ETFs
Take Advantage of Tesla’s Better-Than-Expected Q2 Deliveries With These ETFs
Tesla Inc. (NASDAQ:TSLA) rose more than 10% on June 2 to a six-month high after stronger-than-expected vehicle deliveries in the second quarter, a figure that signals improving demand that could help ease concerns about excess inventory of its flagship Model 3/Y.
Investors looking to take advantage of the strong growth should buy ETFs with a substantial allocation to the luxury automaker. Direxion Daily TSLA Bull 1.5X Actions (NASDAQ:TSLL), Discover Kevin’s Pricing Power ETF fund (NYSE: PP), Select Sector Consumer Discretionary SPDR Fund (NYSE: XLY), Simplify disruption and technology with the Robocar Volt ETF (NYSE:VCAR) and ARK Innovation Exchange Traded Fund (NYSE: ARKK).
The electric carmaker delivered 443,956 vehicles (422,405 Model 3/Y and 21,551 other models) worldwide in the second quarter. While that was a 4.8% decline from the same quarter a year earlier, the delivery numbers were better than the 436,000 that analysts had expected. The annual sales decline reflects increased competition in the electric vehicle market. Electric vehicle sales have been slower, leading investors to demand that each car sold be more profitable than before. Tesla produced 410,831 vehicles (386,576 Model 3/Y and 24,255 other models) in the quarter.
In April, Tesla gave three of its five models a $2,000 price cut in the United States. The automaker cut prices on the Model Y, its most popular model and the best-selling electric vehicle in the United States, as well as the Model X and Model S. In the first half of the year, Tesla delivered 830,766 electric vehicles worldwide, beating China’s BYD, which sold 726,153 electric vehicles.
The strong delivery numbers indicate that Tesla’s turnaround may have begun. In a letter to shareholders in its latest earnings release, the leading electric carmaker said it would accelerate the launch of new affordable electric vehicle models, with production likely to begin in early 2025, ahead of its initial target of the second half of 2025. The new, more affordable models will be built on Tesla’s next-generation platform and will be produced at the same manufacturing facilities as Tesla’s current offerings. Additionally, Tesla is working to increase production by 50% this year.
Tesla is also banking on driverless software and artificial intelligence to try to revive its sales. The automaker plans to launch the “robotaxis,” a self-driving car without a steering wheel or pedals, on August 8. This next-generation vehicle is widely seen as the key to the electric carmaker’s survival, especially as competition intensifies in the electric vehicle sector.
Focus on ETFs
Direxion Daily TSLA Bull 1.5X (TSLL) Actions
With $1.5 billion in assets under management, Direxion Daily TSLA Bull 1.5X Shares is by far the largest U.S.-listed single-stock ETF on the market. It offers 1.5 times (150%) the daily percentage change of Tesla common stock, charging 86 bps in annual fees. TSLL trades in an average daily volume of 29 million shares.
Discover Kevin’s Pricing Power ETF (PP)
The MeetKevin Pricing Power ETF is an actively managed fund that seeks to achieve its investment objective by investing primarily in U.S.-listed stocks of innovative companies that Kevin believes have greater “pricing power” than their peers. The fund holds a small basket of 25 stocks, with Tesla taking the top spot at 18%.
The MeetKevin Pricing Power ETF has accumulated $45.3 million in assets. It charges 77bps in annual fees and trades in an average of less than 22,000 shares per day.
Consumer Discretionary SPDR Fund (XLY)
The Consumer Discretionary Select Sector SPDR Fund provides exposure to the broad consumer discretionary sector by tracking the Consumer Discretionary Select Sector Index. With 52 stocks in its basket, Tesla ranks second with 17.1% of assets.
The Consumer Discretionary Select Sector SPDR fund is the largest and most popular product in this space, with $19.5 billion in assets under management and an average daily volume of about 3 million shares. It charges 9% in annual fees and is ranked #3 on Zacks ETF (Hold) with a medium risk outlook.
Simplify Volt Robocar Disruption and Technology ETF (VCAR)
The Simplify Volt Robocar Disruption and Tech ETF is an actively managed ETF that seeks concentrated exposure to the leader in autonomous driving technology. It uses a call overlay to seek out performance improvements during extreme rallies in Tesla while holding a technology index for diversification and put options as a hedge.
The Simplify Volt Robocar Disruption and Tech ETF charges investors a 0.95% annual fee. It has accumulated $3.8 million in assets while trading on an average daily volume of 2,000 shares.
ARK Innovation Exchange Traded Fund (ARKK)
ARK Innovation ETF is an actively managed fund that invests in companies that benefit from the development of new products or services, technological improvements and advances in scientific research related to the fields of DNA technologies and the genomic revolution, automation, robotics, energy storage, artificial intelligence, the next generation internet and fintech innovation. In total, the fund holds 35 stocks in its basket, with Tesla taking the top spot with 14.6%.
The ARK Innovation ETF has accumulated $6.1 billion in assets and charges investors 75bps in fees per year. It trades an average of 10 million shares per day.
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