Photo credit: Tesla
According to fund manager, Good Soil Investment, Tesla (NASDAQ: TSLA) shares could hit $800 with the inclusion into the S&P 500, and the company is the type of investment opportunity that has unique conditions that most people don't see yet.
Emmet Peppers//Twitter has followed Tesla very closely for 10 years, so he understands the company well. He, like some other analysts, for instance ARK Invest, points out that hedge fund managers who short the stock misunderstand it. Tesla is not a car company, so it shouldn't be viewed from this perspective.
Tesla started out as a company that makes computers on wheels, but very quickly grew into something more: energy storage, smart grid services, self-driving technology, semi-trucks, solar roofs, and insurance, writes Peppers on SumZero. He highlights that Tesla's bulls are gaining momentum and are beginning to see the path the company can take to become the world's largest company.
On November 16, the S&P committee announced that TSLA will be added to the S&P 500 on December 21. This means that approximately 120 million shares must be bought by S&P 500 passive index funds. In addition, there are an unknown but very significant number of “closet indexers” who will have to decide whether they will buy TSLA for index-tracking purposes or short TSLA effectively by simply excluding it from their S&P 500 tracking portfolios, Peppers writes.
"Relative to TSLA's market cap (around $553 billion), there is very little liquidity in the actual stock. TSLA will constitute a large weighting of the index. This combination very well could cause the recent rally in the stock to go higher than it has."
In addition to opening long TSLA positions and longer-term, deep-in-the-money options, Peppers sees the S&P inclusion as opening up new short-term opportunities. "The Jan. 15, 2021, 700 strike calls were purchased the morning after the inclusion announcement for $5.50-$6." Peppers believes that there is at least a 20% chance there will be an S&P inclusion “squeeze” that will cause TSLA to reach $800-plus before the options expire.
He believes that Tesla is the type of investment opportunity that has unique conditions that most people do not yet see, but which have a very clear potential path to materialization if looked at closely and evaluated objectively.
© 2020, Eva Fox. All rights reserved.
We appreciate your readership! Please share your thoughts in the comment section below.
Legal Disclaimer --
This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Eva Fox, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.
About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.