The long-term performance of the Tesla share price has been truly spectacular. We’re looking at a rise of nearly 2,000% over the last decade. And since going public in 2010, the stock has generated life-changing returns for early investors.
Here, I’m going to look at how I’d go about hunting for the next potential Tesla.
Following the smart money
Investors replicating Warren Buffett’s big moves over the last few decades would have done very well indeed. Whether that was his purchase of Coca-Cola shares in the 1980s, or Apple in recent years, following the Oracle of Omaha would have been a winning strategy overall.
But he’s not the only one worth listening to. I think those growth investors who identified and invested heavily in Tesla shares years ago are useful too. And one fund that has long been a supporter of the electric vehicle pioneer is Baillie Gifford’s Scottish Mortgage Investment Trust (LSE:SMT).
So, what up-and-coming stocks is it backing?
Searching for greener pastures
Well, in an attempt to find the next generation of big winners, the trust has invested in nascent growth industries. The thinking here is that the next outliers are likely to be found in totally new emerging areas.
I think that’s probably spot on. Just because Tesla has so far been a spectacular investment, that doesn’t mean other US electric vehicle manufacturers like Rivian and Lucid necessarily will be.
Of course, identifying stocks that might benefit from potentially explosive growth is far from easy. The risk of failure is high, especially in unproven industries.
That said, here’s a handful of stocks held by Scottish Mortgage that might be worth digging into.
|Electric flying taxis
|AI-enabled drug discovery
One to consider
Another holding that I think is worth highlighting here is Ginkgo Bioworks. Ex-Scottish Mortgage manager James Anderson, who first invested in Tesla in 2013 at a split-adjusted price of $6, reckons Ginkgo has enormous long-term potential.
Indeed, Anderson said last year that if he could pick any growth stock for the next 20 years, it would be this. He has described Ginkgo as “the Intel of synthetic biology“.
At $1.82 per share, and despite the risks associated with a richly-valued company posting losses, I think this one is worthy of consideration. I’ve been buying.
I think there are a couple of important lessons here for investors. First, I reckon it’s well worth paying attention to professional growth investors with tremendous records. What are they bullish on when it comes to emerging technologies?
Second, many of the most successful public companies in modern times have been led by founders. Jeff Bezos at Amazon and Jensen Huang, co-founder of Nvidia, are two great examples here.
Admittedly, Elon Musk didn’t start Tesla, but he was an early investor and runs it with a long-term founder mentality. This gives the firm an edge, I’d say, even as competition heats up. Interestingly, Ginkgo Bioworks, Roblox, Joby Aviation and Recursion Pharma are all founder-led.
Finally, it’s important to remember that there will likely be massive down periods in share prices along the way. Tesla has often displayed incredible volatility, falling by 30% or more seven times in a decade. So patience and long-term endurance are essential.