We recently published a list of the 10 Best Stocks to Buy and Hold For 3 Years. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against the other best stocks to buy and hold for 3 years.
What to Expect From the Stock Market in 2025?
On December 12, Tom Lee, Fundstrat Global Advisors managing partner and head of research, joined CNBC’s ‘Closing Bell’ to discuss his playbook for 2025. Following two years of significant gains, his playbook suggests an optimistic yet cautious outlook for the stock market next year. Lee anticipates that the S&P 500 will rise to approximately 7,000 by mid-2025, before retreating to around 6,600 by the end of the year. This reflects an overall expected increase of about 8% for the year, which is consistent with historical averages for stock market returns. In terms of Earnings Per Share (EPS) estimates Lee projects EPS for the S&P 500 at $260 in 2025 while estimating $300 for 2026. This is slightly below the consensus estimates from Wall Street, which average around $268 for 2025.
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Explaining his investment thesis, Lee pointed towards several themes that could drive the market in 2025. He predicts a “tale of two halves,” where the first half of the year will see stronger market performance due to factors like Federal Reserve policies and business-friendly initiatives under President Trump. Conversely, he expects a pullback in the second half, reflecting historical trends after strong consecutive years. He sees potential in small-cap stocks, which have underperformed relative to large-cap stocks historically. Lee also talked about the mega caps that are leading. He mentioned that investors reach for these companies when there is even slight risk in the market. Secondly, mega-cap stocks are highly sensitive to falling interest rates. With the December cut in effect, the market is bullish for tech, thereby further solidifying the investment case for megacaps.
Despite his generally positive outlook, Lee acknowledges several risks that could impact market performance. For instance, he thinks the newly formed Department of Government Efficiency (DOGE) could potentially lead to reduced government spending and slower economic growth if it is too effective in cutting costs. Moreover, the implementation of tariffs could adversely affect economic conditions and corporate profits. Lee pointed out that historical patterns suggest that after two years of substantial gains, markets often experience declines in the latter half of the third year.
Our Methodology
To compile the list of 10 best stocks to buy and hold for 3 years, we applied a consensus approach. We sifted through recent articles to get an aggregated list of the best stocks to buy and hold for 3 years. Next, we ranked these stocks based on the number of hedge fund holders as of Q3 2024, sourced from Insider Monkey’s database.
Why do we care about what hedge funds do? 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 Funds: 99
Tesla, Inc. (NASDAQ:TSLA) is one of the best stocks to buy and hold for 3 years. It is one of the pioneers in the electric vehicle industry. It creates various fully electric cars, including popular models like the Model 3, Model Y, Model S, Model X, and the Cyber Truck. It also designs products related to solar energy including energy storage systems like the Powerwall (for homes) and Megapack (for larger applications), which store energy for later use.
The company delivered approximately 462,890 vehicles in Q3 2024, marking a significant increase from the previous year and setting a record for third-quarter volumes. It also benefited from other automakers’ struggle to meet emissions standards and marked the second-highest revenue from regulatory credits. More importantly, the cost of goods sold (COGS) per vehicle dropped to around $35,100, the lowest level ever for the company.
The company is making significant advancements in its Full Self-Driving (FSD) technology, claiming a 1,000-fold improvement in critical interventions within the software this year. It plans to launch an unsupervised version of its FSD software and introduce a ride-hailing service in California and Texas by 2025. This will be a significant development for the company because as per Grand View Research, FSD vehicle sales are expected to reach $214 billion by 2030, and the management believes the technology can take the company’s gross margins to 70%.
Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q3 2024 investor letter:
“The largest relative detractors during the quarter were Apple, Airbnb, and Tesla (not owned). We’ve spoken at length about our rationale for not owning Tesla, Inc. (NASDAQ:TSLA). In short, the market seems to be pricing in a lot of positive optionality for this company in the near-to-intermediate term (and particularly a fully autonomous fleet of electric vehicles in the medium term). What exists today is an automobile manufacturer limited to the higher-income segment that is increasingly challenged to sell vehicles when interest rates are not zero. We continue to question the company’s long-term growth profile and governance.”
Overall, TSLA ranks 6th on our list of best stocks to buy and hold for 3 years. While we acknowledge the potential of TSLA to grow, our conviction lies in the belief that 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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Disclosure: None. This article is originally published at Insider Monkey.