Overview
Elon Musk is an engineer, entrepreneur and the current CEO of Tesla Motors. He is also the founder of the aerospace manufacturer, Space Exploration Technologies Corporation (SpaceX) and is the chairman of SolarCity Corporation. Musk has amassed a high net worth of over $10 billion and he has also successfully invested in a number of other companies. In this article, we will take a closer look at what stocks Elon Musk holds and what it means for investors.
Elon Musk’s Current Investment Portfolio
As of mid-December 2017, Elon Musk held shares in a number of companies including Tesla Motors, SpaceX, SolarCity, PayPal, AI startup Vicarious, Indian e-commerce company Flipkart and online payment processor Stripe. Musk holds the majority of his shares in Tesla Motors, where he currently holds approximately 28 million shares. This represents around 10% of Tesla Motors’ total equity, making it his largest individual position. According to the SEC filings, Musk has steadily increased his holdings in this company over the past few years.
Musk has also consistently held a sizable interest in his aerospace company SpaceX, which manufactures re-usable rockets and launch vehicles. In October 2018, SpaceX launched its Falcon 9 rocket, with Musk as the chief executive officer. SpaceX has been widely viewed as a long-term investment with the potential to disrupt the commercial space launch industry. Musk is noted to have a large number of SpaceX shares, though he is not legally required to disclose this information.
In addition to his investments in the automotive and aerospace sector, Musk has taken a keen interest in the artificial intelligence (AI) sector. In April 2017, he contributed to the AI startup Vicarious Systems, a company whose mission is to create AI software modeled after the human brain’s cortex. Musk has also invested in Indian online marketplace Flipkart as a personal venture, and he is an investor in the online payment processing company Stripe.
What It Means for Investors
The diversified investments and continued interest of Musk in numerous companies indicates that the entrepreneur is looking for opportunities that span across industries and continents in order to diversify his own portfolio and gain the most out of his investments. While his investments provide little insight into the particular sectors he believes will be most successful in the long run, they do provide an example of the type of investments that Musk finds attractive.
One of the most interesting aspects of Musk’s investment strategy is that he typically invests in companies that are still in the early stages of their development, leading some to believe that he may be attempting to seize a larger stake in these companies before they ‘go public’. By taking an early stage approach, Musk can benefit when these companies finally become available to the public, liquidating his shares for a much higher return.
His long-term approach to investments suggests that he is more interested in finding companies with sustainability and potential for growth than a quick return on his investments. Critics of this strategy argue that his approach is too risky, and that other investments, such as index funds and special financial instruments, may be more financially secure, yet provide just as much potential return.
Tesla Motors
Tesla Motors is renowned for being one of the most innovative and successful electric car manufacturers in the world. Musk’s bullish attitude and managerial decisions have been credited with the growth and success of the Tesla brand, which has seen its market cap grow to over $50 billion since its debut in the U.S. Stock Market in 2010. Musk has said on numerous occasions that Tesla Motors, and his other companies, are designed to drive technological progress and create a more sustainable future.
The company’s stock price has skyrocketed in recent years, creating a great return for investors that purchased shares early on. Despite the company’s current success, investors must also keep in mind that Tesla Motors is still very much in a development phase. The company is still reliant on government subsidies for a large portion of its sales and its products are still struggling to become profitable.
Though the company has made strides in the improvements of its cars and has achieved a high public profile, it is still heavily dependent on Musk’s leadership, who some believe may be too heavily focused on other ventures and not actively managing the company. The success of Musk’s investments in Tesla Motors will depend heavily on his leadership, as well as the overall success of the company in the long term.
SpaceX
SpaceX is a private aerospace manufacturer and rocket service provider founded by Elon Musk in 2002. With its revolutionary re-usable rocket designs, the company has achieved a number of impressive successes including launching their Falcon 9 rocket and Dragon space capsule and providing regular satellite launches for customers. The company is currently focused on more ambitious projects such as the development of its Big Falcon Rocket, which is designed to eventually take humans to Mars.
SpaceX has not necessarily been a great investment for those outside of Musk’s circle, as it remains a private company and is not available on the stock market. Nonetheless, the success of the company has made it an attractive option for venture capitalists, entrepreneurs and retail investors alike.
Investors that are interested in investing indirectly in SpaceX can purchase shares in one of its many clients, such as the communications company Iridium which SpaceX is contracted to launch satellites for. Alternatively, they can invest in technology companies that are involved in the space industry, such as Orbital Sciences Corporation or Aerojet Rocketdyne Holdings Inc.
SolarCity Corporation
SolarCity Corporation is an American rooftop solar energy provider based in San Mateo, California. SolarCity was formerly co-founded by Elon Musk and Peter Rive, Musk’s cousin, in 2006 and is currently the largest solar energy provider in the United States. The company is committed to making solar power cost effective and accessible to everyone, and currently provides services in over 15 states.
SolarCity has experienced some difficulties in recent years, primarily due to competition from other renewable energy sources such as wind and hydroelectric. Additionally, lower cost competitors have entered into the market, making the rooftop solar market much more competitive.
Despite these challenges, Musk has maintained a large stake in the company since its founding and has implemented numerous cost cutting measures and initiatives to help keep the company afloat. In addition, SolarCity also recently announced a partnership with Tesla Motors that will see the integration of SolarCity’s rooftop solar service with Tesla’s electric car infrastructure.
Investment Strategy and Insights
Musk’s investment strategy is highly informed by his strong technical background and is evidence of his cutting-edge ideas and ambitions. He is clearly looking for long-term investments that can produce returns and help him realize his vision for a sustainable and innovative future.
Nonetheless, investors should always conduct their own research before investing, as no certain outcome is guaranteed when investing. It is also important to note that even though Musk’s investments have been highly successful thus far, his greatest returns may still be yet to come.
Risks and Diversification
Despite the potential for high returns, it is important to be aware of the potential risks when investing. Musk’s investments span a wide range of sectors and therefore present diversification opportunities for investors. Investors that are interested in investing in a mix of sectors may consider investing in companies that Musk holds shares in, such as Tesla Motors, SolarCity and SpaceX.
It is important to note that even when investing in a diversified portfolio, there is still a risk of losses. Investors should always be aware of the risks involved in the investments and must continually assess their portfolio in order to minimize risks. Additionally, investors should also be mindful of the greater economic context and invest in companies that they believe in and understand.
Conclusion
Overall, Elon Musk’s current investments are evidence of his ambition, technical know-how and vision for a more sustainable and innovative future. While his investments may provide a potential for returns, investors should always be aware of the risks associated with investing in any particular sector or company. Lastly, by investing in a diversified portfolio, investors may be able to reduce their risk and maximize their returns.
