This week, Elon Musk gained the equivalent of Warren Buffett's entire net worth… in a single afternoon.

SpaceX stock is exploding in popularity among investors, with shares up more than 32% since the company IPO'd last Friday. That has led some investors to call the stock overvalued or claim that it's a bubble.

I somewhat agree. But today's special report shares a personal story about why I don't short stocks. This isn't entirely self-indulgent, however. There are several lessons and key takeaways you can apply to your own investment journey. Additionally, we'll cover whether or not SpaceX is a good long-term investment.

But first, the personal story. And it involves Elon Musk.

Around 2018 and 2019, everyone hated Tesla. It was one of the most heavily shorted stocks on the market, and all the smart-money fund managers could perfectly articulate why the company was doomed to fail.

In fact, according to Elon Musk himself, Tesla was the most shorted stock of all time. While that wasn't technically true, roughly 20% of the company's market capitalization was sold short in 2018. At the time, it was almost impossible to find anyone who actually liked Tesla.

As someone who was just getting into more advanced investing, I remember wanting to join the "smart money" and short the stock too.

Luckily, I didn't, because the bears turned out to be incredibly wrong.

Adjusted for stock splits, Tesla shares are up more than 2,200% since September 2018, when Wall Street hated the stock. There are many legitimate criticisms of the company and its valuation, but Tesla's share price has continued to climb while bears lose money as they're forced to cover.

Had I followed the Wall Street pros, I would have lost hard-earned money. Even worse, the loses would have evaporated into worthless options contracts or me having to cover a short position.

There’d have been nothing to show for it.

Which brings us to SpaceX…

Musk took the company public last Friday, and SpaceX has already surged to nearly a $3 trillion valuation. Musk's stake has made him so wealthy that he could lose $1 trillion and still be the richest person on Earth.

Bears hate this stock, and there's a lot of talk about SpaceX being a retail bubble that's destined to crash. Maybe it does. The valuation is astronomical. Or maybe valuations remain elevated for years because AI, satellites, and computing power are all fast-growing industries attracting enormous amounts of capital.

DARPA was assigning contracts for lunar mining proposals and simulations back in 2023. This industry, much like artificial intelligence, is only growing and potentially has nearly unlimited room for expansion.

There's an old joke that a new paradigm is just a bubble that hasn't popped yet.

I don’t buy it. At least not long-term.

The Internet was once considered a bubble, and its adoption has grown exponentially over the past three decades.

When it comes to meme stocks, I always heed the old adage, "The market can stay irrational longer than you can stay solvent." Shorting stocks, or getting involved in battleground names like GameStop or AMC, is incredibly risky.

It's a zero-sum game in which retail investors are competing against some of the sharpest minds in business and finance.

Instead of shorting, or even buying into a hype stock simply because you think it could go higher, I'd rather look for an undervalued company operating in the same space that is already profitable.

You may not make as much as someone who goes all-in on a meme stock and gets lucky, but there's also far less downside.

A few years ago, when semiconductors became a hot sector, I bought Texas Instruments stock. Shares are up more than 100% since then, excluding dividends. The stock didn't go parabolic like Micron Technology, but it also didn't collapse the way meme stock Quantum Computing did.

Texas Instruments was a solid company I could understand, and doubling your money in less than three years is still a market-beating return.

When AI became a major investment thesis in 2024, I looked at Hewlett Packard Enterprise, the company that manufactures Cray supercomputers. The stock traded at an extremely low PE ratio of 9.52 while remaining profitable and paying a 2.89% starting dividend yield.

For whatever reason, I didn't pull the trigger.

That was my mistake, because Hewlett Packard Enterprise is up more than 170% over the past 12 months.

When it comes to trading meme stocks, there's a lot of survivorship bias. It's risky, it's stressful, and odd rumors or pure speculation can send share prices soaring or crashing.

Personally, I think looking for undervalued companies in hot sectors is a much better use of time. You may not get the blockbuster result of turning your money into a 10-bagger on a highly speculative trade, but you also aren't likely to blow up your account on worthless options contracts.

If you're interested in space but think SpaceX stock is overvalued, it may be more profitable, and more productive, to focus your energy on finding other "SpaceX-like" stocks trading at lower valuations while maintaining stronger fundamentals.

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Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.