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Shares of electric-car maker Tesla (NASDAQ: TSLA) have been surging higher recently. Indeed, the stock has doubled year to date. Over the last 30 days alone, shares have risen 43%. You'd think with such an incredible gain behind it that the stock could cool off soon. But one anal
Politics are increasingly creeping into all areas of American life, and for better or worse, investing is not immune to this phenomenon. We
recently covered the growing number of ETFs that allow people to invest in companies that they believe are aligned with their viewpoints. These ETFs do this by screening for companies that donate money to political candidates or causes.
Now, Subversive ETFs has unveiled an interesting new twist on political ETFs with two brand new ETFS, one for each opposing side of the aisle -- the
Unusual Whales Subversive Republican Trading ETF (
BATS:KRUZ)
and the
Unusual Whales Subversive Democratic Trading ETF (
BATS:NANC)
. How do they work, and could they be worthy of a place in your portfolio?
How Do These ETFs Invest Like Political Insiders?
As one might guess, the Democratic version of this ETF’s ticker is a reference to Democratic congresswoman and former Speaker of the House Nancy Pelosi, while the Republican ying to NANC’s yang is named for Ted Cruz, the high-profile Republican Senator from Texas and former presidential candidate.
While a number of ETFs allow investors to invest in stocks that they feel like match up with their political preferences, these two new ETFs take a whole new approach. Instead of merely tracking which companies make donations to politicians, NANC and KRUZ utilize data provided by Unusual Whales, an options and equity data platform, to track what stocks members of Congress are buying and selling, using this information to invest alongside them. KRUZ invests in equities bought or sold by Republican members of Congress, while NANC does the same thing with Democratic members of Congress.
If you’ve spent any time on the financial side of Twitter (often called "FinTwit") in recent years, you’ve likely seen plenty of accounts discussing the transactions made by Nancy Pelosi and her husband, Paul, and users joking (or perhaps only half joking), that Pelosi is a better investor than
Warren Buffett based on her timely buys and sells before major news comes to light about some of these stocks.
While the ability of politicians to enrich themselves based on inside knowledge and influence they derive from positions as lawmakers is an unseemly part of U.S. politics (the U.S. is the only democracy in the world that allows officeholders to invest like this), I give Unusual Whales and Subversive ETFs credit for using data to level the playing field and at least letting everyday Americans invest like these political insiders.
They are able to do this because, thanks to the STOCK Act, members of Congress and their spouses must disclose what stocks they buy and sell.
How Are Politicians Investing?
Now that we know how they work, let’s take a look at what NANC and KRUZ look like in practice. These ETFs are actually incredibly diversified, which stands to reason, as they are representing the transactions of hundreds of Congressmen and Congresswomen.
NANC holds a massive 741 positions, and its top 10 holdings make up 47.4% of the fund. Below, you’ll find an overview of
NANC’s top 10 holdings using TipRanks’ holdings tool.
As you can see above, NANC skews heavily towards mega-cap tech stocks like Microsoft (
NASDAQ:MSFT
) and Apple (
NASDAQ:AAPL
), so holding it would give investors exposure that isn't all that different from investing in massive tech ETFs like the
Invesco QQQ Trust (
NASDAQ:QQQ)
or the
Technology Select Sector SPDR Fund (
NYSEARCA:XLK)
.
You’ll also notice that NANC’s top holdings collectively boast some pretty impressive
Smart Scores, with eight of its top 10 scoring 8 or above. The Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. The score is data-driven and does not involve any human intervention.
Meanwhile, KRUZ holds 486 positions, and its top 10 holdings make up a fairly minuscule 16.5% of assets. Check out the table below for an overview of
KRUZ’s top holdings.
KRUZ clearly isn’t as tech-centric as NANC, and it skews more towards what you might call ‘old economy stocks’ like energy companies and tobacco giant Philip Morris International (
NYSE:PM
). But there’s a little bit of everything, with Netflix (
NASDAQ:NFLX
) representing the tech sector and healthcare companies also having a presence. Seven out of KRUZ’s top 10 positions feature Smart Scores of 8 or above.
NANC has an ETF Smart Score of 8, edging out KRUZ, which scores a 7.
One thing to make note of is that just because these two ETFs represent different sides of the aisle, that doesn’t mean there isn’t overlap in their positions. Politicians from both parties have bought stocks like Amazon (
NASDAQ:AMZN
), Home Depot (
NYSE:HD
), and Ford (
NYSE:F
), just to name a few, so you’ll find these and plenty more in both ETFs.
Are Analysts Bullish on NANC and KRUZ Shares?
Analysts view NANC in a positive light. It has a Moderate Buy rating, and the
average NANC stock price target of $29.94 implies upside potential of 11.5% from the ETF’s current price.
The analyst community views KRUZ relatively similarly, giving it the same Moderate Buy consensus rating. Further, the
average KRUZ stock price target of $28.52 implies 15.2% upside potential.
