Tesla Misses Q1 Deliveries, Health Insurers Crushed, and Taiwan Earthquakes!

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Market News and Short-Term Predictions

This week three negative news events impacted my portfolio, and I want to talk about how I view all of them with a longer-term mindset.

The first news story that broke this week was that Tesla's deliveries declined by 8.5% in the first quarter to 386,810 vehicles from a year ago and the company produced 433,371 vehicles during the period. Wall Street had expected Tesla to deliver 454,200 vehicles.

This was the first time since 2020, that Tesla experienced a decline in deliveries. Initially, the stock fell by around 7% before closing down 4% on the news as investors digested the bad news.

As someone who wouldn't touch Tesla with a 10-foot pole back in 2021 at peak euphoria, this kind of news and negative sentiment is what allows those who are focused on the long term to get a better entry point/valuation.

I think Tesla is running into a couple of issues in the medium term that I believe aren't the end of the world in the long term. First of all, interest rates being higher is tough for the auto industry as higher rates make buying a car less attractive. Second of all, you have China sales struggling with their economy in the gutter which served as a boom for Tesla in years prior (makes comps harder now).

Tesla is still a speculative stock in my eyes and based on their innovative mindset I believe deserves a bit of premium compared to other auto stocks. If you think it's still the same company in 2021 in terms of innovation around energy solutions, self-driving cars, and robotics then you should be loving that the valuation has come way down.

For me, I have started to nibble at these levels, but would love to see the stock down in the low $100s which might be a reality if the macro issues cause the next couple of quarters to also appear sluggish.

One thing for certain, if they figure out FSD then buying here was a no-brainer. If they don't then it's definitely overvalued as just a car company.

Another news story that broke this week revolved around health insurers. Shares of U.S. health insurers fell after the Biden administration didn’t boost payments for private Medicare plans as much as the insurance industry and investors had hoped.

The announcement puts more pressure on insurers already grappling with high medical costs and uncertainty around claims processing after the ransomware attack at UnitedHealth Group’s tech unit.

The Centers for Medicare and Medicaid Services late Monday said that government payments to Medicare Advantage plans are expected to rise 3.7% year over year. But the thing is that rate was already known and should have been baked in.

This "news" caused stocks like UNH to close to 6% and close in on the $460 zone.

As a long-term investor, I like to see this short-term pessimism around UNH (19 PE) /CVS (11.5) as I believe these companies trade at solid valuation multiples with safer predictable expectations for growth to continue for the industry (which expects a 6.1% CAGR through 2030).

The last piece of negative news that came out this week was related to my position in TSM.

Taiwan’s biggest earthquake in 25 years disrupted production at the island’s semiconductor companies, with potential repercussions for the global technology industry. While my thoughts are with those that were affected, the stock market was quick to also take the stocks potentially affected down on the news.

If I have learned anything from my 15 years of experience investing in the markets, is that while natural disasters have a short-term effect on companies, in the long term it is a blip in the company's history. After momentary panic this morning, TSM closed up 1% on the day.

The point I'm trying to make is for each negative news event I hear about stocks, I tend to look at whether or not they can bounce back in the long term. This type of contrarian thinking can lead to picking up stocks at cheaper valuations when sentiment is low.

Some of my best stock picks have come from this such as AAPL, META, NVDA, NUE, AMD, CAT, JPM, INTU, TSM, TGT, and DPZ. All of these names have experienced periods of negative sentiment which turned out to be great buying opportunities.

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Lessons to Be Learned

Today's lesson is brought to us by Wall Street Bets. Granted none of my followers would be as degenerate as the person in this example, but I figured we could all learn the golden rule from this outlandish story (granted this isn't new for wallstreetbets)!

So this guy ends up buying $150k worth of short expiration call options. AKA this guy is straight-up gambling that the S&P 500 is going higher in the span of 1 day. BRUH.

There are a couple of lessons to be had based on this.

1. Buying short-dated options is gambling. No one knows what the market is going to do in the short term (the next hour to a couple of days) and I will die on that hill. If you expand the timeline to a couple of weeks, I can understand the argument of momentum trading or reversals based on news that shouldn't impact fundaments.

2. So these expired today and SPY ended up closing at $519.41, so holding till the expiration of these positions would be worth around $30k in total. or a $120k loss...GUH. The worst part is the guy updated mid-day he was up $108k on the position! The golden rule remains in long-term investing or short-term trading, if it's good enough to screenshot it's good enough to take profits.

So if you're having a bad day, just remember this dude went from up $108k to down $120k in a matter of hours.

Portfolio Update

Stock Watchlist

Stocks: TSLA, LLY, ADSK, SBUX, NOW, CELH, AAPL

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