We recently compiled a list of the 10 stocks that will make you rich in 5-10 years. In this article, we are going to take a look at where Tesla Inc. (NASDAQ:TSLA) stands against the other the Stock That Will Make You Rich in 5-10 Years.
The US economy grew by 3% in the second quarter, and the stock market hit all-time highs in the third quarter, averting fears of a recession at hand. While the economy has remained resilient for the better part of the year, the US Federal Reserve's 50 basis point rate cut surprised many analysts.
Jamie Dimon believes the steep cut might be justified as geopolitical uncertainties can potentially disrupt the gains achieved by affecting supply chains and triggering uncertainties and fears in the market.
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Powell and other Fed officials are open to further lowering interest rates after last month's half-point cut, but there's market debate on the pace.
Soaring tensions in the Middle East with Israel invading Lebanon and threatening to attack Iran have triggered a layer of uncertainty, which Dimon believes could have a significant impact on the economy. Consequently, the banker believes that the 50 basis point cut could offer the much-needed economic support as inflation continues to drop.
Nevertheless, James Demerit, Main Street Research CIO, believes the upward momentum in the equity markets will persist as the macro environment improves. While valuations appear to have gotten out of hand, there are still opportunities for stocks trading below their fair value as the investment environment improves.
Apart from the magnificent seven stocks whose valuations have gotten out of hand, other stocks are trading at 16 times earnings, which, according to Demmert, is cheap considering the strong fundamentals that support a further rally. Companies that have consistently grown sales and profits should continue delivering regardless of the uncertainties around the US election and soaring geopolitical tensions.
According to Emily Bowersock Hill, CEO of Bowersock Capital Partners, it is time to be upbeat about the market heading into year-end. "The bull market has survived the year's historically weakest quarter," said Hill in an interview with CNBC. "It is likely to remain intact through at least the end of the year, as earnings remain strong, interest rates are moving lower and consumers are still spending."
When considering which stocks to buy, it's beneficial to ask, "Which industries are experiencing the most rapid growth?" Despite some sectors facing challenges post-pandemic, many are flourishing, offering abundant opportunities. The global economy is rapidly evolving, with industries like artificial intelligence (AI), healthcare, travel, online retail, cybersecurity, and green energy experiencing significant growth. The AI market alone is projected to reach $407 billion by 2027 (according to estimates from Markets and Markets). The Bureau of Labor Statistics projects that between 2020 and 2030, total employment in the United States will expand by 11.9 million, or 7.7%, to 165.4 million from 153.5 million.
Some of the top stocks that will make you rich in 5 to 10 years are companies that can rally as the global economy grows on the back of favorable monetary policies. Additionally, they include stocks of companies that are leaders in their respective fields and well-poised to benefit from technological changes such as artificial intelligence.
In an interview with CNBC, Savita Subramanian, BofA Securities head, reiterated utilities and large-cap real estate stocks are well positioned to perform heading into year end. Likewise, industrials and financials should receive a significant boost if the overall economy improves.
According to Subramanian, the idea of the Fed cutting is not only liquidity inducing that should benefit the equity market but a move that ends up cutting money market yields. With liquidity slowly moving out of short-term bonds, most of it is ending up in equity markets as investors take note of high-risk reward opportunities at highly discounted valuations. Subramanian believes dividend stocks and growth stocks are well-positioned to generate significant value going forward.
With this economic perspective in mind, let's start our list of stocks that will make you rich in 5-10 years.
To compile the list of the stocks that will make you rich in 5-10 years, we sifted through multiple reports and rankings and compiled an initial list of 20 possible stocks that experts and analysts believe have multi-year growth opportunities. We then selected the 10 stocks that were the most popular among hedge funds and ranked them in ascending order based on the number of hedge funds that held stakes in them, as of the end of Q2 2024.
At Insider Monkey, we are obsessed with 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).
Number of Hedge Fund Holders as of Q2: 85
Tesla, Inc. (NASDAQ:TSLA) is the pioneer of electric vehicles, enjoying a first-move advantage in refining its technology to the extent of delivering self-driving cars. While most automakers are interested in developing autonomous cars, Tesla has already made a mark by building an autonomous driving platform, called Full Self Driving, allowing it to ship millions of cars and generate billions in revenue and earnings.
Even though Tesla, Inc. (NASDAQ:TSLA) is active in other industries, such as solar energy and battery storage, its automobile division still generates more than 90% of its company's revenue. According to several estimates, it has a 50%-80% market share.
Furthermore, EV demand is increasing even though projections have decreased, leaving the company in a solid position to generate long-term value. Domestic EV sales are now predicted to increase by more than 10% yearly over the next five years,
By 2029, EV sales are predicted to reach $1 trillion globally. This is encouraging since Tesla, Inc. (NASDAQ:TSLA) is expected to hold a 39.4% global market share, which is higher than the combined market shares of the next eight competitors.
Compared to its rivals, Tesla possesses greater capital, greater brand awareness, and greater manufacturing capacity. Furthermore, a number of traditional automakers are currently reversing their EV plans, which might enable the business to hold onto its leading position in the market for some time to come.
Tesla, Inc. (NASDAQ:TSLA)'s sales decreased in Q2 for the second time, following an 8.5% decline in the first quarter. However, that does not indicate that the company is in trouble. The EV giant is well positioned to bounce back amid the transition from fossil fuel cars as it also revamps its product line.
In July, Tesla, Inc. (NASDAQ:TSLA) ended a five-month losing streak with a 1.2% year-over-year increase in registrations. A significant portion of that gain came from the Cybertruck, a fantastic achievement, given that Tesla only produced 5,175 Cyber Trucks compared to 5,546 for all other electric pickups. In total, 85 hedge funds were long Tesla, Inc. (NASDAQ:TSLA) in the second quarter, with a total stake value of $4.9 billion.
Overall TSLA ranks 6th on our list of 10 stocks that will make you rich in 5-10 years. 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, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.