I have a number in mind. With Tesla shares (TSLA) appreciating rapidly over the past few months, more than 70 percent in August alone, our position has become a significant portion of our portfolio. As of this morning’s print, TSLA was 1.9 percent of our portfolio. For context, TSLA ranks 15th out of 32 meaningful positions (at least 1 percent) and 42 total positions. Had I not sold 37.5% of our stake in TSLA during August, TSLA would have been nearly three percent our portfolio.
With that context, please understand my position in TSLA is strongly, though perhaps incorrectly, anchored to a dollar value. Ten thousand dollars is my number. As share prices advance significantly faster than corporate earnings - for context TSLA traded for less than $50 a year ago but yesterday closed within striking distance of $500; the market values TSLA as more than two of Toyota’s market capitalization; and TSLA is barely profitable (end rant) - $10,000 seems like a big round number that does not necessarily need to grow at the same pace as our portfolio. Had I anchored our TSLA position at $5,000 (a similarly arbitrary number), our portfolio would have suffered.
Yesterday, August 31st, was the first day of trading after TSLA shares split five-for-one. As the market opened we held 30.8 TSLA shares and I set a limit order to sell 10 shares at $500 – which is the post-split equivalent of the active order in our account before the close on Friday. Ten minutes prior to Monday’s close, TSLA traded at $499.68 for a brief moment and I made a quick modification to our order.
The roughly 13 percent jump in TSLA on Monday caught me by surprise. Instead of ten, modified the order to sell five shares at $499 – to be sure of execution – and entered a new order to sell five more shares for a twenty percent premium to the current market price. As a result our TSLA exposure was adjusted to $12,900 from $15,400. Going forward I plan to sell more shares as TSLA appreciates at regular intervals. If TSLA is added to the S&P 500 index I may sell more after the dust settles.
The happy result of trimming the TSLA position corrects our balance of cash available. We have been lucky to see our portfolio appreciate more than 22 percent from our high water mark prior to the pandemic and more than 63 percent; our available cash has therefore diminished as a percent of the total portfolio. What a fortunate problem to address. Thank you, Grandma.
PS: Perhaps, to ensure exposure to the upside, I will consider a lower bound of the TSLA position at one percent of our total portfolio.