1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Investors: 126
Tesla, Inc. (NASDAQ:TSLA) is still the world’s leading EV maker and the Most Promising Stock. The world’s most successful automaker, the pioneer of “premium electric vehicles,” now controls the majority of the U.S. EV market. It is obvious that investors have high expectations for CEO Elon Musk and his team, including continued EV sales, robotaxis, and full self-driving technology. It continues to be the top brand in numerous markets and delivered just under 1.8 million vehicles in 2024 because of its first-mover advantage in the electric vehicle market.
Furthermore, there are expectations that Tesla, Inc. (NASDAQ:TSLA) will continue to gain domestically and internationally following its great momentum on Election Day. Shares are up roughly 523% in the previous five years, which illustrates there is still plenty of growth potential ahead for this leader auto stock.
Following US President Donald Trump’s announcement of 25% vehicle import tariffs that will take effect in early April, Tesla, Inc. (NASDAQ:TSLA) shares were up about 3% at the time of writing. EVs manufactured in Tesla’s two sizable U.S. factories will not be subject to tariffs. In addition, Ontario, Canada, where the firm operates a battery equipment business, has levied 25% tariffs on all American-made EVs. Leading Canadian authorities are discussing levying a 100% tariff on Teslas.
Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“The largest relative detractors in the quarter were Tesla, Inc. (NASDAQ:TSLA) (not owned), Thermo Fisher Scientific, and Broadcom (not owned). We’ve spoken at length about our rationale for not owning Tesla. The stock enjoyed a 54% return during the quarter, with effectively all of the share price performance strength coming in the post-election period, as the market expressed a positive view on Elon Musk’s prominent role in the incoming Trump administration and its potential implications for Tesla. While we agree this development should be a net positive for Tesla and recognize the company’s interesting future prospects for autonomous driving and humanoid robots, its current valuation demands that shareholders pay primarily for potential innovations that have yet to materialize, with uncertain risks and timelines, presenting a different type of risk profile than we are comfortable with. Today, Tesla is an automobile manufacturer limited to the higher-income segment and is increasingly challenged to sell vehicles when interest rates are not zero. As such, we continue to question the company’s long-term growth profile, its ability to scale a large robotaxi service (which seems to be the source of euphoria in Tesla shares), and its corporate governance.”
Overall, Tesla, Inc. (NASDAQ:TSLA) ranks first on our list of the 8 Most Promising Car Stocks According to Hedge Funds. While we acknowledge the potential for TSLA to grow, our conviction lies in the belief that some 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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