On October 31, 2023, several Tesla electric vehicles were parked in front of the Tesla service center in the Caney Mesa area of San Diego, California, USA.
Abhirup Roy | Reuters
Marko Sustic makes a big bet Tesla This year.
The investor, who also happens to work in the European automotive industry, bought Tesla stock almost every month in 2023, nearly doubling the size of his position over the course of the year. Sustic holds no other electric vehicle stakes because he believes competitors can’t beat Tesla’s technology.
“We can’t catch them,” said the 32-year-old, who also owns two Tesla cars at his home in Croatia. “It’s just a matter of time before the stock explodes.”
Sustick is not alone. Tesla, which entered the S&P 500 three years ago this week, is expected to attract the largest individual investor flows of any security by 2023, according to Vanda Research. The company finds these most popular stocks by calculating net flows, subtracting the number of shares sold from the number of shares purchased.
This means Tesla will even surpass SPDR S&P 500 ETF Trust (SPY), which tracks the world’s largest stock market index, underscores Tesla’s meteoric rise to retail investor glory. Vanda data shows Tesla wasn’t even among the top 20 stocks purchased by individual investors before 2019.
A bright year
Christopher Schwarz, a finance professor at the University of California, Irvine, said Tesla’s growing popularity among retail traders may be related to its comeback in 2023. After plunging 65% in 2022, the Elon Musk-led stock more than doubled in 2023.
The stock has outperformed other large technology stocks, known as “tech stocks,” this year. “The Great 7.” Many investors hoping for “disruptive” technology among this elite group are focusing on Tesla and chipmakers Nvidia. But Schwartz said Nvidia’s shares, which have more than tripled this year amid interest in all things related to artificial intelligence, may be too expensive for many individual investors.
Schwartz studies the behavior of retail traders and believes a lot of the attention comes from Musk. Schwartz said the Tesla executive’s controversial acquisition of X, formerly known as Twitter, has increased media coverage and scrutiny of the billionaire business tycoon.
Schwartz said that when faced with thousands of stocks to choose from, individual traders primarily look for those that capture their attention, are familiar and fit with current trends. Schwartz said Tesla checks a lot of boxes for the average investor, given Musk’s personality, the growing popularity of Tesla cars on the road and concerns about climate change.
“When people look for something to trade, they always think of trading,” Schwartz said.
Tesla over the past 5 years
“It’s a good deal”
Individual investors told CNBC that Tesla’s bumpy ride in recent years has not made them doubt the company, but has instead created opportunities to buy shares at cheaper prices. To them, there’s no question that Tesla’s stock price will continue to soar.
One of them is Jeremy Ford, a Virginia construction contractor who first bought Tesla stock in 2020 when the pandemic hit. He became interested when his wife considered and ultimately purchased a Tesla.
Ford has spent the past year trying to time its stock purchases and sales based on Tesla news.For example, he sold some stocks before it happened Deliveries were poor in the third quarter but picked up ahead of new details on Tesla’s electric pickup truck.
The 48-year-old now holds roughly the same number of Tesla shares as when he started 2023, but at a lower cost basis.Ford reallocates some profits to new stakes amid interest in disruptive technology Palantir and NVIDIA. The latter is expected to be the fourth largest source of net inflows this year, while the former does not make the top 20, according to Vanda.
Elon Musk speaks at the 2023 New York Times Dealbook Summit at Jazz at Lincoln Center on November 29, 2023 in New York City.
Slavin Vlasik | Getty Images
Still, he remains confident in Tesla’s story and sees developments in robotics and artificial intelligence chips as reasons for long-term optimism. His only serious concern is that the company’s performance will deteriorate if Musk leaves.
“If you can find a company that makes a product that people love, and it’s different from anything anyone else has, you have a chance to really make a lot of money,” Ford said. “At some point, I do believe that I am now You look back at the stock price and say, ‘Wow, that was a bargain.'”
“Guts and Heart”
While Tesla has had a strong year on Wall Street and Main Street, others also see challenges ahead. Roth MKM analyst Craig Irwin said margins may face the following pressures: Further price cuts amid slowing economic growth.
But that may not dampen enthusiasm among individual investors. In fact, Irving said the stock could be a beneficiary of the turmoil in the electric vehicle industry, as any uncertainty would cause investors to turn to companies like Tesla that have proven they can design, build and sell cars.
Irving said retail investors are likely to keep an eye on Tesla longer than institutional investors, given how much they like the brand. This could leave Tesla stock “suspended” above its original pricing.
“Retail trades often rely on courage and heart,” Owen said. “A lot of people like Tesla.”
The analyst noted earlier this year that changes in individual investor sentiment are so important to Tesla’s stock performance that hedge funds take note of the trends when evaluating actions.
Most on Wall Street agree that Irving gives Tesla a neutral rating of no more than “hold,” recommending neither a buy nor a sell on the company. Following a rebound in 2023, analysts polled by London Stock Exchange Group (LSEG) on average see the stock falling about 13% next year.
Individual investors are often the butt of jokes, with investment experts citing their inability to time the market and optimally allocate funds.
However, individual traders have come under the spotlight as “meme” stocks, which have been squeezed by short sellers during the pandemic, have risen. Even as the craze subsides, retail trading remains popular: The average investor will spend more than four times as much on the 20 most commonly purchased securities in 2023 as in all of 2018, according to early December data from Vanda.
For Schwartz, the UC professor, flying to Tesla this year was complicated.
He said it would be concerning if individual investors made larger bets on single stocks than funds investing in diversified indexes like the S&P 500 ETF. However, he said that while investing is safer by spreading your bets across multiple stocks, trying to pick certain companies is preferable to not entering the market at all.
“It would be much better if the trader just bought the index and forgot the password to their brokerage account,” he said. But, “even if Tesla underperforms the market, it’s still better than just spending it on useless consumption and not participating.”
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