What’s going on?
Last year was a tough one for Tesla’s shareholders, after rising interest rates and concerns about Musk’s priorities put a $700 billion dent in the firm’s market value. But 2023 has been a whole lot kinder to the EV giant, with stock climbing 79% in just the first few months of this year. One of the key factors in that U-turn: a whole lot of love from the world of retail investing. See, retail investors own around 43% of Tesla’s shares as of March 2nd, and they’ve funneled $14 billion into the firm so far this year – a serious upswing compared to 2022’s full-year figure of $17 billion. That’s got wide-eyed observers looking to Tesla in order to get to grips with how retail investors think, feel, and act.
Why do retail investors love Tesla?
A compelling narrative
Tesla’s narrative jives well with a couple of the world's hottest macro trends. The most popular themes in our community right now are artificial intelligence and robotics, the clean energy transition, and EV supply chain developments – and those all dovetail perfectly with Tesla’s vision and business model. After all, simple and focused narratives are key to winning over retail investors, who tend to weigh up companies in the kind of top-down way that venture capitalists do.
That said, there is a caveat here: the existence of a macro trend doesn’t always mean there’s a profit to be made, and the retail community could probably benefit from taking this point to heart. At Finimize we try to use moments like this as opportunities to educate, using Tesla as an example to consider when getting to grips with the so-called “big market delusion”. In practice, that’s meant bringing the concept to life with comparisons to previous markets: the kind that also boasted towering values, but saw companies struggling to pass that value onto investors. (Think of the ill-starred e-commerce boom of the 1990s and the online advertising market over the past five or 10 years.)
Modern retail investors are busy people. Far from sitting at a Bloomberg terminal 24/7, our community members have an average of just 10 minutes a day to spend on the latest investing news. That means that big, headline-grabbing events tend to have an outsized effect on retail investors’ decisions – and nobody makes better headlines than Elon Musk. See, Musk’s a dab hand at keeping himself and his companies in the limelight, and that has valuable, real-world implications for the firms in question. Case in point: in just under a week, Tesla’s investor day video managed to rack up a cool 1.4 million views.
Price ≠ value
One common pitfall investors fall into is confusing price with value. New investors are especially likely to assume that a price that’s fallen will eventually climb back up to its previous position – and Tesla’s volatile price swings make it particularly easy for them to get burned. That’s why we’ve used the retail community’s interest in Tesla as an opportunity to educate users on how to assess a stock’s true value. We also display fundamental metrics for each company mentioned in a news article, drawing our community’s attention away from the price chart and focusing it on a few key metrics – like P/E ratio, sales growth, and beta – instead.
What does this mean for financial institutions?
Financial institutions want to welcome retail investors with open arms, but they find themselves facing a dilemma: if headlines, compelling narratives, and some behavioral biases are swaying the community, then what balance should institutions strike between safeguards and autonomy?
At Finimize we’ve chosen to capitalize on zeitgeist moments like Tesla’s rebound. These kinds of events provide the perfect opportunity to discuss investing fundamentals with clear, relevant, real-world applications, giving us a chance to show how reactive, in-depth educational content can turn headlines into departure points – not destinations.