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Ahead of Earnings, Tesla Reminds of ETFs’ Advantages


Shares of Elon Musk’s electric carmaker Tesla (TSLA) jumped 8% Monday on volume that was 22% higher than the daily average. For Tesla bulls, Monday’s action was encouraging because California-based Tesla delivers quarterly results on Tuesday.

Analysts are expecting earnings of $13.4 million or 11 cents a share, compared to a loss of 92 cents a share last year. Sales are expected to have surged almost 1,000% to nearly $535 million. Upside surprises and upbeat guidance could send Tesla racing toward $200 (it closed at $175.20 on Monday) while benefiting the so-called Tesla ETFs in the process. [Tesla Could Drive This ETF Higher]

Those long shares of Tesla would love to see that happen after the stock plunged 17% in October while shedding $4.1 billion in market value. Highlighting just how rapidly the stock has appreciated, Tesla’s lost $4.1 billion in market value last month was more than its entire market cap at the beginning of 2013, reports Michelle Jones for ValueWalk.

However, while Tesla tumbled last month, the two ETFs that have previously held large allocations did not. That scenario could serve as a valuable reminder to investors that while an ETF that holds Tesla is unlikely to outperform the stock on the way, the fund will not be as bad as the stock in the event of, say a 17% one-month decline.

That lesson should have been learned last year when Apple (AAPL) started its decline from the $700 area to below $400 earlier this year. [Apple Slices With ETFs]

The advantage of a Tesla ETF over the stock itself was on full display last month when the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) rose 1.7%. QCLN currently has a 6.65% weight to Tesla, making it the ETF’s fifth-largest holding. Interestingly, Musk’s SolarCity (SCTY) is QCLN’s sixth-largest holding with a weight of 6%.

The Market Vectors Global Alternative Energy ETF (GEX) , which for much of this year has held the largest ETF allocation to Tesla, was higher by 0.15% in October. Nothing to brag about, but far better than a 17% loss.

Tesla’s was once GEX’s largest holding,  but the aforementioned $4.1 billion loss in market cap has relegated the stock to the third spot in the ETF. GEX is not Tesla, but the ETF is up 64% this year and its worst mutli-week loss has been 12.2%. There is a lesson in that.

Market Vectors Global Alternative Energy ETF