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Tesla (NASDAQ: TSLA) stock slumped in 2022. Anyone unlucky enough to buy at the start of January would have lost 65% by the end of that year.
But someone buying at the dawn of 2023 would have more than doubled their money by today.
Have I missed the opportunity to buy at a bargain price? The stock is still some way down from its peak, so I might be in with a chance.
Big profits
Buying high-flying growth stocks on the Nasdaq can take nerves of steel. But there are two ways we could make a lot of money from it.
One is by getting the timing right, as with Tesla. But do I know anyone who can do that reliably? I don’t.
The other way is to adopt the Warren Buffett way.
10 years
The billionaire investor has one key approach that I think makes sense with any sensible investment strategy. He says: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
So, if I’d bought Tesla stock five years ago, I’d be looking to hold it for at least another five years. And I’d try not to worry about even the big ups and downs of the past two years.
Hmm, did I mention nerves of steel?
Well, actually, had I bought five years ago, I’d still have been sitting on a five-bagger even at the depths of the slump. And that can help ease the worries.
Five-year gain
And as the stock has been climbing again, I could now be sporting a big grin… if I’d bought five years ago.
You see, £10k invested in Tesla stock this time in 2018 would have grown to nearly £130k today.
And it doesn’t take an investing guru to know that’s a great result.
Speaking of investing gurus, Warren Buffett’s Berkshire Hathaway would have turned my £10k into just £16,500 in the same timeframe. Still, that’s better than my actual performance.
What does all this say about buying Tesla stock now?
Valuation
The first thing I’d do is check its forecast price-to-earnings (P/E) ratio. Nasdaq P/Es have sometimes been so high they’re almost out of sight.
And Tesla’s right now, after the stock price more than doubled since the end of 2022… actually looks quite reasonable.
Analysts put it on a high P/E of 90 for this year. But they expect earnings to more than double between 2023 and 2025. And that would drop the P/E to only a bit over 40.
And this is the world’s leading electric vehicle technology company, with the business still in its early days.
Risk and reward
Something else Warren Buffett said is nagging at me, though. He pointed out that the early pioneers of the original automotive business weren’t the ones who went on to make the big money.
Tesla is clearly a high-risk investment. But I’m tempted. For the next 10 years.
