Sparks fly as Tesla’s $150 billion market rally leaves fund managers racing to catch up

Elon Musk earned more than $1 billion from Tesla’s recent rally. (Reuters)
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Updated 08 February 2020

Sparks fly as Tesla’s $150 billion market rally leaves fund managers racing to catch up

  • Tesla shares have climbed nearly 320 percent since early June
  • The rally was helped by ramped-up production at Tesla's new car factory in Shanghai

NEW YORK: Pretty much everyone on Wall Street has an opinion about Tesla.

The electric vehicle maker’s stupendous rally in recent months has given shareholders something to cheer about, cost short sellers billions of dollars and vindicated legions of retail investors who have long adored Elon Musk’s company.

Tesla shares have climbed nearly 320 percent since early June, helped by the company's better-than-expected financial results and ramped-up production at its new car factory in Shanghai.

Another factor driving this week’s rally may be fund managers hurrying to raise their allocation of the stock, analysts said.

“A lot of advisors and institutions, they jump in the bandwagon because they don’t want to trail,” said Ross Gerber, president and CEO of Gerber Kawasaki in Santa Monica. “If Tesla goes to $1,000 and they don’t own it, what are they going to tell their clients?”




Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, China on January 7, 2020. (REUTERS/Aly Song/File Photo)

Gerber trimmed his fund’s position in the stock as the company’s valuation soared. He hopes to buy more if the stock falls and said a fair valuation would be about $550.

Retail investors have driven part of the surge, as staunch defenders of Tesla crowd Twitter, Reddit and other web sites.

Among Fidelity Investments customers, Tesla has been the most actively traded stock in recent sessions, with 16,000 buy orders for the electric carmaker's shares. 

The stock is held widely by institutional shareholders. Tesla’s biggest institutional shareholders are Baillie Gifford, Capital World and Vanguard, according to Refinitiv data. It also has an international following. Retail investors in South Korea have been trading Tesla shares at a furious pace in recent weeks, buying and selling $200 million of stock in January, according to the Korea Securities Depository. Volume in November stood at $43 million.

Tesla options positioning is also bullish. According to data from options analytics provider Trade Alert, skew turned deeply negative this week, meaning that demand for calls, used to position for further share gains, has surpassed demand for puts, used to guard against a fall in shares.

That is a departure from the usual dynamic in most stocks, in which options used for downside protection generally command prices higher than those for upside participation.

Tesla’s biggest winner is Musk, who stands to up to $1 billion thanks to Tesla’s recent rally. The company’s market capitalization briefly exceeded $150 billion this week, the second target in his record-breaking compensation package.


OPEC, allied nations extend nearly 10 million barrel cut by a month

Updated 41 min 11 sec ago

OPEC, allied nations extend nearly 10 million barrel cut by a month

  • The meeting, originally scheduled for next week, was brought forward to Saturday

VIENNA: OPEC and allied nations agreed on Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to boost energy prices hard-hit by the coronavirus pandemic.
Ministers of the group and outside nations like Russia met via video conference to adopt the measure, aimed at cutting out the excess production depressing prices as global aviation remains largely grounded due to the pandemic. It represents some 10% of the world's overall supply.
However, danger still lurks for the market. Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.
“Despite the progress to date, we cannot afford to rest on our laurels,” Arkab said. “The challenges we face remain daunting.”
That was a message echoed by Saudi Arabia's Oil Minister Abdul Aziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when US oil futures plunged below zero.


“There are encouraging signs we are over the worst,” he said.
Russian Energy Minister Alexander Novak similarly called April “the worst month in history” for the global oil market.
The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision and a collective effort deserving praise from all participating producing countries.”
OPEC has 13 member states, including Saudi Arabia. The additional countries part of the plus-accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.
Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.
The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March. Analysts say Russia refused to back even a moderate cut because it would have only served to help US energy companies that were pumping at full capacity. Stalling would hurt American shale-oil producers and protect market share.
Prices collapsed as the coronavirus and the COVID-19 illness it causes largely halted global travel. That also hurt US shale production, drawing the ire of President Donald Trump. But Trump welcomed the earlier deal, as US Energy Secretary Dan Brouillette did on Saturday with the extension.
“I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world,” Brouillette wrote on Twitter.
Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.
However, some countries produced beyond their quotas set by the deal. One of them was Iraq, which remains decimated after the yearslong war against the Islamic State group.
On Saturday, Iraq Oil Ministry spokesman Assem Jihad said in statement that Baghdad had “renewed its full commitment” to the OPEC+ deal.
“Despite the economic and financial circumstances that Iraq is facing, the country remains committed to the agreement," Jihad said.
Analysts had expected OPEC and the other nations to extend the cuts of 10 million barrels per day by one more month, but not longer, since the level of demand is still fluctuating.
“If the demand is great, countries like Russia will want to produce more oil, so they probably won’t want to get locked into a longer-term deal that may not help them,” said Jacques Rousseau, managing director at Clearview Energy Partners.