ETFs Rise Due to Tesla Stock’s Santa Claus Rally



Tesla (TSLA) stock continues to rally. So far, the stock has risen 77% sequentially and 28% year-to-date. Tesla stock has been rising since its third-quarter earnings. The company’s surprise profits and expansion plans have boosted the stock. Shareholders and ETFs are also reacting to the Santa Claus rally in the stock.

ETFs with high exposure to Tesla stock

According to the ETFdb website, the top five funds that have more than 10% weight in Tesla are the MicroSectors FANG+ ETN (FNGS), the ARK Industrial Innovation ETF (ARKQ), the ARK Innovation ETF (ARKK), the ARK Web x.0 ETF, and the First Trust NASDAQ Global Auto Index Fund (CARZ).

So, three of the top five funds belong to long-time Tesla bull Ark Investment Management.

FNGS, which has the highest weight in the stock, belongs to BMO Financial Group. The ETF’s top holding is Twitter, followed by Tesla, Apple, Facebook, and Alphabet. The ETF tracks the NYSE FANG+ Index, which includes ten tech-enabled and growth companies that have highly traded stocks.

CARZ is First Trust’s ETF that invests in global auto stocks. The ETF tracks the NASDAQ OMX Global Auto Index. Tesla stock is CARZ’s top holding, followed by Toyota, Honda, General Motors, Daimler, Ford, and more. Since auto sector stocks swing from significant gains to severe losses, the ETF represents a short-term tactical option for investors.

Shy of the 10% mark, the VanEck Vectors Low Carbon Energy ETF (SMOG) and the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) have a 9%–10% weight in Tesla stock. SMOG tracks the Ardour Global Index, which follows shares of companies that are engaged in alternative energy and the technology associated with it. QCLN tracks the NASDAQ Clean Edge Green Energy Index. The fund invests in companies that conduct activities related to the green energy subsectors.

Arks’ stand on Tesla stock

Ark ETF’s high weight in Tesla stock shows its confidence in the company. Ark’s founder and CEO, Catherine Wood, has a five-year bear case target of $700 on the stock. On the bullish side, she expects the stock to touch $4,000.

The target is quite a feat to achieve considering the arguments from bears. They have a series of concerns ranging from accounting practices to Tesla CEO Elon Musk’s tweeting. Also, shorts like David Einhorn and Jim Chanos have been critical of the company and the stock. To learn more, read Tesla Stock Recent Surge Burns Short Sellers.

However, Wood doesn’t seem deterred by the critics. According to a CNBC report on Tesla’s market share, she said, “Our ‘bear price’ says they’ll lose two thirds going to 6%.” She also said, “Our ‘bull case,’ used to be they would lose one third of the market share going down to 11%. We are rethinking that, because they have been maintaining that 17% market share over time. And so it’s quite possible that they could gain share.”

Watch out for Model Y and Cybertruck

The rally in Tesla stock will benefit funds with high exposure to the stock. With sentiments running high, Tesla stock might continue to rally to new highs in 2020. These ETFs provide great investment options for investors who are looking for alternative means of exposure to Tesla stock.

The stock has risen due to the apparent growth path created by Musk. He turned the company to profits and created a path for its earnings growth.

The company’s ramp-up of Model 3 in China and the start-up of Model Y in the US could bring in near-term earnings expansion. Also, Musk’s expansion plans, which include the rollout of Cybertruck, Model Y in Germany, Model 3 in Europe, and Model Y in China, show a clear growth path over the next 3–4 years. Read How Is Tesla Stock Positioned for 2020? to learn more. Plus, Tesla’s evolving alternative segments like solar or robotaxis could boost its earnings in the coming years.

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