Tesla’s had a bumper year, finally making it onto the tech-focused S&P 500 index at the end of December after a string of profitable quarters. But despite the electric carmaker’s investor appeal, oil major ExxonMobil has been outperforming Tesla since August.
Exxon was demoted from the Dow Jones Industrial Average at the end of summer, several months before Tesla joined the S&P. However since that date, Exxon’s share price is up 51% compared to Tesla’s 42%.
“Both moves will have delighted those investors who apply strict environmental, social and governance screens when they select stocks, as well as ‘green’ campaigners more generally – but the irony is that ExxonMobil and the price of West Texas Intermediate crude oil have outperformed Tesla and its newly-crowned Technoking in share price terms,” said AJ Bell investment director Russ Mould, noting Tesla boss Elon Musk’s new self-appointed job title.
The price of West Texas Intermediate crude oil is up 53%, bucking the forecast that green stocks were in line for a boost on the back of US President Joe Biden’s new administration.
“ExxonMobil and oil have also proved too slick for Tesla – purely from a portfolio returns perspective – since Tesla made it into the S&P 500, where is it now the sixth-biggest stock by market cap,” Mould added.
Since August, Exxon has declared two quarterly dividends of $0.87 per share, worth $7.4bn, while Tesla has raised $10bn from shareholders via two tranches in September and December. Moreover, since the end of 2020, Exxon has risen 44% compared to a 10% advance by the electric carmaker.
But Tesla’s market capitalisation sits at $680bn, much larger than Exxon’s $256bn. Exxon has also posted four straight quarterly losses, with long-term issues around demand for oil lingering overhead.
“Whether this means it is too early to write-off Big Oil once and for all is hard to say, given the short time spans involved, but it does raise important questions for investors and portfolio allocations,” said Mould.
“Those investors who run strict ESG screens will be entirely unmoved, in the view that sacrificing a few percentage points of returns in the near term is a price worth paying if their invested companies do no, or much less harm over the long term.”
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