Uh Oh, Correction Territory-How to Navigate Shown by Tesla and Costco
So, we have now entered into correction territory for the stock market. Before I tell you what to do next, first I’ll tell you what a correction actually is, and why they are perfectly healthy. A market correction is when an index or a stock falls 10% from a recent high. We usually average a correction per year, and it usually takes about three months for the market to recover these losses. A correction gives the market time to consider what is happening, and they are perfectly healthy. Nobody is jumping out of the 40th floor because the market is down 10%. This is not a bear market, which would be when the market sinks 20% from recent highs. There is too much strength within this market for it to be a bear market.
Yet, the good have been sold down as much as the bad, which is wrong. There are buying opportunities available. One of them is Costco, down 16% from recent highs. One of them is not Tesla, down 50% from recent highs. These two companies, both lying on opposite sides of the quality spectrum, provide valuable lessons, and they show how to handle a correction, and how to value companies during a correction.
I love Costco as a company. I could go on for hours on their internal quality that makes them a buy at virtually any price. They have sold down 16%, more than the general market for no reason. Their recent quarter was perfectly fine, but their valuation is perennially high, so the market penalizes them aggressively every quarter. There is absolutely no reason they should be worth 16% less, so their stock is a screaming buy because they are a great company at a better price.
Tesla is also down quite a bit, even more in fact than Costco. One would think that because the company is now worth 50% less than it was three months ago that you would have to be an idiot to not buy it. But that is wildly stupid. I’m not about to just dunk on Tesla for a few hundred words, I am using them to illustrate how stupid investors can be sometimes when they try to catch a falling knife.
Tesla stock is down 50% over the past three months, yes, but the stock would legitimately have to be down 90% for me to blink and take a look at the company. The company still is trading at an 87 forward p/e ratio, 100 without NRI, and 120 for the TTM. The thing is, the projections are far too optimistic. Analysts are predicting revenue growth of 15% for Tesla just this year, but that is not happening. I think it is more likely that revenue falls 15% this year than rises 15%. This company is total shit, and its “leader” is a total fuckwit who has no clue what he is doing. Elon Musk has ingested more milligrams of Ketamine over the past 12 months than made good decisions for this company.
I mean, I don’t even know where to start. Maybe with the fact that everything Elon Musk has done over the past 18 months seems to be in service of pissing every Liberal in the world off, which isn’t too bright because that’s who buys all his dumb cars. He has effectively obliterated the non-Nazi market in Europe. A drop of 20%, 50%, 60%, 65%, and 70%. Those are the deliveries from Tesla in Britain, Japan, Germany, France, and Spain for January when compared to January 2024. New Tesla registrations, a proxy for sales, fell by 11% in America when compared to a year earlier, while Ford’s EV registrations jumped 55% when compared to a year earlier. This is a five-alarm fire at the company, and Elon is dicking around on Twitter or at the White House, fighting these weird culture wars. In terms of Tesla, he is completely wasting his time. And obviously his ear to the President isn’t helping Tesla. Sure, Trump said he would buy a Tesla, but Republicans do not like electric vehicles.
Oh yeah, and the tariffs are going to sting for him in a time when Elon needs prices to go down. And they are done in China. BYD has effectively taken Tesla out of the equation, and the CCP would 100% rather a Chinese company dominate in China than an American one.
And Elon knows he is done. Elon knows that Tesla will never reclaim the heights it once held for cars, so he’s doing this weird pivot to AI, but that is not going to work either. Switching will be so capital-intensive, and there is no plan. Everything is so muddled, and the lines between his companies are becoming so blurry. Dude, just make new cars. You’re models are so old. The Model Y, the most recent actual line released by Tesla, is eight years old. The Cybertruck is a failure PR wise, and it continues to be a total laughing-stock.
Yet, people are buying, and I am sure that when the next quarter rolls around and Elon, grasping at straws, says some crazy stuff about how Tesla will make $40 trillion next year, people will believe him for some reason. This company is so stupid, and it boggles my mind that people would rather gamble on a company that is so clearly going to be bankrupt in a decade instead of Costco, which will be worth a trillion dollars in a decade.
