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These Tesla-Heavy ETFs Look Vulnerable After Tesla’s Earnings-Based Plunge

From Zacks: Tesla Inc. released its fourth-quarter 2016 results after market hours on February 22, 2017, posting revenues of $2.28 billion, ahead of the Zacks Consensus Estimate of $2.201 billion.

However, the company reported a loss of $1.25 per share, wider than the Zacks Consensus Estimate of a loss of $1.19 per share. This number excludes 47 cents from non-recurring items. Concurrent with the release, Tesla also announced that CFO, Jason Wheeler will be resigning in April 2017.


Initial production of the company’s Model 3 is on track to begin this July while volume production is expected by September. Tesla expects capital expenditure between $2 billion and $2.5 billion ahead of the start of Model 3 production. Tesla expects to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2017, which represents vehicle delivery growth of 61% to 71% compared with the year-ago period.

Currently, Tesla has a Zacks Rank #4 (Sell). The stock was up 1.52% to $277.67 in after-hours trading following the earnings release owing to the revenue beat.

Given the earnings report and investors’ reaction, we have selected the following ETFs that are heavily invested in the company. If the stock gains traction ahead on the rollout of the Model 3 electric sedan, positions in these funds can be beneficial for investors (see: all the Alternative Energy ETFs here).

VanEck Vectors Global Alternative Energy ETF (GEXFree Report)

This ETF tracks the Ardour Global Index, focusing on companies that are primarily engaged in the business of alternative energy. It also provides good diversification in the sense that it’s well divided between large, medium and small cap companies.

The fund holds about 33 stocks in its basket with an AUM of $64.9 million while charging 62 bps in fees per year. The fund has an average daily volume of about 2,500 shares. Tesla Motors occupies the top position in the basket with about 12.3% allocation.

In terms of country exposure, the fund is skewed toward the U.S. with 51% share while Denmark also has a double-digit allocation with 12%. The fund has added about 8.9% so far this year (as of February 22, 2017) (read: Future of Clean Energy ETFs in Trump Era).

ARK Industrial Innovation ETF (ARKQFree Report)

This fund does not track any index in particular as it is an actively managed ETF seeking long-term capital appreciation by looking for companies that stand to gain from the development of new products or services, technological improvement and advancements in scientific research related to robotics, energy storage, innovative materials, alternative energy sources, infrastructure development, space exploration, autonomous vehicles and 3D printing.

As such, the fund’s top rank holder is Tesla with an 11.1% holding. The fund has 34 holdings with an AUM of approximately $17.5 million and charges a fee of 75 bps. Average daily volume is about 8,200 shares. With more than 80% exposure to the U.S. equity market, it provides good diversification across large, medium and small cap companies. The fund has advanced about 12% in the year-to-date frame (as of February 22, 2017) (read: Industrial ETF Investors! Look at Trump, Not Soft Earnings).

First Trust NASDAQ Clean Edge Green Energy Index Fund ((QCLNFree Report)

This fund follows the Nasdaq Clean Edge Green Energy Index and has an AUM of $57.1 million. It charges 60 bps in fees per year and trades in a volume of around 12,150 shares per day. In total, the product holds 39 securities with Tesla Motors topping the list at about 10.2%.

Technology firms dominate this ETF, accounting for 60% of the assets. The fund is mostly U.S centric and focuses more on mid cap and small cap companies. The product is up 9.1% so far this year (as of February 22, 2017) (read:5 Small Cap ETFs and Stocks to Play January & Trump Effect).

ARK Innovation (ARKKFree Report)

This is an actively managed fund like ARKQ, providing significant exposure to the domestic technology and health care companies among others. In total, the fund holds 44 securities in its basket with Tesla occupying the second position holding 9% share.

The product has accumulated $12 million in its asset base and trades in a paltry volume of about 2,500 shares. Expense ratio comes in at 75 bps a year. The fund is also well-diversified among large, medium and small cap companies. It has gained 15.6% in the year-to date time frame (as of February 22, 2017).

Tesla Inc (NASDAQ:TSLA) fell $5.00 (-1.95%) in premarket trading Monday. Year-to-date, TSLA has gained 20.27%, versus a 5.91% rise in the benchmark S&P 500 index during the same period.

This article is brought to you courtesy of Zacks Research.

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