5 Stocks Most Affected by Inflation

1. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 88

Tesla, Inc. (NASDAQ:TSLA) is a Texas-based manufacturer of electric vehicles helmed by the billionaire Elon Musk.

Earlier this year, CEO Elon Musk accepted that Tesla, Inc. (NASDAQ:TSLA) is bearing a significant impact of inflation in the form of higher raw materials costs and logistical expenses. Tesla, Inc. (NASDAQ:TSLA) reported that vehicle sales in November 2022 declined by 9.5% YoY compared to 2021. This is the first time since 2008 that the company’s vehicle sales declined for two consecutive months on a month-over-month (MoM) basis. Historically, October and November have been considered the strongest months for automobile sales. Tesla, Inc. (NASDAQ:TSLA) might have to bear the pain on multiple fronts as experts believe that the company could be forced to take further price cuts to address its low demand problem. During the inflationary period, Tesla, Inc. (NASDAQ:TSLA) has been forced to cut its prices in China and the US along with production cuts in China due to rising costs.

Here’s what Baron Funds said about Tesla, Inc. (NASDAQ:TSLA) in its Q3 2022 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) makes fully electric vehicles (EVs), related software offerings, solar and energy storage products, and battery cells. After a tough second quarter that included a prolonged shutdown of one of Tesla’s key manufacturing facilities in Shanghai, the company demonstrated a significant 40% sequential increase in production volumes resulting in another quarterly record of production and deliveries. Despite the second quarter complexities, inflationary pressures, and production ramp-up of two new facilities (Berlin and Austin), the company exceeded Wall Street expectations in the second quarter. It maintained healthy 26% normalized gross margins, achieved industry-leading 18% adjusted operating income margins, and has generated over $14 billion of cash from operations over the past year. Moreover, due to Tesla’s high level of vertical integration and U.S. manufacturing capacity, the company is expected to be one of the key beneficiaries of the Inflation Reduction Act, qualifying for significant manufacturing and consumer-related incentives. We believe these incentives can add up to tens of billions of dollars over the coming decade, while also enhancing Tesla’s competitive advantage versus other automakers. The company also held its second artificial intelligence day, which presented continued advancements in its vehicle self-driving program and showcased its rapidly evolving humanoid robot developments (check out the Optimus videos on YouTube). We continue to believe Tesla is well positioned to benefit from complementary tectonic shifts in the automotive industry, including electrification, autonomous driving, and shared mobility. And, yes, Tesla is still effectively debt free, with over $18 billion of cash on its balance sheet, and investors are even speculating about a stock buyback, a far cry from worries of bankruptcy just a few years ago.”

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