Apple Stock (NASDAQ:AAPL)
During the first few months of 2023, the largest public pension in Canada was more optimistic about iPhones than it was about electric vehicles.
In a surprising move, Canada’s largest pension fund recently made headlines by acquiring Apple stocks and divesting from Tesla and other electric vehicle (EV) stocks. This decision has sparked speculation and debate among investors and industry experts alike. In this article, we will delve into the details of this significant investment shift, exploring the reasons behind it and analyzing the potential implications for the pension fund and the broader market.
Canada’s Largest Pension Bought Apple, and Sold Tesla and EV Stocks: Unraveling the Decision
The Canada Pension Plan Investment Board (CPPIB), which manages the country’s largest pension fund, made waves by purchasing Apple stocks and parting ways with Tesla and various EV stocks. This move raised eyebrows across the financial landscape, leaving many curious about the motives and foresight of the pension board.
During the first three months of 2018, Canada Pension Plan increased its holdings in Apple (NASDAQ:AAPL) and decreased its holdings in electric vehicle manufacturers Tesla (NASDAQ:TSLA), NIO (NYSE:NIO), XPeng (NYSE:XPEV), and Li Auto (NASDAQ:LI). The Canada Pension Plan Investment Board, also known as CPP Investments, is responsible for managing the pension, and it disclosed the stock trades, along with a number of other transactions, in a form that it submitted to the Securities and Exchange Commission.
CPP Investments chose not to comment on the recent changes to the investment strategy. As of the 31st of March, the pension fund’s assets totaled 420 billion dollars.
Comparatively, the S&P 500 index advanced by only 7% during the first quarter, while shares of Apple increased by 27%. The market index is currently up 2.3% while shares have gained 6.4% so far in the second quarter.
In the past week, Apple reached what was described as a “multiyear, multibillion-dollar agreement” with the chip manufacturer Broadcom to develop 5G radio frequency components as well as other wireless connectivity components. It has been brought to our attention that the new savings account offered by Apple might give other fintech companies a run for their money.
CPP Investments increased its stake in Apple by purchasing an additional 255,943 shares during the first quarter, bringing its total number of shares owned to 760,518.
The pension decreased its holdings in electric vehicle manufacturers Tesla, NIO, XPeng, and Li Auto from 959,728 shares, 2.3 million American depositary receipts, 621,300 ADRs, and 536,797 ADRs respectively at the end of 2022 to 454,055 shares, 1.6 million American depositary receipts, and 61,000 ADRs, respectively.
The price of Tesla stock increased by 68% in the first quarter, but it has fallen by 6.9% thus far in the second quarter.
The American depositary receipts of Chinese electric vehicle manufacturers NIO, XPeng, and Li Auto each experienced a rise in the value of 7.8%, 12%, and 22% during the first quarter. The NIO, XPeng, and Li Auto ADRs have experienced respective decreases of 27%, 26%, and 13% thus far in the second quarter.
Chinese electric vehicle manufacturers have taken a beating as a result of a number of factors, not the least of which are actions taken by Tesla, the star quarterback of electric vehicle stocks, which has been cutting prices.
Why then has Li Auto been performing so much better than its Chinese competitors, and even Tesla, thus far in the second quarter? The first quarter was very successful for Li Auto, as reported. The number of electric vehicle deliveries hit a new high, and the company anticipates that this trend will only continue.
Tie Li, Chief Financial Officer of Li Auto, made the following statement in the company’s earnings release on May 10: “Our strong cash flow and healthy balance sheet have well positioned us to continue investing in our future, empowering research and development across products, platforms, and systems as well as business expansion to create value for both our users and our shareholders.”
If the pension did not buy back into Li Auto ADRs after March 31st, it is possible that it did not participate in the run during the second quarter.
The CPPIB’s acquisition of Apple stocks and divestment from Tesla and other EV stocks marks a significant strategic shift for Canada’s largest pension fund. This move demonstrates the fund’s commitment to adapt to changing market dynamics, mitigate risks, and seek sustainable returns. By embracing Apple’s resilience and reevaluating its position in the electric vehicle industry, the CPPIB aims to fortify its investment portfolio and navigate the complexities of the global market.
As with any investment decision, it is important to approach the CPPIB’s actions with a long-term perspective. The ultimate impact of this investment shift will unfold over time, influenced by a multitude of factors. Investors and industry observers will be watching closely to assess the outcomes and learn valuable lessons from the pension fund’s strategic maneuvering.
Featured Image:
Author Shariq Khan 
