Billionaires and institutional investors are making big moves in the stock market, and one surprising trend is emerging. Many are selling Tesla (NASDAQ:TSLA) stock, while others are shifting their money to a Canadian mid-cap company, CAE (TSX:CAE). Tesla stock has long been a favourite among high-profile investors, but recent financial results and shifting market conditions have made some of them reconsider their positions. At the same time, CAE, a leader in flight simulation and pilot training, is quietly gaining attention as a stable, long-term growth play.
Tesla stock has been an undeniable force in the stock market for over a decade, revolutionizing the electric vehicle (EV) industry and delivering massive gains. However, recent financials suggest some cracks in the company’s growth story. Tesla stock’s most recent earnings report showed revenue of US$97.15 billion, representing a year-over-year increase of 7.8%. While this is still strong growth, it is notably slower than in previous years. Net income reached US$12.74 billion, and profit margins remained at 13.08%. Yet, with a forward price-to-earnings ratio of 121.95, Tesla stock remains one of the most expensive automakers in the market. Analysts now question whether future growth can justify such a high valuation.
Another factor weighing on Tesla stock is increasing competition and price cuts. As more automakers enter the EV space, Tesla has had to lower prices to maintain sales volume. This has impacted profit margins, making investors nervous. Additionally, Tesla’s sales in Europe have declined, with some analysts pointing to Chief Executive Officer Elon Musk’s controversial public statements as a potential factor.
While some investors are pulling back from Tesla stock, they are not abandoning growth entirely. Instead, they are looking for more stable opportunities with strong industry tailwinds. CAE, a Canadian mid-cap stock specializing in flight simulation and training, has become an attractive alternative. The company’s latest earnings report showed revenue growth of 8.2%, reaching $1.14 billion in the most recent quarter. Operating income also increased to $118.1 million, up from $97.7 million in the previous year.
One of the biggest advantages CAE has over Tesla stock is its diversified revenue streams. Tesla is heavily reliant on consumer demand for EVs, which can be unpredictable, especially with changing government incentives. In contrast, CAE benefits from long-term contracts in both civil aviation and military training. Defence budgets are increasing globally, ensuring consistent demand for the company’s simulation and training solutions.
Another key reason investors are shifting into CAE is its improving profitability. Unlike Tesla stock, which is facing margin compression, CAE is steadily growing its earnings potential. The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) currently stands at $729 million. Analysts expect earnings to rise further. In the upcoming quarter, CAE is projected to earn $0.20 per share on revenue of $1.18 billion. The company’s forward price-to-earnings ratio of 24.21 is much lower than Tesla’s, making it a more reasonably valued stock.
Billionaires and hedge funds often adjust their portfolios based on where they see the best risk-adjusted returns. Tesla stock remains a high-risk, high-reward bet, but CAE offers a more predictable growth trajectory. Investors like David E. Shaw have made major changes to their holdings, selling millions of Tesla shares and reallocating capital to other industries. These moves suggest that even some of the most well-capitalized investors are looking for stability rather than extreme volatility.
The shift from Tesla to CAE highlights a broader trend in the market. While Tesla stock remains an industry leader, it is no longer the only game in town when it comes to electric vehicles. The excitement surrounding the EV revolution is now tempered with concerns about slowing sales growth, pricing pressure, and competitive threats. Meanwhile, CAE operates in an industry that is seeing structural growth, with airlines and military organizations investing heavily in training and simulation technology.
For individual investors, the decision comes down to risk tolerance and investment goals. Tesla stock may still offer strong long-term potential, but the stock’s valuation makes it a high-risk bet. CAE, however, offers a more stable path to growth with a lower valuation and strong industry demand. While billionaire investors have access to data and insights that retail investors do not, their movements can provide valuable clues about where smart money is headed.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Tesla. The Motley Fool has a disclosure policy.
