There is no such thing as a getting spherical it: Tesla (NASDAQ:TSLA) has been an insanely good funding, producing massive returns for patrons keen to carry by way of all of the noise and distractions, to not stage out the potential implications of a world recession. Furthermore, it isn’t merely hype: Tesla is an environment friendly enterprise that makes revolutionary and compelling automobiles that individuals love.Its technological head begin in battery tech and vertical integration in battery manufacturing have furthermore confirmed large benefits, to not stage out the potential for its renewable vitality merchandise, and the seems of autonomous-vehicle suppliers which may ship future income.Picture present: Getty Footage.I’m not a Tesla bear. It’s a unbelievable company that has modified the world of autos for the higher, and absolutely. Nonetheless I take into account there are larger stocks to purchase appropriate now.One amongst my favorites is Brookfield Renewable (NYSE:BEP) (NYSE:BEPC). It may not have supplied Tesla-level returns over the previous few years, nonetheless it’s been a market-beating funding in its non-public appropriate, and has some very exact benefits making it the higher funding. Listed under are two predominant causes.1. Predicting future returnsAs masses as Tesla has been a worthwhile funding, there isn’t any getting spherical it: An infinite quantity of the stock constructive elements acquired proper right here from the stock’s valuation rising, not elementary enchancment in its outcomes.At this writing, Tesla shares now commerce for virtually 17 occasions product gross sales. That’s further per the sort of price-to-sales (P/S) varied you’d rely upon a high-growth, high-margin software program program program stock to earn — not shares of a producer. At this writing, Tesla trades for the next valuation than plenty of of most likely essentially the most worthwhile and helpful high-margin tech stocks on this planet:TSLA PS Ratio knowledge by YCharts.The large takeaway is that Tesla’s returns have hinged throughout the market rising how masses it values the stock, not enhancements in its underlying enterprise outcomes. Tesla has moved from looking for and selling on the underside P/S varied to — by far — the simplest.Proper right here is the rub: Even when it brings higher-margin autonomous suppliers into the combo ultimately, Tesla acquired’t ever be the kind of enterprise that earns 50% or larger gross margins. Of the businesses on this tips, Amazon (NASDAQ:AMZN) may be primarily most likely essentially the most related comparability: one with a enterprise that may be a mix of suppliers and bodily merchandise. Because of the chart above reveals, Tesla trades at an infinite premium, contemplating the place its future margins often are likely to fall.Now let’s have a look at that to Brookfield Renewable:TSLA PS Ratio knowledge by YCharts.What does this inform us? In brief, Brookfield Renewable generates fairly sturdy margins of its non-public, nonetheless hasn’t seen its product gross sales varied change very masses over the sooner varied years. It’s additionally made for a reasonably good funding, bigger than doubling the SPDR S&P 500 ETF Notion (NYSEMKT: SPY) over the sooner three years:TSLA Complete Return price knowledge by YCharts.As masses as Tesla has grown its enterprise, patrons paying a progressively bigger valuation have pushed the overwhelming majority of returns. Brookfield Renewable has delivered unimaginable returns nearly solely from rising its enterprise. A kind of is a predictor for future returns; one received’t be.And that objects up Brookfield Renewable to proceed delivering unbelievable returns for patrons. Its administration has an unimaginable monitor file of allocating capital, and the prices for renewables are falling. That’s additional extra more likely to permit Brookfield to amass and develop further of the utility-scale electrical vitality producing property that ship frequent, recurring cash switch, which has made it an superior funding over the sooner decade.Positive, Tesla is additional extra more likely to return to product gross sales progress, and its market varied is huge. Nonetheless the draw once more dangers at its present valuation are masses larger than the prospects for market-beating returns.2. Constructed for any financial atmosphereTesla has confirmed further resilient to the coronavirus recession than anticipated, with product gross sales falling solely 5% all through the second quarter whereas many different automakers noticed product gross sales fall 20% or further. There’s furthermore its vitality storage enterprise, which has massive progress prospects, as utilities look to leverage the expertise to exchange older, dearer strategies of vitality interval from hydrocarbons.Nonetheless as time passes, the cyclical nature of those companies will current out. Utility-scale investments can ebb and switch from one yr to the subsequent, and as Tesla’s electrical autos flip into further mainstream, the worldwide monetary system will set off its product gross sales to fluctuate. That’s among the many many causes that almost all automakers reap the benefits of third events for many elements, whereas Tesla has a excessive diploma of vertical integration. Whereas that may be a aggressive revenue correct this second, over time it may current a detriment to remaining nimble in its very cyclical finish markets.Brookfield Renewable, nonetheless, sells electrical vitality from wind, image voltaic, and hydroelectric vitality firms it owns. The demand for electrical vitality is often very fastened, and it sells that vitality beneath long-term contracts. The consequence’s terribly predictable and stuck cash switch that it’ll presumably allocate to future progress, and return to patrons via an enormous dividend.This has already confirmed out, with Brookfield Renewables’ predictable cash switch, in contrast with Tesla’s large swings:BEP Money from Operations (TTM) knowledge by YCharts.At current costs, patrons would earn bigger than 4% in yield, an enormous payout that delivers a predictable present of returns by itself. The monitor file of rising the payout is equally spectacular, up over 300% over the sooner decade. Furthermore, patrons can rely upon payout progress that continues to be above-average, since Brookfield targets to extend the dividend about 8% yearly.Put all of it collectively, and as Tesla grows larger, the bar is perhaps raised for it to at all times outperform in a tricky, cyclical commerce. Brookfield Renewable, nonetheless, is constructed to proceed delivering regardless of the financial atmosphere, and might really income from elements that hurt Tesla.Two good companies, nonetheless just one good stockI really like Tesla the corporate. Elon Musk is a visionary who has accomplished an unimaginable job taking his imaginative and prescient and delivering unimaginable merchandise and life-changing returns for patrons. I furthermore suppose Tesla is additional extra more likely to proceed rising, and customarily is a pacesetter in one of the simplest ways forward for transportation and battery expertise for years to return once more. It’s undoubtedly worth a premium to any commonplace automaker.Nonetheless I don’t suppose it’s an superior stock for anybody trying to find to make investments correct this second. Even an lovely enterprise like Tesla is simply not an superior funding at any price.Brookfield Renewable will be an lovely enterprise, with a really extended file of rewarding patrons who’ve purchased and held on tight. The excellence between the 2 is easy: Brookfield Renewable trades for an inexpensive valuation, and the character of its enterprise and the massive varied for renewables progress make it far easier for patrons to foretell a path to continued market-beating returns.
