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Funds with Heavy Tesla Investment Struggle as Stock Continues to Drop

Several mutual funds with a significant portion of their assets invested in Tesla have experienced significant losses in the past year as the electric vehicle manufacturer's stock has plummeted.

Tesla EV and Elon Musk
Tesla EV and Elon Musk

According to Morningstar, 50 actively-managed U.S. equity funds with over 5% of their assets in Tesla saw an average decline of 42.1% in 2020, more than double the average 17% drop among U.S. stock funds. The Baron Partners Retail fund, which has the largest percentage of assets invested in Tesla out of all U.S. mutual funds at 52%, fell nearly 43% in 2020, while the Zevenbergen Genea Institutional fund, which has 13% of its assets in Tesla, saw a decline of nearly 59%.

Musk's Twitter Distraction Cited as Factor in Tesla's Poor Performance

Some analysts attribute Tesla's struggles partly to CEO Elon Musk's acquisition of the social media network Twitter and the subsequent shakeup at the company. Musk completed the $44 billion acquisition in October 2020 and has since fired top executives and let go more than half of Twitter's staff while appearing to shift strategy tweet by tweet.

Tesla's stock fell about 65% in 2020, accelerating declines after the Twitter acquisition. Shares fell 37% in December and more than 12% on the first trading day of 2023 after the company's Q4 deliveries fell short of expectations due in part to logistical issues. According to Forbes, Musk's net worth has also fallen by over $100 billion, causing him to lose his status as the world's richest person.

Big Investors in Tesla Remain Bullish Despite Stock's Struggles

Despite the challenges faced by Tesla in the past year, some of the company's biggest investors have not wavered in their support. The ARK Innovation ETF, managed by star stock picker Cathie Wood, purchased 144,776 shares of Tesla during the sell-off on Tuesday, increasing its stake in the company to about 6.5% of its $5.9 billion in assets.

The fund saw a decline of 67% in 2020. Graham Tanaka, whose Tanaka Growth Fund has about 5.3% of its assets invested in Tesla, also expressed confidence in the company, citing its superior battery technology as a reason for its potential to outperform in the long term.