Tesla’s been a great stock to own in the last few years, zooming more than 750% and splitting its stock 15-for-1 since January 2020.
It’s been an even better stock to own over the last decade. Readers who bought the stock when we recommended it in Cabot Stock of the Week back in December 2011 and held on (as we’ve recommended) now have profits of more than 10,000%!
Long term, I think investors with large unrealized capital gains in Tesla (TSLA) should continue to hold the stock, simply because prospects for the company are still bright, as it revolutionizes not only the automobile industry but also the energy industry.
But if you don’t already own it, I think there are better prospects out there—particularly in less famous stocks.
So, if you’ve got new money to invest and you want Tesla-like profits, I think you should try to find — and invest in — the next Tesla. And how do you identify that stock?
Here’s my short checklist – passed on to me from my recently retired predecessor, Tim Lutts, who was the one with the foresight to add TSLA to Cabot Stock of the Week more than a decade ago!
- The company serves a mass market—which means it can grow very large.
- The company has the potential to revolutionize an important part of that market.
- The company has the potential to make a large profit in the process.
- The stock is NOT loved by most investors today. And the less it is loved, the better!
- The stock has positive momentum.
So let’s take a look at a few candidates for the next Tesla stock starting in the obvious place—the electric car industry.
3 Candidates for the Next Tesla Stock
BYD (BYDDY) Everyone knows Tesla. Most people, or at least most Americans, probably don’t know BYD – short for “Build Your Dreams”. They should: BYD is China’s largest electric vehicle maker, selling 1.85 million battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) in 2022 – half a million more than Tesla’s 1.31 million, making it the top EV seller in the world for the first time ever. The company has more than tripled sales in each of the last two years, and that’s just from selling mostly to China. Now it’s expanding worldwide, to the U.S., Europe and other parts of Asia. That helped make for a very good first quarter: BYD delivered 548,000 BEVs and PHEVs, nearly double the amount from Q1 a year ago and way more than Tesla’s record 422,875 deliveries. Despite such rampant growth, BYD stock trades at a reasonable 31 times forward earnings estimates, with a price to sales ratio of 1.49. The stock is up 33% year to date but still 17% below its July 2022 peak (82). This is a great time to buy a stock that not only looks like the next Tesla – it essentially already is China’s Tesla.
Green Thumb Industries (GTBIF) Cannabis has been beaten to a pulp the last two years. As a group, cannabis stocks peaked in late 2018, and after a brief but spirited comeback in late 2020/early 2021 have done nothing but fall for more than two years. All told, marijuana stocks are down more than 90% from their peak value. It’s hard to trust that a cannabis rally is coming since there’s been no evidence of one. But eventually – it will come. The momentum toward full legalization is too strong – 38 of the 50 states have legalized marijuana for either medicinal or recreational use – and the industry’s growth is undeniable, with revenues expected to double by 2030. So it makes sense to take a flyer on that kind of growth at such depressed levels. And the “safest” way to do it is by buying shares in the largest cannabis retailer, Green Thumb. Like all cannabis stocks, GTBIF’s chart looks terrible, with shares down 75% in the last two years. But earnings are expected to more than quadruple this year (to $0.22 from $0.05 last year), and sales should hit new record highs of $1.06 billion, with another 12% growth expected in 2024. The return on this one might be pretty mild in a year. But if you buy GTBIF and hold on to it for five, 10 years, I’m betting you’ll have a very hefty return.
Centrus Energy (LEU) Many think that wind and solar are the answer to climate change, but about 60% of the reduction in CO2 emissions during the past 15 years has come from switching from coal to natural gas.
And while trillions of private and tax dollars were spent on wind and solar projects over the last 20 years, the world’s dependence on fossil fuels only declined from 87% to 84%.
So, if the top risks to the world right now are climate change and geopolitical conflict, the growth of nuclear energy in both America and China is essential.
Centrus Energy (LEU), based in Bethesda, Maryland, fills that void. It supplies nuclear fuel and services for the nuclear power industry in the United States, Japan, Belgium and several other countries.
The nuclear power industry is rapidly changing, with a new generation of advanced reactors under development. Centrus provides an integrated solution for meeting the industry’s engineering, manufacturing and fuel needs. Drawing on decades of experience, Centrus can help with the design and manufacture of critical components as well as the design and licensing of facilities to produce new fuels.
Investors like the story: LEU shares are up 40% in the last two years but are currently trading at less than half their November 2021 peak. There’s enough upside for this small-cap stock to develop into a big-time player in the fight against climate change.
Do you have a stock in your portfolio that you think could become the next Tesla? Tell us about it in the comments.
*This post has been updated from an original version, published in 2020.