We recently compiled a list of the Best Future Stocks For The Long-Term. In this article, we will look at where Tesla, Inc. (NASDAQ:TSLA) ranks among the best future stocks for the long term.
A Soft Landing is More than Likely
The Fed plans to initiate rate cuts for the first time in over four years and investors do not know what to expect of the financial markets moving forward. On September 17, Stephen Juneau, Bank of America US economist, appeared in an interview on Yahoo Finance to discuss the impact of an unexpected growth in consumer spending on the economy.
Juneau reiterated that economic data is highly volatile and that the retail data released this morning will not impact the Fed’s rate cut decision tomorrow, and he expects the Fed to stick to a 25-basis point cut. As for consumer behavior, the economy is finally moving toward normalization and the consumer’s basket of goods reflects that. These indications, the increasing labor demand, and a stable investment outlook hint that a hard landing is highly unlikely.
The Outlook of Investing Amid Rate Cuts
On September 17, Eric Freedman, US Bank Asset Management Group CIO, appeared in an interview on Yahoo Finance to discuss the rate cut and how investors view investing. Freedman said that the rate cut depends on the Fed’s path, therefore an accurate prediction may not be possible at the moment.
Freedman talks about investment from an individual perspective, suggesting investors must move out of the front end of the yield curve. He then pointed to sectors that are currently providing value to investors, including the consumer discretionary sector, some parts of the energy sector, and tech, especially because investments in the sector are predicted to grow rapidly, well into 2025.
He then discussed what companies need to do to attract investors. Freedman emphasized the need for strong financials and suggested that companies should engage in buybacks or consider increasing dividends. The perfect combination of stocks, according to Freedman, includes companies that are returning cash and seeing strong organic growth.
The future of the economy and the financial market is quite unpredictable. However, some stocks can influence the market not just now, but also in the future. With that, let’s take a look at the best future stocks for the long term.
Our Methodology
To come up with the 10 best future stocks for the long term we looked up growth stocks in the AI, Cloud, Cybersecurity, Biotechnology, Electric Vehicle, and Renewable Energy industries. We then ranked the stocks with the highest number of hedge funds as 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).
Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
Tesla, Inc. (NASDAQ:TSLA) is an automotive and clean energy company that specializes in the production of electric cars and solar-integrated renewable energy solutions. The company is one of the largest EV manufacturers and accounted for nearly 50% of EV sales between April and June, in the United States.
Electric vehicles accounted for 84% of Tesla’s revenue in the second quarter of 2024, pointing to its reliance on the industry. Its energy segment, logged $3 billion in sales, doubling year-over-year. During the second quarter of 2024, Tesla, Inc. (NASDAQ:TSLA) launched a new lineup, 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.
Despite sluggish growth in its electric vehicle segment, the company’s investments in AI make autonomous driving a reality, contributing to its position as one of the best future stocks for the long term. Its FSD v12 vehicle is purely AI-based self-driving and has driven 300 billion miles so far. In addition to AI-based self-driving and AI training chips, the company also made headlines for its Tesla Bot, a humanoid autonomous robot capable of performing miscellaneous tasks.
Overall, TSLA was held by 85 hedge funds at the close of Q2 2024 with total stakes amounting to $4.97 billion. As of June 30, Citadel Investment Group was the largest shareholder.
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 5th on our list of the best future stocks for the long-term. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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 was originally published on Insider Monkey.