To recap my last post, the uncertainty from the US presidential election has subsided. Last week, the S&P 500 Index was up 2.16% with major moves in the Energy sector amid positive news from Pfizer with the efficacy of their Covid-19 vaccine. The sector, which has been struggling for the past few years, posted a 16.46% return for the week. Moreover, Crude Palm Oil continues to rally driven by concerns over production in Malaysia as it grapples with labor shortages.
Crude Palm Oil (KO)
This week, we turn again to Tesla. I initially wrote about the electric car company back in July when they were days away from announcing four consecutive quarters of earnings for the first time. A major steppingstone and the final requirement for the company to be added to the S&P 500 Index. By now everyone knows Tesla was not added to the S&P 500 Index then, but the committee announced this week that the company will finally be added to the index before the open on December 21st. The company posted a fifth consecutive positive quarter.
Unsurprisingly, the stock rallied sharply after the announcement. Mutual funds, ETFs, index funds, and actively managed funds that aim to replicate the S&P 500 index will want to avoid tracking errors and possibly buy the stock before its price surges even more. The committee, however, is considering adding Tesla in stages due to its size (The S&P 500 is a market cap weighted index). With a market capitalization of nearly $390 billion, adding the company will not be as easy as adding another smaller company. Tesla will be the biggest company ever added and index funds will be forced to sell millions of shares to make space for it. The announcement drove shares up over 13% after hours.
Tesla Inc (TSLA US Equity)
Tesla shares hit the highest price since September on Wednesday after Morgan Stanley’s issued an overweight rating. Morgan Stanley says “Buy” as they see Tesla very close to an inflection point where the company will move from only selling cars to creating high-margin software and services revenues. Analyst Adam Jonas raised his price target 50% to $540. Tesla shares jumped another 9.8% on Wednesday which amounts to a $10.2 billion gain to Elon Musk’s net worth now at $120 billion. The loved and hated CEO is on the verge of passing Bill Gates on the Bloomberg Billionaires Index and becoming the second richest person in the world. Tesla’s stock price move since January has catapaulted Musk’s net worth by over $90 billion.
Tesla Inc (TSLA US Equity)
Lastly, this week Moderna Inc announced the high efficacy of their vaccine. However, the good news was overwhelmed by sharp increase in Covid cases which is putting pressure on the economic recovery. Globally, major cities have gone back into lock down and schools are beginning to close. Investors realize the economic recovery may take longer despite the positive news on vaccines.