Up until last week, Tesla (TSLA -4.23%) was one of the largest holdings in my real-money stock portfolio. What started as an ordinary stock position in 2014 had grown into an uncomfortably large portion of my active investments.
Generally, I like to hold onto my winners and let them keep winning. But this time, I had three good reasons to cut back on my Tesla exposure.
Here's why I sold 90% of my Tesla shares last week. I will also tell you what I did with the cash that this move unlocked.
CEO Elon Musk isn't inspiring anymore
Tesla used to inspire me.
I never saw the company as a maker of electric cars, facing off against companies like Toyota Motor and General Motors. No, Tesla's car-making operation was always just a stepping stone toward changing how humans use and produce energy. After kick-starting the car industry into adopting electric vehicles on a massive scale, it would be time to move on.
In the end game, Tesla would be a leading producer of solar-power solutions and battery banks. That's a $13 trillion market today, making the auto industry's $2.7 trillion market footprint look small.
This long-term vision was Elon Musk's brainchild, and I wholeheartedly support it. That's why I'm hanging on to 10% of my Tesla investment, rather than closing out the entire position.
The thing is, I don't think Elon Musk is excited about it anymore. This isn't the place to list all of Musk's silly distractions and mistakes in recent years. Let me just hit some of the lowlights.
- Seemingly bored with the day-to-day struggle of Tesla's business and long-term strategy, Musk has become an important influencer on social media platforms such as Twitter (TWTR).
- His social media obsession grew so large that he attempted to buy Twitter for $44 billion -- and then tried to cancel the deal. That project is going to court now, as Twitter is suing Musk for breach of contract.
- From the department of trivial silliness, Musk is officially the "Technoking of Tesla," paired with the "Master of Coin," Zach Kirkhorn. They also retain their traditional titles of CEO and CFO, respectively, but I guess those terms just weren't interesting enough.
- In the cryptocurrency space, Musk supports the worthless-by-design joke currency Dogecoin, while selling off Tesla's more serious Bitcoin holdings at a massive loss. Maybe he doesn't understand how cryptocurrencies work, or perhaps he just wants to destroy the credibility of the entire crypto idea. Either way, his tweets and interview quotes hold market-moving power in the crypto industry and his jokes/mistakes/whims have consequences.
There's more, of course, but let's stop there. Elon Musk doesn't strike me as a genius on a world-changing mission anymore. Therefore, I'm no longer interested in owning a piece of his primary business. I hope others will continue his work, but Tesla doesn't look like the best way to invest in an electrified future.
Time to cash in enormous gains
My Tesla shares moved from $41 to $726 in eight years, mostly thanks to Elon Musk actually executing his long-term plans. Thank you very much for that 17-bagger, Elon. The 10% sliver I'm leaving in Tesla stock is still 70% larger than my original investment, and now it's time to put the rest of those gains to work in other investments.
So many better places to invest that money
After the inflation-powered market drop in the first half of 2022, it's easy to find more promising places to invest that massive Tesla haul. For example, language-leaning expert Duolingo and telemedicine-veteran Teladoc Health have fallen dramatically from my original investment points, but their business prospects haven't changed. Likewise, digital-media giant Netflix has taken some of the deepest price cuts on the market for all the wrong reasons. Even after a 20% earnings-inspired price boost, my Netflix investment deserved some more cash.
So I doubled down on these three stocks, building on my existing investments. Netflix is my largest holding, once again, taking that crown back from Tesla. I'm very comfortable with this state of affairs since I see tremendous value in Netflix, while my Tesla thesis has lost its long-term appeal.
The stock market has been overvalued for a couple of years, but that problem faded in early 2022. Therefore, it made sense to stash some cash in an exchange-traded fund based on the S&P 500 market index. For this purpose, I chose the respectable, low-fee Vanguard S&P 500 Index ETF.
My portfolio has been rebalanced to more closely match the stocks I do and don't believe in, and I think this action will serve me well in the years to come. Mind you, I have no illusion of timing the market perfectly here.
Tesla's stock jumped higher on solid earnings after I sold my shares, and Teladoc fell after a mixed report. The general bear market may still have further to fall. That's fine, and maybe I'll do some more rebalancing along the way. The market will still go up in the long run.