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Tesla’s second-largest shareholder may surprise UK investors

Shares in electric carmaker Tesla surged to an all-time high of nearly $1,000 earlier this week. This capped an outstanding rally for the stock, which is up around 300% since the beginning of June 2019.

It isn’t very easy to pinpoint precisely one reason why the stock has achieved this performance in such a short period. Instead, there’s been a handful of positive developments that have helped to change investor sentiment.

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Positive developments

For a start, the company reported fourth-quarter revenues of $7.4bn at the end of January, outperforming expectations. It also reported a net profit of $105m, the second straight quarterly net profit in a row.

Further, production in December surged to a record 105,000 vehicles. Throughout 2019 as a whole, the company manufactured 365,000 cars. In 2020, it says it can produce up to 500,000 in its Fremont, California, plant. If it meets this target, that could be a considerable improvement for the business.


These figures are highly impressive, and there’s no doubt Tesla’s efforts to manufacture an electric car on a mass scale have wholly revolutionised the automotive industry. However, as the company is struggling to report a profit consistently, it remains a risky investment.

As such, if you want to invest in this stock, which is the company’s second-largest shareholder, the Scottish Mortgage Investment Trust (LSE: SMT) could be the better option.

Scottish Mortgage owns a basket of high-flying tech stocks from around the world. The largest holding in the portfolio is delivery and cloud computing giant Amazon. Tesla is the investment trust’s third-largest holding.

Baillie Gifford, which manages the trust, own 7.5% of the electric car manufacturer. That makes it the second-largest single shareholder after Tesla’s founder Elon Musk.

A diversified investment

Buying Scottish Mortgage as a way to invest in Tesla has multiple advantages. Because the car producer is a US-listed company, it deals in US dollars, and some brokers don’t offer US market access.

Meanwhile, the investment trust is available to every UK investor. It takes care of all the US dealing paperwork and currency transactions, so you don’t have to. At the same time, the trust also provides diversification. As mentioned, Tesla is the third-largest holding in the £9bn investment trust.

The rest of the portfolio is invested in a basket of other high-flying and world-changing stocks around the world. For example, 16% of the portfolio is invested in Chinese equities, 5% in German stocks and there are some small Indian equity holdings as well.

Baillie Gifford only charges 0.4% per annum in fees to manage this portfolio on your behalf.

Dividend income

What’s more, unlike buying Tesla directly, shares in Scottish Mortgage support a dividend yield. At the time of writing, the dividend yield stands at 0.5%. This token distribution might not seem like much, but it’s much better than the rate of interest offered on most savings accounts today.

All in all, if you want to benefit from Tesla’s growth, but don’t want to deal with the hassle of owning US stocks or have too much exposure to one business, the Scottish Mortgage Trust seems highly attractive as a long-term growth investment.

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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.