Holding TSLA – Good idea? A look at the ARK Investing Model

Years ago, I read on Facebook, somebody say TSLA should be traded, not held.

I didn't disagree. With all the volatility, if you could time the stock right, you could make crazy gains.

While, I just hold, after seeing the stock go from ~$900 to ~$600, it makes me wonder, *what if I timed it better*.

I am not going to be an hourly trader. Not even a day trader. I don't want to make decisions regularly. Buying and holding is easy.

Having said that, if I were to trade, the smartest people I have seen trade TSLA so far is ARK Invest.

While the actual formula would be much more complicated, comparing to increasing amounts in a dynamic portfolio over time, I am going to simplify their model as much as possible in an attempt to see how they did.

ARK attempts to keep each position to 10% of their portfolio.

TSLA is one of those 10%.

We will assume that we are only comparing to the rest of the portfolio and that the rest of the portfolio remains constant.

We will use a static time to make decisions which is the closest trading days after the 1st and the 15th of every month.

Our position will initially consist of 100 shares of TSLA and this equals exactly 10% of the portfolio. Since the rest of the portfolio remains constant, we are striving to keep the value of the TSLA holdings as close to our initial value as possible. When the stock price goes down, we buy shares. When the stock price goes up, we sell shares.

We will start at Mar 1, 2019 when the open value of TSLA was $306.94.

100 * $306.94 = $30,694. This is our end goal number. What we want to know is how much profit/loss can we make in $ while attempting to keep our balance to as close to $30,694 as we can.

Our buy and hold strategy would have earned us $36,105 profit as share price is currently $667.99/share. What would happen if we attempted to keep our TSLA holdings value consistent by buying/selling shares around the 1st and 15th of every month?

Conclusion: ARK's model is very interesting. I played around with it a bit. Despite the fact that they are slightly lower at this time of writing with the stock price at $629, when I set the price back to the $306.94, ARK was +$13,517.46 and we were $0.

Under certain circumstances, it works better. If the share price increases dramatically however, they would continue to decrease their position limiting their growth potential. Buy and hold would outperform them in that situation.

I will continue to update prices on this model to see how things go. For now, I am going to stick with the buy and hold strategy. I will work towards getting more data to see if we can backdate this strategy many years to see it's performance.

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jsturgis