Investor Takeaway
This is an interesting concept for an investment vehicle, and I also give Subversive ETFs and Unusual Whales credit for seeking to level the playing field between politicians and everyday Americans, at least in the investing sphere.
It’s feasible that this strategy of following the investing decisions of Congressmen and congresswomen could be a fruitful one, but these ETFS just launched in February of 2023, so for now, they don’t have much of a track record to judge them on, and time will tell how effective this strategy is.
These are still relatively tiny ETFs in the investing landscape -- KRUZ currently has just $4.9 million in assets under management, while NANC has $6.7 million.
One additional downside to be aware of is that both of these ETFs charge relatively high fees -- KRUZ and NANC both have expenses ratios of 0.75%, meaning that if you were to invest $10,000 into one of them today, you would pay $75 in fees in year one. For these reasons, I am watching KRUZ and NANC as an interested observer rather than buying one or the other.
One additional idea is that if I were interested in investing in NANC, I would consider simply investing in the aforementioned ETFs like QQQ or XLK, as they give you much of the same exposure to the large-cap tech stocks that make up NANC’s top holdings and offer lower fees and a much longer track record of performance.
Disclosure
Even if you like EVgo (
NASDAQ:EVGO
), the company's stock looks like a no-go due to recent deals between a well-known
electric vehicle (EV) manufacturer and two giant automakers. Therefore, I am bearish on EVGO stock.
EVgo is an ambitious start-up business that has a network of EV charging stations. This might sound like a terrific growth opportunity for prospective investors. Yet, the market isn't bullish on EVGO stock, and while I don't always agree with the crowd, I actually share their sour sentiment in this instance.
As we'll discover, at least one insider bought EVgo shares not long ago, and Wall Street's analysts aren't ultra-bearish on the stock (though that's liable to change). Nevertheless, after you've heard the latest developments in the EV space, you'll probably choose not to consider a long position in EVgo today.
EVgo Posts Seemingly Strong Sales, but Don't Get Too Excited
EVGO stock
has been on a steep downtrend lately, and this might baffle some investors. After all, the stock should be moving higher since EVgo posted a
first-quarter 2023 earnings beat. Be sure to delve into the details, though, before you think about jumping into a trade.
It's true that EVgo posted a quarterly net loss of $0.18 per share, slightly beating the consensus estimate of a loss of $0.19 per share. Furthermore, EVgo's Q1-2023 revenue
increased 228.6% year-over-year to $25.3 million, and those sales figures look impressive.
On the other hand, EVgo's quarterly sales fell short of Wall Street's forecast by $1.5 million. Moreover, EVgo's guidance for Fiscal Year 2023 revenue is rather vague, at a wide range of $105 million to $150 million. Analysts, meanwhile, called for revenue of $138.8 million.
So, EVgo's results and outlook aren't ideal. For what it's worth, an EVgo insider, Chairman David Nanus, recently
bought 5,882,352 shares of EVGO stock. That's a bold $20+ million bet, but is it enough to convince cautious financial traders to invest in EVgo?
The answer is -- probably not. Traders are likely still skittish, as EVgo
disclosed an underwritten public offering of around $125 million worth of Class A shares last month. Even beyond the share dilution concerns, it's not necessarily a positive sign if EVgo feels the need to boost its balance sheet by selling a large number of shares.
Tesla's Charger Deals Spell Trouble for EVgo
In case there weren't already enough reasons to worry about EVgo's future prospects, the EV infrastructure industry dropped not just one but two bearish bombshells on EVgo. Late last month, Tesla
reached an agreement with Ford (
NYSE:F
), so that now and in the future, anyone who owns a Ford vehicle will have access to Tesla’s network of rapid EV charging stations known as “superchargers.”
Furthermore, in a still-fresh development, General Motors (
NYSE:GM
) established a similar
EV charging agreement with Tesla to the one that Ford forged with Tesla. According to a
Barron's report, General Motors anticipates that its EVs will be able to access Tesla’s “supercharging” network sometime in 2024.
This is good news for the vehicle electrification movement in general since it will allow convenient interoperability between EV and charging brands. However, it's potentially devastating news for a competing EV charging station provider like EVgo.
It makes sense that
EVGO stock dropped like a rock today, as traders can envision many Ford and General Motors EV drivers using Tesla's "superchargers" because they recognize the familiar Tesla brand name instead of going out of their way to try an EVgo charger.
Is EVGO Stock a Buy, According to Analysts?
All in all, Wall Street has been fairly optimistic about EVgo, though this could change at any given moment. On TipRanks, EVGO stock has a Moderate Buy rating based on four Buys, three Holds, and one Sell rating assigned in the past three months. The average
EVGO stock price target is $8, implying 138.8% upside potential.
Conclusion: Should You Consider EVGO Stock?
In case you haven't figured it out already, I'm definitely not recommending taking a long position in EVGO stock. I usually root for start-up businesses seeking to support clean energy initiatives. Yet, Tesla's new EV charging agreements are just too problematic for EVgo.
