Invest In Tesla: Top Mutual Funds To Consider

Tesla's share price has soared by an incredible 800% in a year, prompting many investors to wonder how long this can continue. Despite Morningstar analysts assigning the company a Very High Uncertainty rating, there are at least four managers who have a high conviction in Tesla's long-term growth potential. These include James Anderson's Scottish Mortgage Investment Trust, Baillie Gifford Global Discovery, Franklin US Opportunities Fund, and JPMorgan American IT. Tesla's share price has risen 447% since June 2019, and there are various theories about what is causing this surge. One theory suggests that it is due to a 'short squeeze', where investors who bet against Tesla are forced to unwind their positions, driving up the stock price. Another factor could be the growing sense of optimism from the company, which has posted two quarterly profits in a row, hit record production numbers, and opened a factory in China.

Scottish Mortgage Investment Trust

The Scottish Mortgage Investment Trust (SMT) is a £14 billion investment trust that focuses on companies disrupting their industries. It has been a long-time backer of Tesla, with Tesla being its highest conviction bet and biggest driver of returns in 2023. However, in 2024, the trust halved its position in Tesla, reducing its stake from more than 12% of its portfolio to below 5% at the end of August. This move was made to comply with regulations that state investment trusts can have a maximum of 15% of their assets in any one stock, and Tesla's share price surge had pushed its weighting in the trust above this limit.

Despite reducing its stake, the fund manager, James Anderson, remains a strong supporter of Tesla and intends to be a significant shareholder for many years. He praises Tesla's efforts and achievements in driving forward a transportation and energy revolution, stating that "without Tesla's efforts, the possibility of averting climate disaster would have been significantly reduced." Anderson also expresses optimism about Tesla's ability to raise capital, stating that "Tesla no longer faces any difficulty in raising capital at scale from outside sources."

The Scottish Mortgage Investment Trust's decision to reduce its position in Tesla while maintaining its long-term backing of the company demonstrates a balanced approach to investing in a company with high growth potential while also managing risk. By crystallizing some of the gains from Tesla's extraordinary run-up in 2023, the trust ensures that it locks in profits while still remaining a significant shareholder. This strategy allows the trust to benefit from Tesla's continued growth while also diversifying its portfolio and managing the risk associated with having a large concentration in a single stock.

Overall, the Scottish Mortgage Investment Trust's approach to investing in Tesla highlights its focus on disruptive companies and its willingness to take a long-term view while also actively managing its portfolio to balance risk and return.

Baillie Gifford Global Discovery

The Baillie Gifford Global Discovery Fund invests with a five-to-ten-year view, and the fund's price could change significantly based on the valuations of a few companies. The fund's managers do not attempt to predict or control short-term price changes, instead focusing on the bigger picture. Baillie Gifford Global Discovery invests in immature, disruptive companies that are run differently from the average, and the fund's investment horizon of at least five years, combined with a creative research approach, helps the managers see value where others don't.

The Baillie Gifford Global Discovery Fund is suitable for investors with a high tolerance for volatility in the value of the fund's share price and those whose investment time horizon aligns with the fund's. Baillie Gifford Global Discovery can be held in an Investment ISA, SIPP, or Investment Account.

As of 30 September 2024, Baillie Gifford Global Discovery's top holdings included Alnylam Pharmaceuticals, American Superconductor Corp, and Oxford Nanopore Tech.

Franklin US Opportunities Fund

The Franklin US Opportunities Fund is one of four Morningstar-rated funds that believe in Tesla's long-term growth potential. The fund has a portfolio weight of at least 2% in Tesla.

The Franklin US Opportunities Fund is offered by Franklin Templeton, a company that provides a range of mutual fund investment options. The fund's objective is long-term capital appreciation, and it primarily invests in equity securities of companies expected to benefit from the development, advancement, and use of technology. This includes companies like Tesla, which is at the forefront of electric vehicle technology and energy product innovation.

The fund managers at Franklin Templeton have a strong conviction in the long-term growth potential of Tesla. They recognize the company's leadership in the electric vehicle market and its competitive advantage in software development, including battery technology and semiconductor sensors. This aligns with Franklin Templeton's focus on investing in companies that benefit from technological advancements.

The fund has a Morningstar rating, indicating that it has been assessed by Morningstar analysts and meets their criteria for a quality investment option. The fund's performance and potential are evaluated based on various factors, including its portfolio, assets under management, and expense ratio.

With a portfolio that includes Tesla, the Franklin US Opportunities Fund offers investors exposure to innovative companies driving forward transportation and energy revolutions. This aligns with Franklin Templeton's broader investment strategy of supporting companies that leverage technology for long-term growth and capital appreciation.

JPMorgan American IT

Parton draws a comparison between Tesla and Amazon, stating that the market initially viewed Amazon as a plain vanilla bookseller, but it has since evolved into much more. Similarly, he encourages investors to view Tesla as more than just a car company. He predicts that Tesla will maintain a significant share of the electric vehicle market's growth over the next 10 to 20 years.

Ark Invest

One of Ark's most notable investments is in Tesla. Cathie Wood, the founder, CEO and chief investment officer at Ark, has defended her thesis on Tesla, projecting that it could run to $4,000 a share or higher. Wood attributes this conviction to Ark's unique model and nimble investing method, stating that the company is grossly undervalued by Wall Street. Ark's top holding is Tesla, and Wood has stated that their conviction in the company has only increased over the last year.

In addition to financial analysts, Ark employs scientists and computer scientists, believing they can better assess the impact of disruptive technologies. The company publishes its current analyses, transactions, and portfolios and also opens its research reviews to the public.

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