says some mutual funds will have to add
stock to keep up with profitable returns, now that the electric vehicle pioneer will join the S&P 500 index. This is greater demand for Tesla shares above and beyond
index funds have to buy. And as with all relatively fixed asset portfolios, funds buying Tesla shares have to sell something to make room.
Indexers, of course, are adding shares of Tesla (ticker: TSLA) to their portfolios as Tesla enters the S&P 500 on December 21st. This decision was made on Monday.
The news caused a lot of madness for the purchase of Tesla shares this week. Traders grab stocks before buying indexes, hoping to land them at a higher price as December 21 approaches. Shares of Tesla rose about 20% for the week and reached a new 52-week high of about $ 508 per share on Thursday.
Goldman Sachs’ (GS) portfolio strategy research team said in a report Friday that of the 189 monitored mutual funds that invest in high-capital stocks, 157 did not own Tesla shares at the beginning of the fourth quarter.
This is quite a revelation: Tesla is a stock with a very large capitalization and is not easy to miss. It is the most valuable carmaker in the world and is likely to enter the S&P 500 as one of the top 10 stocks measured at market value.
One of the reasons some funds do not hold shares in EV behemoth is that the performance of Tesla shares – without being part of the S&P indices – does not affect the criteria that these funds use. There is less pressure to own high-flying, highly valued stocks if it does not affect a fund’s performance relative to its competition on a daily basis.
Maintaining a benchmark is a daily job for active mutual fund managers, so managing non-benchmark equity positions is a headache that many don’t seem to want.
Goldman estimates the demand for Tesla shares of about $ 8 billion if these high-capitalized mutual funds buy Tesla’s base weight – in addition to what index funds will buy.
Tesla shares regularly trade more than $ 20 billion in value for a day, so the figure of $ 8 billion is not that big – especially compared to the tens of billions that have to be bought by passive index funds. Still, there is a greater demand for stocks that Tesla bulls and aggressive dealers will try to gain in the coming weeks.
Goldman also listed some of the most owned shares – compared to the reference weight – held by the same funds. They include:
(LOW). The sale of these 10 shares may be a small source of funds for managers who buy Tesla in the coming weeks.
In most cases, any projected impact of index shifting would be temporary and largely untenable. But as always, Tesla shares tend to be the exception to the rule. His moves are often bigger than most – which means that any event that affects trading can make the potential amount of money made or lost very significant.
Write to Al Root at firstname.lastname@example.org