Baillie Gifford has slashed the size of its holding in Tesla, the Elon Musk-led electric vehicle company which was its highest conviction bet and biggest driver of returns last year.
The Edinburgh-based asset manager has halved the weighting in both Scottish Mortgage (SMT), the UK’s largest investment trust, and Baillie Gifford US Growth (USA), the best-performing trust last year.
The trusts’ positions in Tesla grew significantly after its nine-fold share price leap in 2020, and after taking some profits, USA’s exposure has fallen to 4.4% from 8.7%.
Other Baillie Gifford funds have yet to report their latest portfolio weightings, but seem likely to have followed suit. Having been Tesla’s largest external investor a year ago with a 7.7% stake, Edinburgh-based Baillie Gifford cut its exposure to 2.8% at the end of December, ranking it Tesla’s fifth biggest shareholder, including Musk who owns 18%, according to Refinitiv data. This was down from Baillie Gifford’s 4.4% position in September.
According to Scottish Mortgage’s latest factsheet, first reported by Fund Hunter on Twitter, Tesla was a 5.1% position, the fourth biggest in the global portfolio at the end of January. This was cut from 8.9% at the turn of the year when it was still its top holding by a significant margin.
As recently as the end of November, fund managers James Anderson and Tom Slater held a whopping 12.3% of the portfolio in the Californian company.
As Tesla’s shares have risen more than nine times in value since the start of 2020, the Baillie Gifford duo has faced frequent questions over whether the stock is overvalued and when they will take profits.
While Anderson and Slater have acknowledged trimming the position previously on portfolio management and diversification grounds, the magnitude of the cut suggests last month saw the first reduction on investment grounds.
January was a relatively placid month of gains by Tesla standards, as the shares rose 19% in dollar terms while US markets were roughly flat.
The move follows a similar cut to long-time Scottish Mortgage favourite Amazon last year, today a 5.9% position.
Last week Tesla bought $1.5bn of bitcoin using its reserves and announced plans to accept payments in the leading cryptocurrency, sending it to dizzying new highs. Musk (pictured) has frequently commented on digital coins on Twitter, often contributing to volatility in their price movements, while also influencing the trading frenzy in Gamestop and other US companies late last month.
In comments to The Times, Anderson sounded sanguine about Tesla’s foray into bitcoin, although he expected to raise it with the company.
‘That neither surprises or unduly bothers us,’ he said. ‘It’s the nature of the company and we’ve long since made our peace with that. Doubtless we will discuss it [the crypto move] in the future and any limits.’
‘As a portion of their now substantial assets, we are content for them to go in this direction,’ he added.
At the end of January, SMT’s 4.8% weighting to Chinese electric vehicle company Nio was little changed month on month, indicating the decision to trim Tesla does not represent a cooling on the wider sector. Chinese internet giant Tencent is now the FTSE 100 trust’s top holding, at a 6.5% position.
The latest portfolio data for the £7.9bn American fund, the open-ended sister strategy, has not yet been released. The same applies to the £4.9bn Long Term Global Growth Investment fund, which Slater also works on, and £2.3bn Positive Change fund where Tesla has been top holding.
Scottish Mortgage shareholders have enjoyed a 118% total return over one year, flying ahead of the 12% gain for the MSCI AC World index.