The point I haven’t seen addressed in the comments is I think Tesla has unusually potent ingredients for a more than 10% chance of a 10x+ upside. Just scaling up its gigafactories and dominating battery production across all industries seems like a sufficient ingredient to tell a disjunction of such stories.
IMO this is addressed by the “market is already pricing it at 10x growth” point. To unroll that, consider three cases: company grows to 100x, company grows to 10x, and company stays at 1x. In the world where those are the only options, pricing the stock at 10x its “stay the same size” value means that the 1x case is roughly 9 times more likely than the 100x case (and otherwise doesn’t constrain things). Someone who thinks it’s 10%/0%/90% should have the same EV as someone who thinks it’s 5%/50%/45% or 0%/100%/0%.
Now, you can argue it’s 10%/50%/40%, or whatever, and so it should be priced at 20x instead of 10x, but this is more in the “the usual kind of high-priced high-quality stock” territory.
Making an equity bet where the maximum loss is 1x therefore still seems attractive to me.
This also seems slightly off to me; all bets have a direct maximum loss of 1x, in some meaningful sense, and the “real loss” is going to be in the opportunity cost. That is, if I buy $10 of Amazon and you buy $10 of Tesla, and mine becomes worth $100 and yours becomes worth $1, we can look at this as you choosing to be $9 poorer or $99 poorer depending on where we put the baseline.
IMO this is addressed by the “market is already pricing it at 10x growth” point. To unroll that, consider three cases: company grows to 100x, company grows to 10x, and company stays at 1x. In the world where those are the only options, pricing the stock at 10x its “stay the same size” value means that the 1x case is roughly 9 times more likely than the 100x case (and otherwise doesn’t constrain things). Someone who thinks it’s 10%/0%/90% should have the same EV as someone who thinks it’s 5%/50%/45% or 0%/100%/0%.
Now, you can argue it’s 10%/50%/40%, or whatever, and so it should be priced at 20x instead of 10x, but this is more in the “the usual kind of high-priced high-quality stock” territory.
This also seems slightly off to me; all bets have a direct maximum loss of 1x, in some meaningful sense, and the “real loss” is going to be in the opportunity cost. That is, if I buy $10 of Amazon and you buy $10 of Tesla, and mine becomes worth $100 and yours becomes worth $1, we can look at this as you choosing to be $9 poorer or $99 poorer depending on where we put the baseline.