Watching Elon Musk's antics with S&P 500 stocks from the sidelines is entertaining. That is until you realize you're exposed to them in your ETFs.
Given the huge market gains of Tesla in years past and Musk's interactions with Twitter, it's not impossible for your exposure to the eccentric billionaire to hit 20% of your holdings. That's the weighting of Tesla in the $16 billion-in-assets Consumer Discretionary Select Sector SPDR ETF, says ETF.com. But add on exposure to Twitter, which is upward of 12% in the tiny Simplify Volt Pop Culture Disruption ETF, you can see how you can quickly put a decent chunk of your portfolio into Musk's hands.
Investors might want to tally their exposure to any single executive, including one as eccentric as Musk. "While investors benefit from diversification through ETFs, TSLA and TWTR are being driven in part by the investor confidence in Musk, which provides key person risk," said Todd Rosenbluth, head of research at ETF Trends and ETF Database.
What's Your Exposure To Twitter?
Musk dominated drama this month with his on-again-off-again $44 billion bid for online short messaging service Twitter. It's been a rough ride for anyone holding the shares.
Twitter stock shot up roughly 50% from its March low until its April high. Twitter's board of directors approved Musk's buyout of the company on April 25. But shares have lost about a quarter of their value since then. Musk now indicates he's backing away from the deal.
All this drama hasn't done any favors for some of the ETFs putting the biggest parts of their portfolios into Twitter. Simplify Volt Pop Culture has now lost half its value this year. But Twitter's ups-and-downs are taking some slightly larger ETFs for a ride, too. The $37 million-in-assets Invesco Dynamic Media ETF puts 8.4% of its portfolio into Twitter stock. And the ETF is down 25% this year.
Where You Own More Of Musk
Twitter remains somewhat of a fringe stock in the S&P 500. But coupled with Tesla, you're likely to put more of your portfolio in Musk's hands.
Twitter ranks just the 240th most valuable stock in the S&P 500. It's only a 0.09% position in the SPDR S&P 500 ETF. But Tesla is now the fifth largest position in the S&P 500. It holds a weight of 1.8%, which is ahead of the 1.7% weight of Warren Buffett's Berkshire Hathaway and 1.4% position in Meta Platforms.
But it's not hard to gain more exposure to Musk's Tesla. Following the Consumer Discretionary Select Sector SPDR's huge holding in Tesla, there's ProShares Ultra Consumer Goods, which has more than 19% of its portfolio in the single stock. And then there's the $4 billion-in-assets Vanguard Consumer Discretionary ETF with a nearly 17% position.
To be sure, owning a piece of Musk's businesses is great when they work. You didn't hear many complaints last year when shares of Tesla jumped roughly 50%.
But now's it's time for investors to size-up their Musk risk, says David Trainer, CEO of research group New Constructs.
"The Musk and Twitter saga is a warning sign for Tesla shareholders. Not only is the stock's valuation completely disconnected from fundamentals, it's obvious that Musk is distracted right now," he said. "Tesla is an overvalued stock and should be avoided and Twitter's stock has arguably no upside catalysts and it should be avoided, as well."
ETFs Exposed Most To Twitter And Tesla
| Top exposures to Twitter | Symbol | Weight | YTD % ch. |
|---|---|---|---|
| Simplify Volt Pop Culture Disruption | 12.2% | -51.2% | |
| Invesco Dynamic Media | 8.4% | -25.4% | |
| Global X Social Media | 7.8% | -34.1% | |
| Invesco S&P 500 Equal Weight Communication Services | 6.7% | -18.5% | |
| Mohr Growth | 4.6% | -16.0% | |
| Top exposures to Tesla | |||
| Consumer Discretionary Select Sector SPDR Fund | 20.7% | -30.2% | |
| ProShares Ultra Consumer Goods | 19.5% | -34.9% | |
| Vanguard Consumer Discretionary | 16.7% | -30.2% | |
| Fidelity MSCI Consumer Discretionary Index | 15.6% | -30.3% | |
| Direxion Daily Consumer Discretionary Bull 3X Shares | 14.8% | -71.1% |
