GoPro, Tesla – Fundamental Valuation and Investing

It may seem like a time for crowing.  The position advocated in these posts, that GoPro and Tesla had reached values that were unsustainable, has been vindicated.  But it is a better time to take stock in the relation between fundamental valuation and investing, than for self-congratulation.

Making money from fundamental valuation requires the confluence of three factors.  The first is that once the investor completes the fundamental valuation the estimated value differs significantly from the market price.  This is actually likely to be quite rare.  Assuming both the investor and the market are reasonably rational, the two valuations will typically be quite similar in which case there is no incentive to invest.

If the two valuations differ, then it must be...