UK investors don’t have to miss out on the huge gains being made by US stocks like Tesla. If you are a UK investor who wants to invest in Telsa, you can do it indirectly by buying FTSE 100 stock Scottish Mortgage Trust (LSE: SMT). SMT manages a portfolio of listed and unlisted stocks of companies that are “building the future of our economy” and Tesla is one of them.
The US does seem to do things bigger. Giant market caps and rip-roaring share price rises are great, but paying hundreds or sometimes thousands of pounds for a single share is not so great. It makes it difficult to build a diversified portfolio, for one thing. Buying SMT shares is an indirect way to get exposure to Tesla and other exciting stocks, at a more manageable price per share. It’s also more convenient, as it is just buying another FTSE 100 stock rather than a US-listed one.
High per-share prices
The Telsa stock price has surged from a March low of around $350 to over $2,000 now. Those prices are in US dollars. A single share in Tesla will cost a UK investor about £1,560 right now. Now, Tesla is trying to make its shares easier to invest in by doing a stock split at the end of August. Each shareholder will end up with five shares for every one held. This should, in theory, reduce the price of Tesla shares by 80%.
After the stock split, a UK investor could buy a single Tesla share for £312. That is a lot more manageable. But it’s probably still more than the average UK saver puts away each month. High per-share costs are not limited to Tesla. A lot of the hot US technology stocks also have eye-watering prices attached to them. Netflix shares are priced around £376 each and a UK investor buying Amazon will have to pay an astonishing £2,500 per share. Then there might also be extra fees for trading and holding foreign stocks and shares in UK accounts.
There are of course other ways to hold Tesla in a Stocks and Shares ISA but buying shares in SMT is a good option. Tesla makes up a little over 11% of SMT’s portfolio. So a UK investor buying FTSE 100-listed SMT gets Tesla exposure but pays around £9.40 for each share. That is a lot more manageable.
US tech stocks like Tesla, Amazon, and Netflix have high per-share costs. Even after Tesla’s stock split putting together a portfolio of these three stocks will cost £3,188. Amazon will make up 78% of this portfolio. It is easy to see that stocks with high costs per share are difficult to work with and can result in very concentrated portfolios. Highly concentrated portfolios can be risky.
SMT owns around 90 securities in its portfolio. Tesla is the largest holding, but Amazon (9%), and Netflix (3%) are there too, along with a host of other public and private companies. Buying SMT shares will give a UK investor exposure to the likes of Tesla and Amazon but with greater diversification right off the bat.
The SMT share price has outperformed the FTSE 100. The management team appears to have talent. If investors want exposure to Tesla and other US tech stocks without the fuss, I think investing in SMT shares is a good way to go.
The post UK investors get a slice of Tesla when they buy this FTSE 100 stock appeared first on The Motley Fool UK.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James J. McCombie owns shares of Scottish Mortgage Inv Trust. The Motley Fool UK owns shares of and has recommended Amazon, Netflix, and Tesla and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.
Motley Fool UK 2020