Is Tesla (TSLA) currently a bubble stock? Based on fundamentals, right now it certainly is. Will Tesla be worth more than it is today in five years, or 10? I think so, but now is probably not the right time to buy. Wait for the speculators to be washed out, then come in.
Whenever values come unmoored from fundamentals, you have a bubble. What makes it worse, from that point, are those buy-side analysts telling you to ignore those fundamentals, and pointing to the most recent gains. What's even more infuriating is that they're usually right, for a time.
It's the reaction to such commentary that should tell savvy investors how to behave. When negative stories are seen as the normal give-and-take of a market, that's one thing. When the authors are criticized directly, or their motives get questioned, that's A Clue that the bulls are running out of arguments.
This excess bullishness can happen to anyone.Joseph P. Kennedy famously got out of stocks when his shoeshine boy gave him a stock tip. James Kostohryz used this story while calling gold a bargain at $1,700/ounce, in August of 2011. Gold is now at $1,320. Does this make Kostohryz a fool? No, it does not. Because he wasn't suggesting you sell all your stocks and just buy gold. Diversification, among asset classes as well as stocks, remains the key to long-term investment success. Remember, though, you're not in business. You're an investor. You can root for investments the way you do your favorite sports team, but if you fall in love with one you're going to get burned. What investment pros constantly harp on, portfolio re-balancing, is the right idea but often done poorly. The idea is not just to have assets across a wide front, but to take profits from areas that have become unmoored from fundamentals and apply them in areas that are currently undervalued. What if everything is overvalued, you ask? Everything is never overvalued. Investing wisdom lies in knowing there are always unloved assets worth adopting, and adopting them. Then, when everyone else falls in love with them, slowly and quietly step away. At the time of publication, the author owned 80 shares of AAPL. Follow @danafblankenhor This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV