bias in action here, but the fact remains, I did sell because, in every case to some degree, I thought the market had gotten way ahead of even an optimistic valuation for Tesla. Trying to catch a market top with plans to get back in at a lower price rarely works.
It's good to avoid letting emotion affect your investing, but...
We're humans, and humans have emotion. I write about stocks for a living, following the market daily, and I rarely sell any stock. But Tesla has been one of the few stocks I've owned that has been hard for me to just ignore. So sure, it's been a "mistake" to sell every time I've sold in the past, but part of being a successful investor is also acknowledging your own limitations.
For me, that limitation has been sticking Tesla in the "ignore" pile of my portfolio. I've been fortunate to have made money on the stock. My best advice for anyone considering buying Tesla at recent prices is, if you can't ignore it, and you're investing money you can't afford to lose, you may want to follow my lead, and just not own Tesla at all right now.
