Why Kevin O’Leary Changed His Mind On Tesla, Keeps Allocation Capped At 5%

Jason Raznick, the founder and CEO of Benzinga, on Thursday interviewed Kevin O’Leary on the “Raz Report.” Among the topics discussed with the “Shark Tank” star and co-founder of O’Shares ETFs was Tesla Inc (NASDAQ: TSLA).

O’Leary On Tesla: O’Leary was a Tesla bear for some time, sharing a bearish thesis on CNBC and with Benzinga over the years.

“Cathie Wood was the hammer on Tesla at the time,” O’Leary said, noting the Ark Funds CEO having a more bullish take on the electric vehicle company.

Tesla shares were correcting with an analyst downgrade at a time when O’Leary almost shorted the stock.

“Consider it a data company,” O’Leary’s son told him on a new approach to Tesla.

At the time, O’Leary was questioning the valuation of Tesla strictly as a car company. His son, who was a Tesla intern in the summer, convinced O’Leary to look at how Tesla was becoming a technology company and had tons of collected data.

O’Leary’s son convinced his dad to buy shares of Tesla, which paid off quite nicely for the entrepreneur.

Watch the full interview in the video below:

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5% Allocation: The large increase in Tesla’s share price over the last several years has forced O’Leary to sell shares to follow a rule he has in place.

O’Leary holds a max allocation of 5% in any individual stock. When Tesla goes up and passes the 5% allocation, he sells shares.

It was O’Leary’s mother who taught him to hold a max of 5% in one stock and 20% in any given sector. O’Leary told Benzinga the strategy has worked for him and saved him in the technology crash.

“You listen to your mother,” O’Leary said.

O’Leary now has a cost basis of $0 on his Tesla shares and he is able to put the capital and invest it elsewhere.

O’Leary said the sale of Tesla stock has helped him add to positions in Peloton Interactive (NASDAQ: PTON), DocuSign Inc (NASDAQ: DOCU) and Zoom Video Communications (NASDAQ: ZM).

See more from Benzinga

© 2021 Benzinga does not provide investment advice. All rights reserved.

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