3 Reasons EV ETFs Are Better Stocks to Buy Than Tesla


  • These three EV ETFs give you exposure to Tesla (TSLA) and much more.
  • Consumer discretionary stocks are due for a comeback.
  • Cathie Wood continues to love Tesla.
EV ETFs - 3 Reasons EV ETFs Are Better Stocks to Buy Than Tesla

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Of the largest pure-play electric vehicle manufacturers by market cap, Tesla (NASDAQ:TSLA) is by far the largest at $619.3 billion. The second-largest is Li Auto (NASDAQ:LI) at $26.3 billion, or about a quarter the size of Tesla. If you want a pure-play, Tesla is your biggest and best option. However, Tesla may not be your best option. Further, the company’s production for the Cybertruck isn’t expected to start until mid-June at the earliest, and who knows when the Model 2 will hit production facilities. If those launches aren’t successful, being exposed to just Tesla is a risk most investors shouldn’t take.  Buying one of the many EV ETFs to ride Tesla and the entire industry’s future success would be far more prudent. Here are three reasons why.

Reason No. 1 — An ETF Offers Greater Exposure

Illustration of an ETF in multiple sectors.
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One of the largest Tesla ETF weightings is held by the Consumer Discretionary Select Sector SPDR Fund (NYSEARCA:XLY), one of 11 sector ETFs offered by State Street. Tesla is currently the second-largest holding of this $13.9 billion ETF with a weighting of 14.97%, behind only Amazon (NASDAQ:AMZN). It is one of 56 consumer discretionary stocks in the S&P 500. The median market cap is $24.5 billion, with the smallest having a $6.0 billion market cap.

The top 10 holdings account for approximately 70% of the portfolio, with Tesla accounting for 21% of the top 10 weightings. So, not only do you get major exposure to Tesla, but you also are making a bet on some of America’s most popular companies, including Nike (NYSE:NKE) at 4.43% and McDonald’s (NYSE:MCD) at 4.22%. Most importantly, you get a diversified portfolio for just a 0.10% management expense ratio. That $10 per $10,000 invested.

Reason No. 2 — You Can Put Your Faith In Cathie Wood

white color silhouette vector of Cathie Wood without face. Cathie Wood stocks
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Now and again, someone comes along in the financial services industry that’s a lightning road for attention — good and bad. That’s Cathie Wood to a tee. Her celebrity is so high that ETFs have been created that bet for and against her funds. Her largest ETF by net assets is the ARK Innovation ETF (NYSEARCA:ARKK), with $7.66 billion, nearly 3x bigger than the ARK Genomic Revolution ETF (BATS:ARKG) at $2.25 billion

ARKK is actively managed by Wood and has been since its inception in Oct. 2014. Its focus is on innovation and growth, two categories of stocks that got hammered in 2022. ARKK had a total return of -67.0% last year, more than 3x worse than the S&P 500. However, in 2023, it rebounded nicely, with a total return year-to-date of just shy of 30%. The top 10 holdings, which account for 64% of the fund’s net assets, include Tesla at 10.31%. .

Reason No. 3 — You Can Be Patriotic  

An American flag is seen waving outside the window of a building.
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At first, I thought the God Bless America ETF (NYSEARCA:YALL) was a joke. I mean, what a ridiculous name for an ETF, but then I saw another fund with an equally horrendous name that owns Tesla — The Meet Kevin Pricing Power ETF (NYSEARCA:PP) — and I realized that the ETF space has gotten so crowded, the only way to differentiate yourself is with really dumb names. However, the YALL ETF has managed to gather nearly $32 million since launching last Oct., so there’s no question some people are buying what they’re selling. 

The actively-managed fund invests in U.S.-listed equities with market caps of $1 billion or more. In addition, it eliminates companies that, in the opinion of Curran Financial Partners, exhibit left-leaning tendencies. YALL is not only asking you to trust them on their stock-picking acumen, but it’s also asking you to trust them on their ability to discriminate between left-leaning policies and good corporate citizenry. With a 0.65% management expense ratio, that’s a big ask. While the top 10 holdings aren’t out of the ordinary, nothing is compelling about them except that Tesla is the top holding at 12.79%. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2023/03/3-reasons-ev-etfs-are-better-stocks-to-buy-than-tesla/.

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