I started writing this blog yesterday, 02/02/2020 and incase you havent noticed it was a very special day. Never again in this century will the dates align so well to be able to generate a palindrome sequence.  Interestingly the day also coincided with the biggest sporting event for the year, the SuperBowl, Kansas Chiefs playing 49ers, as well as being the Groundhog day. The title of today’s blog article is my homage to this very special day that we are all fortunate to experience!

I do not have any burning topic to talk about for today, so will keep it short, focusing on one very interesting topic that came on my radar recently  and will highlight market events of the past week, that just reminds me of the famous Maynard Keynes quote.. “markets can remain irrational longer than you can remain solvent”

Escheat What?

Imagine you are a true Buffet-type investor, a long-term buy-and hold type of an investor. With conviction you put $10K in one of the most successful would be IPOs of all times and then never looked at your investment again. 20 years down, you are closing in on retiring and are exicted about the investment you made back in the day to allow you to have a comfortable retirement life. You go back to your brokerage account to sell your stocks but find out that the state has taken over your account and has sold all your stocks 10 years prior!!! The stock in question Amazon, and the State sold the stocks in 2008!

This is a true story highlighted in a recent NPR, Planet Money podcast, titled the Escheat Show. If one’s brokerage house is domiciled in the state of Delaware, the State takes control of all accounts that have no activity for 3 consecutive years! The sad part is the State does not keep the account intact, it liquidates all the stocks and keeps the cash in coffers pending for the rightful owner to make a future claim!

Escheat is a law doctraine that transfers property of individials held by organization that has no contact with the owner for an extended period of time and has no knowledge of person’s death! In principle the law is designed to help individuals reclaim their lost proprerty, given organizations have no incentive to return the property to the rightful owner if he/she has lost touch with the organization. But this law also leads to bizarre scenario such as above, which was the focus of NPR show!

Lesson learned, (1) Even if you never intend to sell a single stock from your brokerage account, make sure to login to account now and then just to make it know to the brokerage house that the account is active and the owner whereabouts are not lost in translation! (2) Every state has an unclaimed property website, where you can search by your name to find out whether you have a claim to property (or cash) that for whatever reason never made it to you. Make sure to check the database of the state in which you have lived the longest!

Markets never stop to amaze!

Last week was the week when the fundamental value-investor mantra played in reverse. We saw a market-correction most impacting stocks that were cheap to begin with, and producing most gains for stocks that by any fundamental metric were already very expensive! In other words, cheap got even cheaper and expensive became more expensive! Case in point TSLA

TSLA reported their fourth quarter earnings numbers, $2.14 adjusted vs. expected $1.72 per share and revenue of $7.38 B vs. $7.02 B expected. These numbers led to a massive rally in already expensive TSLA share price, the stock rallying as much as 13 % on the news!

Whats funny is that the numbers that should matter, diluted EPS and net income, both not very rosy, did not matter at all! The diluted EPS of $0.58,  after discounting the $1.56 a share in non-cash expense, was well below consensus estimate of $0.99, and the net income fell to $105 M from $140 M a year earlier.

Aswath Damodaran put out a long seeking alpha post (and a video blog) on his valuation analysis for TSLA after the earnings report, where in he acknowledged the momentum behind TSLA, but simply could not digest the price to which TSLA had risen, forcing him to cash out on his gains.

I was (and still am) convinced of a classic FOMO story and to put money where my mouth is, I shorted TSLA last Friday, taking a small short position in TLSA, ready to cover short should the stock rise beyond $700.

I am lost for words to describe what transpired today! TSLA rose 19 % beyond the closing price on Friday to $780!  For now I am licking my wounds, though realizing that no matter how strongly I feel negatively about the market valuation for TSLA, the stock simply has too much of a positive momentum behind it to hold onto any short position. I will simply stay on the sidelines and watch the drama play itself out.

Video/Book/Article/Audio for the Week

• Book: The Best Investors and their worst investments, by Michael Batnick. I started re-reading this book this past weekend, to find some solace in the fact that several of the greatest investors of all-times made big- (and some times career ending) investment mistakes. To quote John Dewey, “Failure is instructive. The person who really thinks learns quite as much from his failures as from his successes”
• Blog: This is 40: Growth vs Value, nice market perspective article on the age-old tussle between growth and value investing.