We recently published a list of 10 Best Stocks to Buy and Hold For 5 Years. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against other best stocks to buy and hold for 5 years.
Is Corporate America Celebrating the New Administration?
On November 7, Reuters reported that stocks in the United States were higher than usual after the Fed announced a 25 basis point rate cut, extending the rally fueled by the election results. The Fed decision came promptly after the job market showed signs of easing and inflation moved towards the Central Bank’s target of 2%. Most investors expect the new administration to ease taxes and regulations, all of which sparked all three of the major indexes. The S&P 500 and Dow, each logged their largest one-day percentage jumps in two years.
Now that the elections are over, investors are keen to know how will markets perform amid election results. On November 8, Bethany McLean, contributing editor at Vanity Fair, joined Catalysts on Yahoo Finance to discuss why businesses may be optimistic as the new president takes over the White House.
McLean emphasizes that investors foresee a myriad of benefits such as tax cut extensions, fewer regulations, and less aggressive antitrust oversight, all of which have sparked a surge in markets. Despite the possible benefits, she emphasizes it is difficult to predict what the administration is going to do at the moment.
McLean expects the new administration to be friendlier with companies in the technology sector, however, she remains fixated on waiting to see how the policies play out. She further adds that if any future policies made by the new administration negatively impact the stock market, she expects them to “switch course.”
On the flip side, some analysts maintain that the easing cycle has a greater bearing on the stock market than the elections, hinting that value names may be more important as of now. On November 7, Arup Datta, senior vice president at Mackenzie Global Quantitative, joined Wealth! on Yahoo Finance to share his market thesis as the 2024 elections come to a close.
Datta shares that he is extremely positive about the market but emphasizes that the win will have little impact on financial markets in the long term. Speaking of the magnificent seven, he adds focusing on quality names with positive growth and value for his investment portfolio helps him navigate the market in such conditions.
He suggests that while the magnificent seven have been the talk of the town for the past 18 to 21 months, he would like to “pivot away” from that by a little. Historically, value stocks have performed better amid an easing cycle, adds Datta.
As the new administration settles in and the Fed initiates its second cut of the cycle, the near-term market will most likely remain volatile. Speaking of the future, some names happen to promise long-term growth due to their proprietary revolutionary technologies and crucial investments. That said, let’s take a look at the 10 best stocks to buy and hold for 5 years.
Our Methodology
To come up with the 10 best stocks to buy and hold for 5 years, we sifted through multiple similar rankings and compiled an initial list of 20 stocks. We then ranked the top 10 based on their hedge fund sentiment at the end of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A row of electric cars being charged simultaneously at a public charging station.
Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company specializing in producing electric cars and solar-integrated renewable energy solutions. The company is one of the largest EV manufacturers in the United States.
In the third quarter of 2024, Tesla, Inc. (NASDAQ:TSLA) logged revenue worth $25.18 billion, up by 8% year-over-year. Automotive revenues accounted for most of the revenue, at $20.02 billion. Overall, revenue was driven by increasing vehicle deliveries. Previously, Tesla, Inc. (NASDAQ:TSLA) launched a new lineup of electric vehicles to boost the launch of new models. Its new lineup and extensive production line will deliver over 3 million vehicles of capacity when optimized fully.
Tesla, Inc. (NASDAQ:TSLA) boasts solid growth potential over the next few years. On October 28, John Murphy, senior automotive analyst at Bank of America, appeared in an interview on Yahoo Finance to share his stance on TSLA. He states that Tesla is at the “next level” of electric and autonomous vehicles. Murphy suggests that the company is witnessing growing gross margins which will be able to fund the future Tesla wants, potentially in the realms of self-driving and robotics. He adds that the company has a strong core and a solid “opportunity curve.” According to Murphy, he has “never seen a company like this before” and is pretty impressed with how the company is progressing, calling it a “real innovator.”
Tesla’s (NASDAQ:TSLA) investments in AI make autonomous driving a reality, contributing to its position on our list. Tesla is poised for significant growth in the coming years because of its growing emphasis on AI.
Baron Funds mentioned Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“As discussed in the Fund’s prior shareholder letter, the fears about Tesla’s products were misplaced. Instead of the company being exclusively dependent on limited vehicle models and software advancement, the company announced it will more rapidly introduce products that appeal to a wider audience. It also demonstrated that its price reductions were the result of efficiencies rather than only to spur demand. Margins exceeded expectations. And the company’s integration of its hardware with proprietary AI software should facilitate full self-driving capabilities and subsequent new revenue streams. This integration of hardware with software creates a dynamic growth company as it more fully explores its potential with Optimus, humanoid robotics. The combination of these catalysts resulted in Tesla’s stock increasing meaningfully and rapidly in the second half of the quarter. This stock price momentum has continued into the next period.”
Overall, TSLA ranks 8th on our list of best stocks to buy and hold for 5 years. While we acknowledge the potential of TSLA to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.