- The green economy is expected to grow in the next decade as governments and corporations strive to fight global warming.
- Right now it is difficult to have enough expertise to invest in the opportunity as it is complicated.
- However, Tesla is directly involved in the green sector as it only builds and sells green technologies.
- As a result, it seems like a good and easy way to invest in an environmentally friendly way.
- And Tesla has a track record: Investors who bought and held shares after going public in 2010 saw a return of 9,200%.
Investing in the green economy is difficult, mostly because green investing is still pretty esoteric for people who are not professionals or do a lot of research.
The chance will increase over the next decade, although the speed of this development is up for debate. If Joe Biden wins the November presidential election and the Democrats take over the Senate and hold the house, a program to combat global warming could be the biggest story of 2021.
Outside the US, green opportunities are also increasing. In Europe, both the Volkswagen Group and the Mercedes-Benz parent company Daimler are committed to extensive electrification of new vehicles and anticipate regulatory changes that could mark the beginning of the end for gas-powered cars and trucks.advertising
In China, most automakers expect market growth in the coming decade that could make the country the world leader in electrified transport.
However, if you’re looking to invest in that transition, Tesla may be your best bet.
Tesla has a track record of reducing risk over the past year
Odd Andersen / AFP via Getty Images
First, Tesla has a track record of rewarding investors. If you had bought stocks after going public in 2010, you would get a return of 9,200% today. And that would be if you just used your own money. If you’ve bought with leverage, even at a relatively high interest rate, the expected increased return is staggering.
It all happened with Tesla’s coin risk in an angry clip, with the stock swaying up and down like a dinghy in a hurricane and CEO Elon Musk’s Twitter habit adding to the mayhem. It also happened when Tesla essentially ran a factory, sold a model or two at a time, struggled to validate a household solar business, and shipped fewer than 500,000 cars a year.
In the next few years, Tesla should cross that 500,000 mark and have four assembly plants online (a new US plant in Texas could join the flagship in California, as well as one plant in China and one under construction in Germany). Tesla could also operate several battery factories by then. The valley of mega-risk has been crossed, and since the company only sells green technology, buying stocks is the obvious way to invest in a global warming solution. I’m not saying you should, mind you – just that the strategy is obvious.advertising
Risky startups and risky traditional automakers
Other electric car startups like Rivian, Nikola, and Lucid Motors are far more risky because they haven’t brought vehicles to market yet. On the other hand, when their stocks go public they should be cheaper.
What about established automakers with electric ambitions?
Investment professionals have been arguing for years that General Motors, which plans to produce 22 new electric vehicles by 2023, is terribly undervalued. But the game there may be buying GM stock in the hopes that the company will decide to outsource its electronics business, which upset Wall Street but avoided GM’s management.advertising
Tesla looked pretty expensive after a major rally earlier in the year raised stocks above $ 2,000. But a five-for-one stock split in August put stocks back within reach.
Remember, this is not about buying an electric car maker or a solar panel manufacturer. That would be something to worry about as automakers are great at burning capital and if you look at the sector, it is difficult to find something that outperforms the markets (other than Ferrari). Solar has a history of countries like China flooding the market with cheap modules and making business a low margin, margin-like affair.
The point is that you want to invest in the emergence of a future green economy, and you want to do it without sorting through green bond funds or socially responsible ETFs or dealing with the complexities of trading carbon credits.advertising
Investing in one company and one stock rather than an entire sector
Tesla offers a straightforward way to do this, while still having enough risk embedded in the business to generate a significant return without weighing the chance against such high risk that you would be tempted to get out if the stock takes a nosedive will suffer sometime in the next five years.
On the other hand, putting all eggs in one basket carries your own risk. You are clearly not protecting yourself by investing across the sector and taking advantage of the wide ingenuity and discounted pricing for companies that haven’t really broken cover yet.
I should point out that I’ve never owned a single stock in Tesla. And to be honest, I’d doubt I’d buy Tesla stock if journalistic best practices didn’t stop me. I think there are better companies to invest in outside of the transportation industry that have solid sales and profitability prospects and that are unattractive due to the sharp fluctuations in their share prices. advertising
However, if you think the future could be greener than the past or present, and you want to bet a few dollars on your guess, Tesla seems like one of the best ways to invest in a single company that works for you developing green economy is representative.