Many of us wonder what is worth investing in the current environment? The legendary Warren Buffett suggests how to find the answer to this question. According to him, two principles are key. The first is: never lose money. The second is: never forget the first rule. With this in mind, here are the types of investments should be considered avoiding, when making decisions in 2025.
Table of contents:
Tesla
Undoubtedly one of the biggest beneficiaries of Donald Trump's presidential election win was Elon Musk, who now owns a 12.8 percent stake in Tesla worth as much as $142 billion. The company's shares, following the expected imposition of prohibitive tariffs on overseas competitors, have gained as much as 62 percent over the past year. However, as another famous investor Howard Marks points out, ‘Investment success comes not from buying good things, but from buying them at a good price’.
Source: Conotoxia MT5, Tesla, Daily
Tesla's current share price could hardly be called favourable, as it suggests that the company's profits could double every year for the next five years. The basic valuation price-to-earnings (P/E) ratio is currently as high as 104, while the market average is hovering around 25. Even in the most optimistic scenario, the projected growth rate exceeds the previous one, which was still impressive - averaging 42 percent per year over the last decade.
It is also worth noting that Tesla operates in an extremely capital-intensive industry and has to spend as much as 75 percent of the profit it generates to maintain its growth rate. As such, Invest.Conoxotia.com analysts warn that 2025 could prove to be a negative surprise for investors considering buying Tesla shares at their historic peaks.
Source: Conotoxia own analysis
Crude oil
2024 brought surprises for investors in the WTI oil market. The price of crude oil fell at one point to a support level of USD 65 per barrel. Despite the temporary rebound, it is believed that crude oil prices could continue to fall significantly.
As the largest crude oil producer, the US accounts for 21.4 percent of global production, while the OPEC+ group supplies nearly a third of global production. In the US, production has reached record levels under the presidency of Joe Biden, and Donald Trump's campaign promises to further increase production, in order to lower crude oil prices. Meanwhile, OPEC+ maintains an output cut of 5.7 percent of global demand to stabilise prices. However, this strategy is proving ineffective due to rising supply from the US and weakening demand.
Faced with these challenges, OPEC+ members may decide to end the policy of cutting production, to minimise their own losses. Maintaining costly cutback policies may soon be curtailed, which could consequently lead to a further decline in crude oil prices, on global markets.
Source: Conotoxia MT5, XTIUSD, Daily
DAX 40
In 2024, the German economy contracted by 0.3 percent and industry lost as much as 4.6 percent. Despite this, the DAX 40 index rose by 18 percent.
Source: Conotoxia MT5, DE40, Daily
Passenger car sales in Germany fell by 27.8 percent year-on-year in August, with registrations of electric cars down by as much as 69 percent. Only Volkswagen reported an increase in sales (+4.2 percent), while BMW, Mercedes-Benz and Porsche recorded declines.
Over the decade, German shares grew by an average of 4.2 percent, compared to 13.1 percent in the USA. The valuation of the DAX 40 index assumes earnings growth of 16.5 percent per year, which analysts at Invest.Conotoxia.com view as unlikely due to increasing competition, especially from China. For this reason, there could be a correction on the DAX 40 index in 2025.
Source: Conotoxia own analysis
Intel
Intel, once considered a leader in its industry, is now facing serious financial problems. The company, which designs and manufactures processors and graphics cards, has missed out on key technological milestones, giving way to competitors such as Nvidia, AMD and TSMC. Despite strong market growth driven by the development of artificial intelligence technology, Intel's sales fell by 6 percent year-on-year. This caused the company's shares to be repriced 70 percent below their historic highs.
Source: Conotoxia MT5, Intel, Daily
To catch up with its competitors, Intel had to incur high capital costs, which led to a record loss of $16.6 billion in the last quarter. The loss represents about 20 percent of the company's current capitalisation of $85.5 billion.
The company plans to bring its new lithography technology into full production in Q3 2025. However, these forecasts, published in 2021, have not yet been updated, raising doubts about their realisation.
The current valuation, based on the company's pre-crisis results, assumes that sales would have to grow at a rate of around 37 percent per year for the next few years. According to Invest.Conotoxia.com analysts, rising operating costs will mean that many investors may be disappointed with the company's performance in 2025.
Source: Conotoxia own analysis
Grzegorz Dróżdż, CIIA, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
The above trade publication does not constitute an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No. 596/2014 of April 16, 2014. It has been prepared for informational purposes and should not form the basis for investment decisions. Neither the author of the publication nor Conotoxia Ltd. shall be liable for investment decisions made on the basis of the information contained herein. Copying or reproducing this publication without written permission from Conotoxia Ltd. is prohibited. Past performance is not a reliable indicator of future results.
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