We’ve covered the explosive rise of Tesla Inc (NASDAQ: TSLA) shares in 2023 so far numerous times here at the Fool. Tesla stock has truly been on a tear this year.
Despite a recent pullback, the world-famous electric vehicle and battery manufacturer is still up a whopping 149.5% year to date, rising from US$108.10 a share back in January to the US$269.79 the company closed at last night. No doubt this steep rise has helped Tesla CEO Elon Musk feel a whole lot richer.
As we covered late last month, an investor who put $2,000 into Tesla shares at the start of the year would be sitting on a happy pile of just over $5,000 today.
But Tesla or not, such a steep rise in a company’s share price is highly unusual. Let alone for a company that now commands a market capitalisation of more than US$845 billion.
As such, many investors might be wondering whether it would be prudent to cash in some Tesla shares at this pricing, perhaps to buy back in later when the shares have come back to earth.
That’s a very understandable train of thought. After all, we’re all taught to follow the maxim of ‘buy low, sell high’.
However, a recent report from Chris Demasi, Portfolio Manager at Montaka Global Investments, has recommended against selling out of Tesla shares.
The report notes that Tesla shares, as well as the other US tech giants, have indeed been on a heck of a run in 2023:
Together Amazon, Microsoft, and Alphabet contributed nearly 30% of the gains made by the S&P 500 in the first half of the year… Adding Nvidia, Meta Platforms, Apple, and Tesla, this exclusive group of just seven AI and technology winners accounted for almost 80% of total index gains, despite representing just a quarter of the value of the index.
So should investors sell their Tesla shares right now?
However, the report also argues that selling out of Tesla, or these other winners, would be “a costly mistake in the long run”:
If we look at the recent rallies over a short timeframe, it looks like stocks have run too hard and too far.
While stock prices of some of the world’s best companies are up a lot this year, they are only just getting back to where they were at the beginning of last year.
Meanwhile, their underlying businesses are much better positioned than they have ever been and keep getting better. These are companies that can multiply in value many times over by the end of this decade.
Selling out to bank ‘profits’ from a 50% or even 100% turnaround following a big drawdown might well look like a big mistake if these stocks increase four or five-fold in the years ahead.
Investors have an opportunity to make extraordinary gains if they can stay the course with winning companies as they transform industries and create value over time.
Indeed, tech share Tesla is arguably still transforming the transport and energy industries with new and innovative products. This company has created a lot of value in recent years, and if you think it is likely to continue to do so, it’s hard to argue with Demasi’s thesis here.
