Investor's Corner

Tesla (TSLA) expands British fund’s value by $2B, but it could have been bigger

(Photo: Andres GE)

Tesla (NASDAQ: TSLA) holdings have made the Scottish Mortgage Investment Trust Plc a big winner in 2020, with over 1.87 million shares to the fund’s name. However, the British fund could be kicking itself because it unloaded a sizeable portion of TSLA shares in Q1.

Because of the electric automaker’s spike in value through the 2020 fiscal year, the Scottish Mortgage has increased in value by more than $2 billion since the end of March. The shares of TSLA stock, along with other valuable company holdings like AMZN, have brought a Year-to-Date return of 56% so far this year, Bloomberg reported.

The significant spike in value for the Scottish Mortgage has solidified itself within the United Kingdom’s FTSE 100 benchmark, which is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization.

TSLA holdings account for about 11% of the $16.9 billion in assets that the fund manages, but it could have been even sweeter than that.

Scottish Mortgage decided to trim its TSLA holdings during Q1, ultimately letting go of about 125,000 shares of the electric automaker’s stock. Because of the move, the fund missed out on about $170 million in value, which is based on TSLA’s closing price on August 18 of $1,887.09.

Bloomberg indicates that of the Scottish Mortgage’s top 20 equity holdings by market value, the fund only reduced holdings of Tesla during the first half of the year.

As of July 31, 2020, Tesla stock remains the most significant holding for the Scottish Mortgage Fund, according to its website.

A spokesman for the Scottish Mortgage Fund said that their decision was based “on the overall balance of the portfolio rather than simply the individual Tesla holding,” and that the current managers of the holdings remain supportive of the electric automaker’s stock.

Overall, the fund’s valuation has grown in 2020 because of the performance of all of its holdings, not just Tesla. However, TSLA stock undoubtedly contributed the most to the 56% YTD return that the fund has experienced.

Robert Starkey, an analyst at Morningstar investment research group, said that Scottish Mortgage “has benefited from good stock picks as well as being in sectors which have been favored during the global pandemic.”

Automaker stocks have not been a conservative pick during 2020 with the pandemic. Many large car companies have experienced sizeable losses in market capitalization throughout 2020 because of a lack of demand and a decline in production efforts. Tesla has continued to grow because of developments in its battery technology, and an evergrowing demand spike for its electric cars, which can be ordered online instead of through a traditional dealership.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Tesla (TSLA) expands British fund’s value by $2B, but it could have been bigger
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