Thread by @JonahLupton

Yesterday we got the news $TSLA is going into the S&P 500. Based on the $5-6 trillion of S&P Index assets those funds/ETFs will need to buy approximately $65-75 billion of $TSLA stock over the next 4+ weeks unless the S&P committee extends the allocation requirement into Q1.

Now that we know this is finally happening there's a floor on $TSLA stock for the near term. There are very few reasons why anyone that owns $TSLA stock should be a seller right now. This is going to make it harder for these funds to not bid up the price.

With this news I believe we see $TSLA at $500+ by end of week, $550+ by end of year, $600+ by end of Q1 and possibly $650-700 by end of 2021.

Now let me explain why... we already know that @ElonMusk owns 18-20% of $TSLA stock and he's not selling.

Over the next couple months the S&P 500 Index funds will own 15-20% of $TSLA stock and they're not selling.

We already know $TSLA has the most insane cult following of early investors and they're not selling.

But here's what keeps the stock moving higher...

Now that $TSLA is going into the S&P 500 and will be one of the 10 largest companies in the US stock market it will force thousands of fund managers to start buying $TSLA.

The most common benchmark used for fund managers to gauge performance (and bonuses) is the S&P 500 Index.

No large cap fund manager or growth manager indexed against the S&P 500 can take the risk of not owning $TSLA.

We saw this happen in 2019 where $AAPL and $MSFT pushed the S&P 500 up 30%.

Last year if you were managing a large cap fund or growth fund and didn't own $AAPL and/or $MSFT there's a good chance you underperformed your primary benchmark.

In the world of institutional investing you don't need to crush your benchmark but you can't keep underperforming it.

This is why you see so many large funds owning all the largest companies because in a market cap weighted index like the S&P 500 those mega cap companies can really move the needle and if you don't own them you're playing a dangerous game of catch-up.

Putting the valuation and fundamentals aside, the performance of $TSLA over the next 6-12 months is more about supply vs demand (ie buying from the index funds) and then the active managers needing to add $TSLA since it's now a key participant in their primary benchmark.

As $TSLA's market cap rises over the next couple months b/c S&P funds are buying shares it means the next S&P index rebalancing in Q1 will be even higher for $TSLA.

If it's 1.1% to 1.2% for Q4, it could easily be 1.3% to 1.4% in Q1 depending on how the rest of the S&P performs.

$TSLA is currently my largest position at 9% and I added to it this morning at $452. Everyone needs to do what's right for them but personally I don't see any downside to owning $TSLA right now with 20-40% upside over the next 6 months.

Update:

I trimmed a few of my holdings today so I could increase $TSLA from an 8% position to 10% position.

Over the next 3-4 months I think $TSLA is a slam dunk for 20-25% upside thanks to the S&P inclusion.

Once $TSLA gets to $540+ then I’ll consider trimming it back.