Should you buy Tesla shares after Trump's election victory?

Tesla (TSLA) shares surged on the results of the 60th U.S. presidential election, thanks in no small part to CEO Elon Musk's passionate support of Donald Trump, now the 45th and 47th man to win the White House.

Few things hold more appeal for investors than the sight of rising prices, which leads to the question: Should you buy Tesla shares?

To answer this question, it is helpful to look around your own physical environment. Are you reading these words at a desk with, say, six monitors showing real-time changes in asset prices around the world? Do these numbers fluctuate between the colors red and green?

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If the answer is no, then you should not buy Tesla shares based on the election results. After all, it's all about buying cheaply.

Additionally, retail investors who own diversified funds tracking the S&P 500, Nasdaq Composite and Nasdaq-100 likely already have sufficient exposure to TSLA. The electric vehicle maker's market capitalization of more than $920 billion gives it sufficient weight in these benchmarks.

TSLA Stock: The Street speaks out

But let's say you're a stock picker. Is Tesla a buy at current levels?

Industry experts who pay close attention to the stock should certainly know. The problem here is that Wall Street is sharply divided over the name.

Of the 52 analysts surveyed by S&P Global Market Intelligence covering TSLA stock, 12 rate it a Strong Buy, six rate it a Buy, and 19 rate it a Hold. Additionally, four call TSLA a sell and seven say it is a strong sell.

This leads to a consensus recommendation of “Hold”. Meanwhile, the Street's average price target of $222.96 is implicit in Tesla stock Disadvantage of more than 20% compared to current levels.

One reason Tesla stock has been bearish has always been its valuation, but that hasn't really worked out so far. The stock always looks expensive. And it has always been volatile. In fact, TSLA trades at 115 times expected earnings per share. It has a five-year beta of 2.3 and recorded an all-time maximum drawdown of 73%.

And yet, despite these problems, Tesla stock has been a huge market driver over the longer term. While TSLA has significantly underperformed the S&P 500 over the most recent one- and three-year periods, it has delivered excellent outperformance beyond that. Heck, over the last five years, TSLA has beaten the broader market by about 50 percentage points on an annualized total return basis.

On the other hand, as every prospectus says, past performance is no guarantee of future returns.

If you were a Tesla bull before Tuesday night, hey, don't let the dream die. But adding exposure to Tesla stock when the stock is about to make a knee-jerk move is generally not part of a sound investment process. At least not if you're not a professional.

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