Maybe at some point in time, there will be reasons to consider investing in EVgo. For the rest of 2023, however, it's simply too risky to consider buying EVGO stock, and current shareholders might want to think about cutting their losses and moving on to something safer.
Disclosure
Tesla (
NASDAQ:TSLA
) stock is
on a roll, and you definitely don't want to stand in the way of this moving train (or car) because you're liable to get run over. I am bullish on Tesla stock because the sentiment surrounding Tesla is overwhelmingly positive. Furthermore, the optimism may be justified by Tesla's arrangements with Ford (
NYSE:F
) and General Motors (
NYSE:GM
).
Believe it or not, Tesla stock has already risen for 10 consecutive days, and today will probably make it 11 days in a row. As we'll discover, analysts are lukewarm on TSLA stock's future prospects. Yet, financial traders are relentlessly pushing Tesla's share price higher.
If the trend is your friend, then Tesla stock could be your profitable pal as long as the Tesla train keeps on moving forward. If you're not on board with this, it's still probably not a great idea to short TSLA stock since that's a very dangerous proposition.
Don't Obsess Over Tesla's Valuation
If you subscribe to the
Warren Buffett philosophy of investing in undervalued businesses that pay dividends, then you might bristle at some of Tesla's vital stats. Tesla doesn't pay any dividends, and both
crowd wisdom and
blogger sentiment are bullish for TSLA stock.
Plus, value-focused investors would probably cringe if they found out that Tesla has a GAAP trailing 12-month (TTM) price-to-earnings (P/E) ratio of 69x, which is several orders of magnitude greater than the sector median P/E ratio of 16.6x. Further, Tesla's TTM price-to-book (P/B) and price-to-sales (P/S) ratios are much higher than their respective sector median values.
Yet, every time Buffett-style investors complain that Tesla is too richly valued, financial traders find another reason to push the share price higher. For instance, even after many consecutive green days, TSLA stock still moved up yesterday because of a rumor/report that Tesla is
in talks with a regional government in Spain to set up a new "gigafactory" or large
electric vehicle (EV) factory there.
Clearly, the market is eager for positive news and will accept just about any excuse to buy Tesla stock in 2023. Still, there's at least one news item that's not just an excuse, as it points to Tesla's value-added collaboration with a pair of old-school automotive giants.
Tesla Partners with Ford and General Motors on EV Chargers
In late May, Tesla
reached an agreement with an unlikely partner -- Ford. Currently and in the future, anyone who owns a Ford vehicle will have access to Tesla's network of "superchargers" (i.e., rapid EV charging stations).
The market celebrated this bold move, and I don't blame them. If the vehicle electrification movement is going to continue in the U.S., automakers and charging station providers will need to work together. Tesla and Ford, even though they are rivals as automakers, are leading by example with this EV-charging agreement.
Now, in a fresh update, General Motors is following Ford's lead by establishing a similar
EV charging agreement with Tesla. Reportedly, General Motors expects its EVs to be able to access Tesla's "supercharging" network sometime next year.
There's a bigger-picture implication here since Ford's and General Motors' arrangements with Tesla should make it more convenient to charge a wide variety of EVs. All in all, these agreements are a win-win for practically everyone concerned -- except for anyone imprudent enough to short TSLA stock.
Is TSLA Stock a Buy, According to Analysts?
It might surprise you to discover that Wall Street's experts aren't massively bullish on Tesla right now, though they are somewhat positive. On TipRanks, TSLA stock comes in as a Moderate Buy based on 15 Buys, 10 Holds, and four Sell ratings. However, the
average Tesla stock price target is $198.54, implying 19% downside potential.
If you’re wondering which analyst you should follow if you want to buy and sell TSLA stock, the most profitable analyst covering the stock (on a one-year timeframe) is
Alexander Potter of Piper Sandler, with an average return of 115.39% per rating and a 64% success rate. Click on the image below to learn more.
Conclusion: Should You Consider Tesla Stock?
Tesla will probably continue to punish the short-sellers and reward its shareholders this year. The skeptics can point to valuations all day long, but that's not likely to stop the fast-moving Tesla train.
So, I won't try to stand in the way of TSLA stock's powerful forward momentum right now. Also, I believe it's fine to consider a long position in Tesla if you'd like since the market's optimism appears to be justified.
Disclosure
U.S. stock futures are mostly unchanged before the last trading day of an eventful week. This week, the market’s benchmark – the S&P 500 Index – exited from a bear market since October 2022 and formed a new bull market.
For the foreseeable future, the charger wars are over, and Tesla can be declared the victor. But what does that mean for existing or wannabe TSLA investors?
In this video, I will talk about the recent partnership between General Motors and Tesla (NASDAQ: TSLA), what both companies will gain from it, and which other automakers will follow suit. At the end of May, Tesla and Ford announced the same partnership.