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Ride on Tesla's Hottest Run With These ETFs

Tesla Motors TSLA has been on its hottest streak, rising 20% in the initial week of 2020 and surpassing the $500 per share level for the first time in its history. This has boosted the company’s market cap to about $90 billion, which is nearly $5 billion more than that of General Motors GM and Ford F combined.

With the latest gain, Tesla has added about 103% in the past three months compared to 10.2% gain for the S&P 500. The rally began in October when the electric carmaker reported a surprise profit for the third quarter of 2019. Then, Tesla’s entrance into China and solid fourth-quarter delivery numbers published earlier this month led to bullishness on company’s growth.

Tesla has started delivering Model 3 cars made at its Shanghai factory to Chinese consumers in its cooling electric vehicle (EV) market. Meanwhile, the company produced a record 105,000 (86,958 Model 3 and 17,933 Model S and X) vehicles and delivered a record 112,000 (92,550 Model 3 and 19,450 Model S and X) vehicles. The number is above analysts’ expectation of 106,000 polled by FactSet. This has pushed 2019 total deliveries to 367,500 vehicles, up 50% from 2018 and in line with its guidance range of 360,000-400,000 vehicles (read: Tesla Reports Record Q4 Deliveries: ETFs to Ride the Surge).

Further, analysts’ optimism has bolstered the momentum in the stock. Oppenheimer has raised the price target on Tesla by nearly 60% to $612, citing that the company has advantages over its competitors, including battery technology, powertrain design and customer enthusiasm. The move is the latest in the string of upward revisions in the stock’s target price by analysts like Piper Sandler, Argus Research and Credit Suisse.

The growth levels for the electric carmaker are also impressive. The company is expected to see year-over-year growth of 79.7% for 2019 when it reports earnings later this month, and an enormous 2324% for 2020. Moreover, optimism over car demand will likely push the stock up to new heights this year (read: Electric Vehicles to Rev Up in 2020: Play These ETFs (Revised)).

Given the bullishness, it seems Tesla is a great candidate for a portfolio. The stock currently has a Zacks Rank #2 (Buy) and a Growth Score of A. It belongs to a top-ranked Zacks industry (in the top 44%). All these indicate continued solid trend in the near future.

ETFs to Watch

The huge surge in TSLA price has put the spotlight on ETFs having substantial allocation to this luxury carmaker. Investors should closely monitor the movement in these funds and grab any opportunity from a surge in the TSLA price.

ARK Autonomous Technology & Robotics ETF ARKQ

This is an actively managed ETF seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services as well as technological improvement and advancements in scientific research related to energy, automation and manufacturing, materials and transportation. This approach results in a basket of 38 stocks with TSLA occupying the top spot with 12.5% share. The product has accumulated $181.7 million in its asset base and charges 75 bps in fees per year.

ARK Innovation ETF ARKK

This is an actively managed fund seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (Genomic Revolution), industrial innovation in energy, automation and manufacturing (Industrial Innovation), the increased use of shared technology, infrastructure and services (Next Generation Internet), and technologies that make financial services more efficient. In total, the fund holds 39 securities in its basket with Tesla occupying the top position, accounting for 10.3% share. The product has gathered $1.9 billion in its asset base.

ARK Next Generation Internet ETF ARKW

This is an actively managed fund focusing on companies that are expected to benefit from the shift in technology infrastructure to the cloud, enabling mobile, new and local services. The fund holds 43 stocks in its basket with Tesla occupying the top position at 9.3%. The ETF has amassed $442.6 million in its asset base and its expense ratio is 0.75% (read: S&P 500 Hits New Highs: ETFs Soaring to Start 2020).

VanEck Vectors Low Carbon Energy ETF SMOG

This ETF tracks the Ardour Global Index Extra Liquid, which focuses on the performance of low carbon energy companies primarily engaged in alternative energy. It holds about 30 stocks in its basket with AUM of $106.6 million while charging 63 bps in fees per year. Tesla occupies the top position in the basket with 9.5% allocation. In terms of country exposure, the fund is skewed toward the United States with 71% share while Denmark and China round off the next two spots.

MicroSectors FANG+ ETN FNGS

This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly-traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket with Tesla occupying the ninth position with 10% share. The product has accumulated $35 million in its asset base within two months of debut and charges 58 bps in annual fees (read: 9 Leveraged ETFs That More Than Doubled in 2019).

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Ford Motor Company (F): Free Stock Analysis Report
 
Tesla, Inc. (TSLA): Free Stock Analysis Report
 
General Motors Company (GM): Free Stock Analysis Report
 
ARK Autonomous Technology & Robotics ETF (ARKQ): ETF Research Reports
 
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
 
ARK Innovation ETF (ARKK): ETF Research Reports
 
VanEck Vectors Low Carbon Energy ETF (SMOG): ETF Research Reports
 
MICRS-FANG+ (FNGS): ETF Research Reports
 
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