Is it riskier NOT owning Tesla (NASDAQ:TSLA)?

Is it more risky to NOT own shares of Elon Musk’s Tesla Inc (NASDAQ:TSLA) than to own it. This broker thinks it is. Here’s why

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Tesla Inc (NASDAQ: TSLA) has long been a company that divides opinions. And that’s putting it politely. Rewind two years and every investor with an opinion on this company seemed to be in one of two camps. One camp espoused that Tesla would be a company that would one day dwarf Amazon.com Inc (NASDAQ: AMZN) with the real-life Iron Man CEO Elon Musk at the helm. The other fervently believed that Tesla was the world’s biggest scam, Musk a conman and that the company was going to zero.

Well, back in the present, the debate still isn’t too different. Yes, Tesla has proven itself to be able to consistently grow while becoming profitable. But for many people in the second camp, the US$656 billion market capitalisation that this company now commands (more than Toyota, Volkswagen, General Motors and Ford combined) is the new problem.

But the performance of the Tesla stock price over the past year or so has kept delighting its fans, and confounding its critics. Tesla shares are now up close to 500% over the past 12 months. And up more than 1,100% over the past two years.

It’s been a bandwagon many investors have been sorely tempted to jump on – and many have. But jumping on the said bandwagon after 1,100% gains in two years is not for the faint of heart in any investment. And Tesla shares, despite their success, remain highly volatile.

Driving Tesla home

But one investment bank is now going out on a limb with Tesla. According to Bloomberg, Morgan Stanley is now telling investors that it is now more risky not to own Tesla than to own it. 

Why? Well, Morgan Stanley believes that the Biden administration’s proposed infrastructure spending plan is the gamechanger. This plan, in its proposed form, reportedly includes US$174 billion to develop electric vehicle infrastructure across the United States. The broker thinks this would give Tesla a further advantage over other carmakers in the US. Its conclusion is that “auto investors face greater risk not owning Tesla shares in their portfolio than owning Tesla shares in their portfolio”. And that’s despite “a labyrinth of national and local laws that will present advantages and disadvantages to various automakers”. 

It’s worth pointing out that the Biden administration’s infrastructure plan has yet to pass through a narrowly divided US congress. It could be significantly amended before passage. Even so, it’s worth pointing out that it’s a big call to say owning a stock like Tesla is less risky than not owning it. We’ll have to wait for some hindsight here to see if Morgan Stanley is right.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Ford and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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