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Want To Own Tesla Stock? 2 ETFs For Exposure With Lower Risk

By Investing.com (Tezcan Gecgil/Investing.com )ETFsDec 08, 2020 09:54AM ET
www.investing.com/analysis/want-to-own-tesla-stock-2-etfs-for-exposure-with-lower-risk-200547148
Want To Own Tesla Stock? 2 ETFs For Exposure With Lower Risk
By Investing.com (Tezcan Gecgil/Investing.com )   |  Dec 08, 2020 09:54AM ET
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Tesla (NASDAQ:TSLA) is one of the most-watched names as Wall Street indices march steadily higher. Shares in the California-headquartered electric vehicle manufacturer hit a record high of $648.72 on Dec. 7.

Tesla Weekly Chart
Tesla Weekly Chart

Electric vehicle and alternative energy sectors have performed strongly in 2020. In early October, Tesla released Q3 metrics for vehicle production and deliveries. It delivered 15,00 Model S/X and 124,100 Model 3/Y vehicles.

During the third quarter, revenue was $8.77 billion. It also generated a profit of $331 million, making Q3 the company's fifth straight profitable quarter. Gross margin stood at 27.7%,

Year-to-date, the stock is up over 600%, so $1,000 invested in January 2020 would now be worth over $7,000. However, on a short-term basis, TSLA stock is highly volatile. Its beta, a concept we discussed recently, is over 2.

As a result, many retail investors may be hesitant about adding the carmaker's shares to their portfolios.

One way to participate in Tesla's growth story, without having to endure the stomach-churning intraday moves, could be to buy an exchange-traded fund (ETF) that includes TSLA stock as a holding.

On Dec. 21, the EV group will be added to the S&P 500 index. Then any fund, such as the SPDR S&P 500 ETF (NYSE:SPY), that tracks the index will include access to Tesla shares. There are currently well over 150 ETFs that include shares of the company among their holdings. Here are two such funds:

1. iShares U.S. Consumer Goods ETF

  • Current Price: $168.70
  • 52-Week Range: $92.00-167.48
  • Dividend Yield: 2.01%
  • Expense Ratio: 0.43%

The iShares U.S. Consumer Goods ETF (NYSE:IYK) provides exposure to U.S. consumer goods firms, such as food, automobiles, and household items. The fund started trading in June 2000, and assets under management are $711 million.

IYK Weekly Chart
IYK Weekly Chart

IYK, which has 96 holdings, tracks the Dow Jones U.S. Consumer Goods Index. The top ten stocks make up approximately 54% of total holdings.

As far as industries are concerned, funds are distributed among Food, Beverage, Tobacco (36.93%), Auto & Components (20.36%), Household & Personal Products (19.87%) and Consumer Durables (15.69%), among others.

The leading names in the ETF include Tesla, which accounts for 15.03% of the fund's total holdings, Procter & Gamble (NYSE:PG), one of the global leaders in the consumer products world, and carbonated soft drink giant Coca-Cola (NYSE:KO).

IYK has increased over 25% since the start of the year and hit a 52-week high on Dec 7. Trailing P/E and P/B ratios stand at 25.11 and 5.46, respectively. As a result of the recent run-up in price, these valuation metrics are relatively expensive. Those investors who would like to have exposure to shares of Tesla and U.S. consumer giants could consider investing in the fund, especially in the case of a short-term decline toward $155.

2. SoFi Select 500 ETF

  • Current Price: $13.70
  • 52-Week Range: $7.84 - $14.20
  • Dividend Yield: 1.17%
  • Expense Ratio: N/A (fees currently waived)

The SoFi Select 500 ETF (NYSE:SFY) gives access to the 500 largest publicly-traded U.S. companies as measured by market capitalization. In determining companies' weightings in the ETF, the fund managers use metrics including sales growth and forward-looking revenue estimates.

SFY Weekly Chart
SFY Weekly Chart

SFY tracks the Solactive SoFi U.S. 500 Growth Index. The fund started trading in April 2019. As an enticement, annual expenses will be waived for investors during the first three years of the fund's trading.

The top ten stocks make up approximately 28% of net assets of over $110 million. Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Berkshire Hathaway (NYSE:BRKa), (NYSE:BRKb) and Tesla, which has a 1.81% weighting, head the list of stocks in SFY.

As far as industries are concerned, funds are distributed among Technology (24.6%), Consumer Non-Cyclical (23.5%), and Communications (15.4%), among others.

SFY has returned over 22% since the start of the year and hit a record high in late November. Short-term profit-taking in some of the holdings may put pressure on the fund. Yet no single company's weighting is large enough to affect its value significantly. Those investors who believe in the growth story of most of the companies in the ETF could consider buying into the declines.

Want To Own Tesla Stock? 2 ETFs For Exposure With Lower Risk
 

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Want To Own Tesla Stock? 2 ETFs For Exposure With Lower Risk

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Comments (8)
Kaloyan Petkov
Kaloyan Petkov Dec 08, 2020 3:38PM ET
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For such overhyped company I would apply Residual Income model to analyze it. FInd out how: https://www.abiranalytic.com/residual-income
Charles Sturrock
Charles Sturrock Dec 08, 2020 2:52PM ET
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Vanguard Consumer Discretionary ETF (VCR) holds Tesla also. It has returned 43.66% this year thus far and has a 2.09% yield. All for a very reasonable .10% expense ratio. In addition VCR contains:  Amazon.com Inc AMZN 23.00% The Home Depot Inc HD 7.25% Tesla Inc TSLA 5.76% McDonald's Corp MCD 4.02% Nike Inc B NKE 3.78% Lowe's Companies Inc LOW 3.04% Starbucks Corp SBUX 2.60% Target Corp TGT 1.95% Booking Holdings Inc BKNG 1.71% TJX Companies Inc 1.57%
nck prm
nck prm Dec 08, 2020 11:11AM ET
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why pay for the costs of ETF if it underperforms nasdaq index?
Jim Gregory
Jim Gregory Dec 08, 2020 11:08AM ET
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thanks honey
Orhan Tolu
Orhan Tolu Dec 08, 2020 11:05AM ET
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Great Article .
mad god
mad god Dec 08, 2020 11:02AM ET
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QQQ is another one
Two Wongs Make White
Two Wongs Make White Dec 08, 2020 10:06AM ET
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many thanks great read. I make many profit on tsla option!
Jan Skilbrei
Jan Skilbrei Dec 08, 2020 6:08AM ET
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its s strange place, nobody writes such articles when there is (was), a pullback/weakness, Tesla is overvalued, its obvieous...
Nirosha HB
Nirosha HB Dec 08, 2020 6:08AM ET
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deaf yes
 
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