Shorting Tesla Bonds is a Denmark-Based Hedge Fund’s Strategy

Tesla (TSLA) shares have been on a recent run given its latest earnings report, but one play that is benefitting Denmark-based hedge fund, Asgard Credit Fund, is shorting its bonds. Given the fund returned 29% in 2019, this could be a play worth noting.

“It’s mispriced,” said Daniel Pedersen, the chief investment officer at Asgard Credit Fund, via a Bloomberg report. “Tesla could be upgraded to BB- during 2020, but even in that scenario the credit spread is still too tight.”

As for the stock itself, Tesla short sellers got burned last week after the company reported fourth-quarter earnings results that beat Wall Street expectations. A CNBC report noted that earnings came in at “$2.14 per share, well ahead of expectations for $1.72 per share. It said it expected positive cash flow and net income on a continuing basis going forward barring one-time production investments, a relief to those who’d poured cash into the young auto company in recent years.”

Short sellers could be getting redemption, however, with certain analysts saying that the stock is fundamentally overvalued. It brings to mind the bust in the early 2000s, according to Barclays auto analyst Brian Johnson, who says a forthcoming drop in its share price is imminent given its lofty valuations.

For stock watchers, here are a few ETFs to look at with Tesla holdings:

A few ETFs to watch with holdings of Tesla:

  1. ARK Industrial Innovation ETF (NYSEArca: ARKQ): seeks long-term growth of capital. The fund is an actively-managed fund that will invest under normal circumstances primarily in domestic and foreign equity securities of autonomous technology and robotics companies that are relevant to the fund’s investment theme of disruptive innovation. Most of the fund’s assets will be invested in equity securities, including common stocks, partnership interests, business trust shares and other equity investments or ownership interests in business enterprises.
  2. First Trust NASDAQ Clean Edge Green Energy Index Fund (NasdaqGM: QCLN): seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the NASDAQ® Clean Edge® Green Energy Index. The index is designed to track the performance of small, mid and large capitalization clean energy companies that are publicly traded in the United States.
  3. VanEck Vectors Low Carbon Energy ETF (NYSEArca: SMOG): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Ardour Global Index. “Low carbon energy companies” refers to companies primarily engaged in alternative energy, including renewable energy, alternative fuels and related enabling technologies (such as advanced batteries).

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