Tesla Driving Performance Of These ETFs

To electrify its rental car fleet, Hertz recently placed an order for 100,000 Tesla vehicles. This was the single largest purchase ever for electric vehicles, and represents about $4.2 billion in revenue for the automaker.

The news sent Tesla stock soaring, bringing the company's market cap to over $1 trillion.

Tesla’s stock price has seen jaw-dropping returns over the past several years. Since late October 2019, Tesla stock has gained 1,680% relative to just a 57% gain for the SPDR S&P 500 ETF Trust (SPY).

While this price appreciation has been a great benefit to any Tesla shareholder, the stock is also prone to significant drawdowns. Earlier this year, Tesla saw its stock price fall by 36% in less than six weeks.

For those who want exposure to Tesla stock in a diversified wrapper, the automaker is held within a wide variety of ETFs, often with a significant weighting. ETFs that hold this stock, or any other stock, can be found by using the Stock Finder Tool on the ETF.com site.

Disruptive Tech ETFs

It is no surprise that many of the ETFs with the largest allocation to Tesla are those that focus on disruptive technologies, including several funds from ARK Invest.

A benefit of holding these ETFs instead of Tesla’s stock alone would be to garner exposure to additional companies that are involved in themes such as autonomous driving, cloud computing, artificial intelligence and other disruptive technologies.

The ETF with the largest allocation to Tesla is the Simplify Volt RoboCar Disruption and Tech ETF (VCAR). VCAR is an actively managed global ETF that offers exposure to companies that are focused on autonomous driving. The fund also uses options with the goal of enhancing the upside and reducing drawdowns.

This ETF is fairly new, having launched last December, and has not proven to be popular with investors thus far. Current assets under management are less than $2 million. And year-to-date, VCAR has fallen by 2.7%.

Given its significant weighting to Tesla, appreciation of the automaker’s stock price could lift performance, and in turn, bring more investor interest to the ETF.

Consumer Goods ETFs

Tesla stock also represents a significant allocation of many consumer discretionary and consumer goods portfolios. In spite of their less focused scope relative to the disruptive tech ETFs, Tesla’s market cap means that these ETFs have similar weightings to the stock due to their cap-weighted methodology.

A benefit of these ETFs relative to the disruptive tech ETFs are that they are significantly cheaper. The Fidelity MSCI Consumer Discretionary Index ETF (FDIS) is the cheapest of those listed, ringing up at just 0.08%.

Using our ETF Comparison Tool shows just how much cheaper this ETF is relative to a small thematic ETF like VCAR.

Table courtesy of FactSet

Rather than providing exposure to technology themes, these sector ETFs provide exposure to the U.S. consumer discretionary category. Other top holdings of FDIS include names like Amazon, Home Depot and Nike.

Table courtesy of FactSet

Though these ETFs have similar weightings to Tesla, they tend to have significantly more securities in their portfolios than the disruptive tech ETFs. While VCAR’s performance has been more correlated with that of Tesla’s stock so far this year, FDIS has been on a steady uptrend.

Green ETFs

Given Tesla’s status as an electric vehicle pioneer, it is no surprise that the stock is also found in several ESG and electric vehicle-oriented ETFs.

While these ETFs tend to have higher expense ratios and be more concentrated, just as the disruptive tech ETFs were, their exposure is to the theme of green energy. Electric vehicle adoption is expected to grow significantly over the coming years, which could be a tail wind for ETFs focused on these types of companies.

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

Another benefit of choosing to hold Tesla within one of these ETFs rather than as a stand-alone stock is that many have caps on single-security exposure and they are rebalanced regularly. This feature can help prevent your portfolio from being overexposed to any one name, especially if that stock sees significant upside.

Tesla’s hefty appearance in many different types of ETFs gives investors the option to gain access to the stock while receiving proper risk management without manual effort.

Contact Jessica Ferringer at [email protected] or follow her on Twitter