I just had a call with someone that has put their entire portfolio into TSLA

This was the conversation:

Me: How have you modeled your price target and how frequently are you updating it?

Them: I haven’t built a model or anything, but I think it’s going to up

Me: Why do you think that?

Them: Because robo taxis are the future.

Me: But how much of that expectation do you think is already priced into the stock?

Them: Well there is no revenue from robo taxis yet.

Me: That’s not how stocks work, but OK. How are you going to determine when to sell it?

Them: It should be worth $10m - $15m for me in about 5 years and that should be enough for me to stop working.

In the academic world, people go round and round postulating why anomalies in markets exist and persist.

I’ve had enough calls like this to conclude the behavioral anomalies are not going anywhere anytime soon.

I don’t care if you want to concentrate your portfolio, but at least have some tangible/quantifiable reason for it.

In the meantime, we are happy to systematically harvest the other side of this behavior to create excess returns without needing concentrated bets.