Cambyses' Electric and Autonomous Vehicle Initiative -- Suitability and Risk Factors

Cambyses does not provide a generalized Buy, Hold, Sell recommendation. Rather, we examine each security in light of its compatibility with a specific investor’s risk profile, aims and goals for their portfolio, intended strategy, time horizon and several other criteria. For full information on any security that we cover, request our suitability analysis for that company.

Review Cambyses' Suitability, Risk Criteria, and Data Sources:  Cambyses determines whether a security should be in your portfolio by reviewing and analyzing nine suitability factors, eleven risk factors, and a variety of performance data (both fundamental and technical). When we are done, we review what other analysts have to say (their opinions rarely change our mind, but, once-in-a-while.

Because the data has become more available, we recently began evaluating companies' Environmental, Social, and Governance positions as well - Both their stated & reported policies and their adherence to them.  That part of our protocol is not yet mature.

Cambyses' Suitability and Risk Analysis - Applied: Since Tesla was one of the first modern entrants to the EV arena, we think it is fitting that they be our exemplar when we demonstrate how our suitability analysis applies to real life operating data. 

Tesla is the "800 pound gorilla" of not only the EV sector, but has evolved as a market capital leader and an innovation driver. It is, at present, the only pure-EV play that has achieved international status. 

Notes About Cambyses' Electric and Autonomous Vehicle Portfolio

Almost without exception, the securities in Cambyses’ EV Initiative portfolio are suitable only for investors with high risk tolerance. Most of the securities are 1.5 to 2.5 times as volatile as the S&P 500 (Measured by Beta). The securities are, in addition, moderately correlated to each other and to the S&P Index. Thus, Cambyses portfolios are only minimally less volatile than their constituent securities. Their general movement mirrors that of the S&P 500 index.

 

A significant number of the Initiative companies face significant financial risks. A superficial balance sheet review might conclude that the companies are quite solvent (current Ratios of 2.0-5.0 are common) and largely debt free (though that is changing). That impression is, however, misleading. Many of the same companies are pre-revenue or have not produced at-scale. Thus, replenishment or maintenance of their working capital reserves is almost entirely dependent on retaining an enthusiastic and deep-pocket investor base that isn’t concerned with dilution.  Those investors, historically, have been few and far between and their willingness to stay-the-course has been limited.

The Initiative Companies’ volatility and financial risk influences their suitability for inclusion in virtually any portfolio – Cambyses’ included. As a general rule: Initiative securities are suitable for inclusion in portfolios with either:

Very short planning horizons or holding expectations (“day trade” portfolios), or

Long-term growth portfolios based on buy-and-monitor practices.

With almost equal generality, Initiative securities are not suitable for

Target and Target-Deadline portfolios (e.g., pre-retirement portfolios, or education savings)

Preservation or value strategies, or (in all likelihood)

Mid-term holding approaches

Suitable prospects for option trading and other strategies must be identified on a case-by-case basis.