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To say Tesla Inc (NASDAQ:TSLA) has had a wild week would be an understatement. After ascending to almost $969 on Tuesday, the electric vehicle maker closed around $749 on Thursday. Even with that slide, the stock enters Friday up nearly 17% over the past week.
While plenty of articles have been written about exchange traded funds with significant Tesla exposure, it almost feels like heresy to discuss the fund's that are light on Elon Musk's company. But as CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth points, some well-known ETFs have no exposure to shares of Tesla.
Here are some prominent examples.
Related: Teslamania Runs Wild! Now What?
It's not just the SPDR S&P 500 ETF (NYSE:SPY). It's the Vanguard S&P 500 ETF (NYSE:VOO), the iShares Core S&P 500 ETF (NYSE:IVV) and any ETF that follows the S&P 500 or a related index. As Rosenbluth notes, the reasoning behind this is simple.
“The S&P 500 Index requires a company to generate four consecutive quarters of positive GAAP earnings before the stock is eligible to be added following an index committee vote,” he said. “While TSLA reported GAAP EPS of $0.58 in the fourth quarter of 2019, pushing its string to two quarters, CFRA Equity Analyst Garrett Nelson highlights that Tesla announced a delay in vehicle deliveries from its recently-started China factory due to the coronavirus outbreak.”
Plenty of folks think of Tesla as technology company and perhaps a time will come that it's moved to that sector, but for now, the company, like auto manufacturing stocks, resides in the consumer discretionary sector.
The Consumer Discretionary Select Sector SPDR (NYSE:XLY), famous for its massive weight to Amazon.com (NASDAQ:AMZN), can't hold Tesla until meets the S&P 500 profitability requirement because XLY's underlying index is essentially a representation of the S&P 500 consumer cyclical constituency.
The iShares S&P 500 Growth ETF (NYSE:IVW), as is the case with the aforementioned S&P 500 ETFs, isn't alone in its exclusion. In addition to the iShares fund, several rivals track the S&P 500 Growth Index and Tesla isn't yet part of that benchmark.
Based on Tesla's market value of almost $133 billion at Thursday's close, if the stock entered the S&P 500 Growth Index tomorrow, it would be the third-largest consumer discretionary name in the benchmark, behind only Amazon and Home Depot (NYSE:HD).
Rosenbluth has Overweight ratings on all of the ETFs mentioned here.
