Stocks 101

Yesterday, it was announced that Tesla, one of the biggest companies in the world and the largest electric car manufacturer, would join the S&P 500 index. This news is awesome for long term investors, it adds a level of security to their investments in the future, but what does it really mean?

First of all, what is the S&P 500 index.This is a large group of 500 large publicly traded companies in the United States based on market cap. It is not a precise list of the top 500 companies that are the most valuable, because there are other indicators as to what companies can be in this index. The S&P 500 serves as a benchmark or equity barometer for investors to examine and use to make their decisions in the stock market. There are other similar indexes used by investors such as Dow Jones.

Tesla did pass this benchmark to join the S&P however it did score below average and the electric car maker might have to join in sections. Nevertheless, with the inclusion of the TSLA stock in the S&P 500, Tesla will be placed into the portfolios of innumerable managed funds and will provide a clear outlook for Tesla’s shareholders. Based on the market cap of Tesla on Tuesday, if it were to join on this day, it would join at a valuation of about $420 billion which is the ninth largest company in the index by market cap. 

The joining will take place on December 21st before the trading day begins, as said before in portions of two possible due to its large size and market cap. Tesla would be one of the richest additions in the past decade. Tesla shares would sum up to about 1% of the index and the S&P funds indexed would have to be sold for a value of about $50 billion in order to make room for Tesla. 

2020 has been a year not to forget with all of the tragedies and an immense number of people dying from disease, the stock market has also had a historic year. March 16, 2020 will go down as one of the worst days for investors in the US as the stock market fell with the news of a “lockdown”. Regardless, Tesla has had a great year with the stock starting the year at about $280-300 until it went on a tear in the summer and had a split at the end of August. Overall this year Tesla has been on the rise, up almost 500% this year. Though many have warned against it, investors think Tesla will nose dive soon, something we have yet to see with the monumental climb Tesla is making. 

This past weekend Pfizer, a multinational pharmaceutical company, announced that it has a potential vaccine which is more than 90% effective. This was huge news not only for the US but for countries around the world as many once strong economies are now crippling to the ground. The US especially had one of the best economies ever before COVID-19 hit in March and now this vaccine could give the stock market the jumpstart it needs. 

It’s common knowledge that the stock market is very volatile now, beginner traders are getting rare opportunities to make loads of money with the extremely shaky market. Many have said that the rise could lead to a recession or we could see the market explode in the coming weeks and months as the news of a potential vaccine shook a sector of the stock market on Monday. Travel.

Expedia (EXPE) saw a 20% spike as soon as the market opened and other travel stocks such as Tripadvisor (TRIP) and Trivago (TRVG) saw 30% spikes early Monday morning. With more news surfacing in the coming weeks, travel stocks should be carefully watched as the industry has seen billions in potential profit lost with the travel bans and safety precautions taken by many individuals across the world. With certainty, after COVID has come under control of major health departments travel will start to grow back to the pace that it was at before the pandemic and though it will be slowly opened and available travel stocks will for sure be the first ones on the rise. 

Some popular travel stocks to watch in the coming weeks and months are Expedia (EXPE), Tripadvisor (TRIP), Trivago (TRVG), and MakeMyTrip (MMYT). These are a small amount of the major travel booking stocks that were significantly affected with Pfizer’s groundbreaking news. 

The United States just set a record of the most COVID-19 cases in a day this past Friday, October 30th: 100,000 new coronavirus cases. Though this is known to the whole world as people watch and see the news reports on the pandemic everyday and some even routinely monitor the numbers. This wave of COVID could completely change the rest of Q4 for this year as elections are also coming up and this is arguably the most important election in US, if not, world history. This will change the economy and the election could change the projections of many stocks as the highly volatile market is already very risky for day traders and options traders. 

Some stocks to watch in these upcoming months are Netflix (NFLX), Zoom (ZM), and Moderna (MRNA). Out of these, I think Netflix is the safest bet as Zoom and Moderna could be more unpredictable, but are suitable for weekly/monthly options. With Netflix just reducing their prices they did climb pretty high, but came back down as followed by the popular trading strategy, buy the rumor, sell the news. This basically means that a stock should be bought before the rebound and should be followed based on rumors and sold before the news actually comes out. As seen in many top tier company stocks such as Microsoft, Netflix and Tesla. Stock prices rise with a rumor and drop when the news comes out, so it’s not ideal to buy it right before the news comes out. 

With NFLX, this stock has been floating in the mid 400s to mid 500s for a few months as COVID started and an ideal buy would be under $480 and sell would be about $520. Projections for the fourth quarter of Netflix are lower than last lower, over 30% lower however we could see this be downgraded as Coronavirus cases surge across the country, flu season is starting and the weather is getting cooler prompting many people to stay indoors and spend their time inside their homes. 

Elon Musk’s world famous car and clean energy company continues to innovate and design exceptional products and show the world that electric cars are the answer to the future. 

Tesla is now valued higher than prominent car brands such as Toyota and Volksvagen and is also valued higher than famous companies such as Coca-Cola and Disney. The market value of Tesla has climbed to a whopping $290 billion making Tesla the highest valued car company in world. 

On August 31st, Tesla will be splitting its stock five-for-one to make the stock “more accessible” for many investors and even their own employees. The stock is floating around $1,550 as of August 12th and it has climbed nearly 400% since the Covid-19 pandemic started. A five for one split in this specific scenario would mean that if an investor has 1 share of Tesla valued at $1,500 they would get 5 shares valued at $1,500 meaning that each individual share would be worth $300. 

This is exceptional for both current shareholders and future investors who plan to buy the stock after the split. Many people will be buying TSLA causing an inclination for the stock to climb as it would be in any other circumstance. The TSLA stock has been doing exceptionally well this year as they continued to meet deliveries during quarantine and beat quarterly earnings expectations. 

Tesla needs to be on every investor’s watchlist in these coming weeks as this is a huge opportunity to make large profits off the stock, especially with this highly volatile market.