Tesla Stock Could Soon Be In Your Portfolio If It Enters The S&P 500 If the electric carmaker enters the S&P 500 index, as is widely expected, Wall Street's most controversial stock would start appearing in even the most mainstream investment accounts.

Tesla Stock Is Soaring. It's Controversial. And Soon, It Could Be In Your Portfolio

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DAVID GREENE, HOST:

Tesla has seen its stock soar really to mind-boggling heights recently. And the electric automaker might soon be joining the S&P 500. This would mean the stock would show up in millions of people's retirement portfolios. NPR's Camila Domonoske explains why this is significant.

CAMILA DOMONOSKE, BYLINE: Warren Buffett is famous for carefully deciding which companies to invest in based on their underlying value. Tesla CEO Elon Musk is not impressed.

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ELON MUSK: And to be totally frank, I'm not his biggest fan.

DOMONOSKE: Here's Musk on Joe Rogan's podcast in May.

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MUSK: He reads a lot of sort of annual reports of companies and all the accounting. And it's - I mean, it's kind of a boring job if you ask me.

DOMONOSKE: Musk has several not-boring jobs. He runs SpaceX, which aims to colonize Mars and Tesla, which set out to save the earth by making electric vehicles cool. Here he is telling Jay Leno why he wanted Tesla's Cybertruck to be bulletproof.

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JAY LENO: I mean, I don't...

MUSK: It's badass and super cool.

LENO: Well, yeah. OK. That's - super cool.

MUSK: (Laughter).

LENO: See, I like that answer. That's a good answer.

MUSK: I mean, do you want your trucks to be bulletproof or not?

LENO: Yeah. I guess I would. I guess I would.

DOMONOSKE: He's having more fun than Warren Buffett. But Buffett's job is an important one, even Musk agrees - careful evaluation to make smart investments. The decisions are normally driven by numbers, by profits and dividends, not by feelings and perception.

ASWATH DAMODARAN: I mean, it's a financial investment. It's not a Picasso.

DOMONOSKE: That's Aswath Damodaran. He is a professor of finance at the Stern School of Business at NYU. And he argues that Tesla's stock. Well, it might actually be a bit like a Picasso, with its value driven by intangibles.

DAMODARAN: When the mood and the momentum catches it, it doesn't matter what the news is. It doesn't matter what the numbers are. The stock is either going to soar if the mood is right or collapse if the mood is not there.

DOMONOSKE: Lots of people are in the mood to invest in Tesla. During this pandemic, Tesla's stock quadrupled. The company is now worth more than Toyota, which made 30 times more cars last year. Yes, Tesla has been doing well, but this kind of stock price? In May, Elon Musk tweeted that even he thought Tesla's stock was too high. Since then, the stock has doubled. Cathie Wood, a high-profile Tesla investor, says, sure, this doesn't make sense if you look at Tesla as a car company. But she argues it's not an auto company.

CATHIE WOOD: Tesla is a robot company - autonomous - an energy storage company - batteries - and an artificial intelligence company.

DOMONOSKE: She thinks the stock could go much higher. Faith in Tesla's future has driven its stock up for years. But there's a new wrinkle that could be adding a bit more fuel. Tesla is poised to enter the S&P 500. That influential index tracks 500 huge corporations. Index funds are a way to invest in the entire stock market instead of trying to pick winners.

HOWARD SILVERBLATT: And the purpose is to emulate the market, not to beat it.

DOMONOSKE: Howard Silverblatt is with the S&P Dow Jones Indices, the company that makes the index. This week if Tesla reports another quarterly profit, as is expected, it will be eligible to be added to the index, which isn't just a matter of prestige. A lot of index funds track the S&P 500. So when a stock gets added to it, those funds...

SILVERBLATT: Have to buy it. Whether they think it's the best deal or the worst deal, they have to buy it.

DOMONOSKE: That means many people would suddenly own a tiny slice of Tesla in their retirement funds. And that buying spree tends to push stock prices up, but only temporarily. Of course, most Tesla investors aren't banking on the S&P to decide the future of Tesla's value. They believe in Elon Musk. And earlier this month, as Tesla's stock soared, Elon Musk, he was richer than Warren Buffett.

Camila Domonoske, NPR News.

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