Tesla (NASDAQ:TSLA) stock surged on Donald Trump’s victory, owing to Elon Musk’s apparent alliance with the former president. Unsurprisingly, it was the most bought stock by investors using the Hargreaves Lansdown platform last week.
However, interestingly, Tesla was also the most sold stock during the week, perhaps indicating that some investors were looking to cash in on the surging shares — the stock jumped 31% last week.
MicroStrategy (NASDAQ:MSTR) was the second-most bought stock by Hargreaves Lansdown investors who seemingly wanted to US stocks and the ‘Trump Trade’ rather than those closer to home.
So, let’s take a closer look as to why investors might have been interested in these two companies.
Tesla: an ally in The White House
Investors flocked to Tesla shares following Trump’s presidential victory for several key reasons.
Firstly, Musk’s vocal support for Trump may result in the South African billionaire having influence in the incoming presidency. Trump has even suggested Musk could have an efficiency role within the administration.
Secondly, Trump’s proposed policies, including lower corporate taxes and deregulation, are viewed as potentially beneficial for Tesla’s growth and profitability. Additionally, Trump’s stance on tariffs, particularly against Chinese imports, could give Tesla a competitive edge over foreign EV manufacturers in the US market.
Moreover, the potential reduction in EV subsidies under Trump’s administration is also seen as potentially benefiting cash-rich Tesla more than its smaller competitors, given the company’s dominant market position and scale.
Lastly, but potentially most importantly, investors speculated that Musk’s relationship with Trump could lead to advantageous policies for Tesla, particularly in areas like autonomous driving regulations.
This is important because Tesla stock is valued on its potential in the autonomous driving realm and robotics, with a price-to-earnings (P/E) ratio of 100 times — that’s five times higher than EV peers.
Personally, I’d argue that the company is falling behind the likes of Waymo and Chinese peers as its Robotaxi reveal fell somewhat flat.
It’s a very expensive stock, which probably explains why it was also the most sold stock last week by Hargreaves Lansdown investors. It’s also not on my watchlist given the stock’s insane multiples.
MicroStrategy: a Bitcoin play
Investors flocked to MicroStrategy — an American Bitcoin development company — stock last week, driven by a surge in Bitcoin’s price following Trump’s election victory.
Trump’s unexpected pro-crypto stance, including promises to make the US a “crypto capital” and establish a national Bitcoin reserve, ignited enthusiasm in the cryptocurrency market.
This was coupled with a pledge to end the “anti-crypto crusade” and replace SEC Chair Gary Gensler, signalling a potentially more favourable regulatory environment for digital assets.
This shift in Trump’s approach to cryptocurrencies led to Bitcoin soaring above $80,000, directly benefiting MicroStrategy due to its substantial Bitcoin holdings.
The company’s ’21/21 Plan’ will see it invest $42bn in Bitcoin over the next three years and this appears to align well with the market’s renewed optimism for crypto.
It’s an interesting company but I’m still unconvinced by crypto. There’s no P/E ratio as it’s not forecasted to turn a profit this year despite surging crypto holdings. Once again, it’s a stock I’m staying clear of as I prefer more predictable industries.
