Tesla Motors Inc (TSLA) and Mister Market: What’s a Company Worth?

The funny thing about Amazon.com, Inc. (NASDAQ:AMZN) and its “insane valuation?” If you’d bought shares at the height of the market’s insanity in 1999, you would be up 390%. TTM revenue was over $60 billion, and its market value is over $120 billion today.

Foolish bottom line

It’s worth mentioning that these are three very distinctly different businesses, and any kind of valuation comparison can be flawed because of that aspect. But getting caught up in that would be to miss the point: Don’t get caught up in the market “being wrong” about a stock. Understanding how over time, Mister Market values a specific company, is a much more valuable approach.

As to my decision to sell half my holdings? I’m a serious fan of Tesla Motors Inc (NASDAQ:TSLA), and I think it’s combination of leadership, starting with Elon Musk, the approach that isn’t about making an electric car so much as it’s about making the best car it can, and targeting a segment of the market that will pay the premium for an amazing car, will establish it as a long-term leader, and a winner. I will re-invest the dollars of my sale back into Tesla at some point, and there’s a very good chance I may pay more for those shares than I sold them for. But when I do buy back in, it will be with a better understanding of how the market values the company.

As to you, if you don’t have a position in Tesla (or the other two companies discussed,) I think a small position has a place in any portfolio. These are three companies actively changing the industries that they play in. And while that doesn’t come cheap, it can pay off hugely.

The article Tesla and Mister Market: What’s a Company Worth? originally appeared on Fool.com and is written by Jason Hall.

Jason Hall owns shares of Amazon.com, LinkedIn, and Tesla Motors (NASDAQ:TSLA) . The Motley Fool recommends Amazon.com, LinkedIn, and Tesla Motors . The Motley Fool owns shares of Amazon.com, LinkedIn, and Tesla Motors. Jason is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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