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I’m not a big fan of short actions, or at least I’m not talking about the concept. At the beginning of my contributions to InvestorPlace, I tried a little to be directly negative with some companies. Most often, it never goes well, and other people misunderstand what it means to be low. However, with The Action of Nikola (NASDAQ: NKLA), you may not have this problem.
You see, if you’re not convinced that your rival’s Tesla rally (NASDAQ: TSLA) is sustainable, you can necessarily succeed in a short position simply by buying Nikola shares. This way, you don’t have to worry about being negative about anything. You’re just a different action plan from the rest of the crowd.
Probably, more than a few investors think Nikola’s inventory is quoted in sympathy with his biggest rival. After all, Tesla was necessarily the pioneer of the electric vehicle market. And what’s smart for Tesla deserves other electric vehicle players.
But that’s not what’s going on. Instead, since Nikola was made public through a special acquisition company, the dating between NKLA and TSLA is opposite. Specifically, the two values center a correlation coefficient of -63%. In other words, it’s a reverse dating: as TSLA increases, NKLA moves down and vice versa.
It is interesting to note that when you take the correlation coefficient of the June 11 pair, and therefore the initial emotion of an audience begins, you get a much more powerful inverse relationship; correlation coefficient of -78%.
You don’t need to be an expert in math to recognize the validity of the above calculations. With just one chart of the two titles, you can see that they are like oil and water. In this environment, if you need to protect yourself against TSLA volatility, you can simply buy Nikola shares. If Tesla finds a weakness, there’s a smart chance TSLA will smell higher.
In this case, what we see is a zero-sum game. With a sector that deserves greater gain from greater selection and competition, this dynamic is jarring.
For those who need to stick to a safer bet at Tesla, I understand. Today, the greatest enthusiasm related to Nikola’s inventory is theoretical. While Nikola sets production targets, Tesla is already producing. This is a big difference that obviously benefits TSLA.
However, it is fair to note that you pay a higher premium for this distinction. By directing the capital to Nikola’s stock, he bets that the underlying corporation is the one that directly demands Tesla’s situations. So far, many have moved away from this direct confrontation and instead chose market niches for electric vehicles, such as Electrameccanica (NASDAQ: SOLO) or Ayro (NASDAQ: AYRO).
What leaves Nikola aside is that the company doesn’t seek to reinvent the wheel. Instead of looking to force the customer to settle for something exaggerated (see Tesla Cybertruck), Nikola opts for something vintage but cutting edge with his Badger electric van.
In addition, giant corporations are detecting Nikola’s potential. For example, Nikola received a minimum order of 2,500 electric garbage trucks from the waste control company Republic Services (NYSE: RSG). With complete production deliveries planned for 2023, Nikola is advancing at an immediate pace.
And therein lies the double-edged sword of electric cars. Its relative ease of manufacture makes electric cars suitable to disrupt combustion engine manufacturers. At the same time, the accessibility of the electric vehicle production invitation festival can be updated temporarily.
In the end, any company that dares challenge Tesla will have its hands full. TSLA is not only a vertically incorporated monster, but has set its mark on the space of electric vehicles. In this sense, Tesla is for Google or Amazon (NASDAQ: AMZN) of Alphabet (NASDAQ: GOOG, NASDAQ: GOOG).
In this sense, Nikola’s inventory can simply delight in a repressed call from electric car consumers who have necessarily been channeled to the only selection of natural electric cars in recent years. For a “stupid money” bet, I think it works.
Josh Enomoto, a former senior business analyst at Sony Electronics, helped negotiate primary contracts with Fortune Global 500 companies. In recent years it has provided exclusive and critical data for investment markets, as well as for other sectors, adding up law, structure control and health. At the time of writing those lines, it is NKLA long.
The message If you want to sell Tesla short, just buy shares of Nikola made the first impression on InvestorPlace.