We recently compiled a list of the 10 Best High Growth Stocks To Buy. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against the other high growth stocks.
At Wall Street, long-standing investment strategies are being reshuffled as the monetary and political landscape evolves. Reallocation is the name of the game in a week where the S&P 500 and Nasdaq experienced declines of 1.97% and 3.65%, respectively, marking their largest weekly losses since April. Conversely, the Dow advanced 0.72%, and the small cap-focused Russell 2000 climbed 1.68%. A few tech mega-caps—led by Apple Inc., NVIDIA Corporation, Meta Platforms, Inc., and Amazon.com, Inc.—have dominated stock market returns, especially over the last 18 months, a trend that is evident in the diverging performances of the largest 50 stocks in the S&P 500, weighted by market capitalization. This trend, however, seems to have reversed sharply recently, with mega-caps selling off while the average stock holds close to record levels.
Investors are grappling with this sudden shift, and one possible explanation is that mega-caps may have become too expensive. “The stock market is experiencing a long overdue rotation,” said Glen Smith, chief investment officer at GDS Wealth Management. “Investors are pulling money out of high-performing big tech stocks and reallocating it to other market areas.” Notably, tech giants like NVIDIA Corporation, previously popular among options traders, saw a notable shift in sentiment, with demand for bearish puts surpassing calls at the highest rate in five months. “It signals a different regime,” said Erika Maschmeyer, a portfolio manager at Columbia Threadneedle Investments. “The market could be choppier and more volatile, with more dispersion than we have seen.”
This divergence has reassured some Wall Street experts who had been concerned about the rally’s dependence on a few massive tech stocks. Additionally, rising optimism about forthcoming interest rate decreases from the Fed has bolstered smaller and more cyclically oriented names. In that regard, the Fed’s battle against inflation might be nearing its end after U.S. consumer prices unexpectedly fell in June. Chicago Fed President Austan Goolsbee considers the latest inflation data “excellent” and describes persistent housing inflation improvement as “profoundly encouraging.” However, Scott Rubner of Goldman Sachs is skeptical about buying the dip. The tactical strategist believes the S&P 500 has little room for upward movement from its current position. He points out that historically, July 17 has marked a turning point for the equity benchmark, with data dating back to 1928 supporting this claim. Rubner notes that August typically sees the worst outflows from passive equity and mutual funds.
On another note, the U.S. economy added slightly more jobs than expected in June. Nonfarm payrolls increased by 206,000 for the month, surpassing the Dow Jones forecast of 200,000 but falling short of the revised May gain of 218,000, which was significantly reduced from the initial estimate of 272,000. However, the unemployment rate unexpectedly rose to 4.1%, matching the highest level since October 2021 and presenting a mixed signal for Federal Reserve officials considering their next monetary policy move. The jobless rate was forecasted to remain steady at 4%. Although June job creation exceeded expectations, much of this growth was driven by a 70,000 surge in government jobs. Additionally, the health care sector, a consistent leader, added 49,000 jobs, while social assistance contributed 34,000 and construction increased by 27,000.
The 2024 presidential election is heating up, with President Joe Biden opting not to run for re-election and Republican nominee and former President Donald Trump continuing his campaign after surviving an assassination attempt. Historically, presidential election years have often brought strong returns for stock investors, influencing short-term economic policy. However, recent events suggest that this election year may be far from typical.
Our Methodology
To compile our list of the best high growth stocks to buy, we identified companies with strong sales growth over the past five years. These companies were then ranked based on the number of hedge fund investors in the first quarter of 2024, out of a total of 919 hedge funds. 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).
25 Most In Demand Cars Heading into 2024
Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 74
Annual Sales Growth Over the Past 5 Years: 36.73%
Tesla, Inc. (NASDAQ:TSLA), headquartered in Austin, Texas, is a prominent American clean energy company, renowned for its electric vehicles. Tesla not only designs, manufactures, and sells electric vehicles (EVs), but also offers energy storage solutions, solar panels, and solar shingles.
The EV giant is set to further enhance its product lineup with the anticipated launches of the Cybertruck and Tesla Semi this year. The company’s energy division reported significant achievements in the first quarter of 2024, with margins reaching a record high of 24.6%. Energy storage deployments are projected to increase by at least 75% in 2024 compared to the previous year.
Morgan Stanley recently reiterated its Overweight rating on the TSLA stock, maintaining a price target of $310.00. Investors are keenly anticipating continued leadership from Elon Musk, who is expected to participate in the upcoming second-quarter conference call and host a robotaxi event on August 8th in Austin. Despite potential legal challenges, Musk’s influence over Tesla, Inc. (NASDAQ:TSLA) remains substantial, though he has yet to secure the 25% blocking minority voting power he aims for. Morgan Stanley suggests that further purchases or strategic financial mechanisms might be required to achieve this goal, with the firm also highlighting Musk’s considerable personal wealth, estimated at over $100 billion, which could serve as collateral for future transactions to increase his stake in Tesla, Inc. (NASDAQ:TSLA).
One of the top high growth stocks to buy, Tesla, Inc. (NASDAQ:TSLA), is held by 74 hedge funds as of Q1 2024.
Here’s what Baron Funds said about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2024 investor letter:
“The vast majority of the Fund’s underperformance this quarter stemmed from the Fund’s 10-year investment in Tesla, Inc. (NASDAQ:TSLA). Tesla’s shares fell 29.3% during the period and detracted 13.41% from the Fund’s first quarter results. Although Tesla has contributed importantly to the Fund’s performance since 2014, on occasion it has detracted from quarterly performance. In previous instances when Tesla shares have underperformed during a discrete period, they have shortly afterwards reflected the strong growth of the underlying business and the stock has appreciated considerably. We believe that will be the case again, although cannot guarantee it.
A significant decline also occurred at the end of 2022. In that instance, investors had become concerned about a host of external factors. Investors believed the company founder, visionary, and CEO Elon Musk was distracted by his acquisition of Twitter. They also believed a weak Chinese economy emerging from COVID and U.S. government policies would curtail the purchases of Tesla vehicles. These fears proved to be overblown. As the company achieved milestones in the succeeding year, the stock subsequently doubled over the next 12 months…” (Click here to read the full text)
Overall TSLA ranks 6th on our list of the best high growth stocks to buy. You can visit 10 Best High Growth Stocks To Buy to see the other high growth stocks that are on hedge funds’ radar. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that under the radar 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 is originally published at Insider Monkey.