Archive for Emily Graffeo

Bitcoin entering into the mainstream could erode its diversification value over time, JPMorgan says

FILE PHOTO: A copy of bitcoin standing on PC motherboard is seen in this illustration picture, October 26, 2017. REUTERS/Dado Ruvic/File Photo
  • JPMorgan said bitcoin's acceptance into the mainstream could hurt its diversification value.
  • The bank found that as bitcoin becomes more mainstream, it becomes more correlated to other assets. 
  • JPMorgan also found bitcoin has been less successful than other hedges during stock market drawdowns.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bitcoin promoters have long touted the cryptocurrency's role as a diversification tool. A bit reason why is because the token is seen as uncorrelated to other assets and can therefore rally during major stock market drawdowns.

However, a team of JPMorgan strategists said on Thursday that as bitcoin and other cryptos become more mainstream, their correlation with other assets increases, and this decreases their diversification benefits.

"Bitcoin improves long-term portfolio efficiency, but its contribution will probably diminish as its mainstreaming increases its correlation with cyclical assets. And crypto continues to rank as the least reliable hedge during periods of acute market stress," the strategists led by John Normund said.

JPMorgan found that allocating up to 2% of a portfolio to crypto can improve portfolio efficiency due to the various cryptocurrencies' sky high returns, but investors may need to reassess that allocation as cryptos become more mainstream. 

"In a portfolio context, the mainstreaming of cryptocurrencies - particularly with retail investors - appears to be raising its correlation with all cyclical assets (Equities, Credit, Commodities, the EM complex)," said JPMorgan.

Their models show that bitcoin's cross-asset correlation appears to be rising, and has coincided with its mainstreaming through products like the Grayscale BTC fund. 

Read more: GOLDMAN SACHS: These 22 stocks still haven't recovered to pre-pandemic levels - and are set to explode amid higher earnings in 2021 as the economy recovers

After examining the largest global stock market drawdowns since 2008 and comparing bitcoin's performance versus other portfolio hedges, the strategists found that bitcoin was one of the least profitable hedges. In the February and March 2020 stock market crash, for example, bitcoin lost 33%, while US treasuries, a more traditional hedge, gained 6%, according to JPMorgan data. 

Overall, the strategists found that bitcoin ranks the worst in terms of medium returns (-5%), compared to fiat currencies like the USD vs EM FX (3%). It also doesn't have a high success rate of turning positive during stock market declines. In all of the drawdowns studied, bitcoin turned positive 42% of the time, compared to the USD vs EM FX hedge, which has a 100% success rate of offering positive returns during equity drawdowns.

"Perhaps market dynamics will be different during an equity market correction driven by much higher US inflation and a more durable loss of confidence in the dollar," the strategists added. "But until and unless those macro concerns materialize, crypto's ownership structure inclines it to underperform in a macro crisis those very currencies it aspires to replace."

In a more positive outlook for bitcoin, the strategists also said that cryptocurrencies could serve as "insurance against dystopia" like high inflation or a breakdown of the payments system.

"Relative to any other asset class or portfolio hedge, cryptocurrencies would uniquely protect portfolios against a simultaneous loss of faith in a country's currency and its payments system, because they are produced and they circulate outside conventional and regulated channels…" said JPMorgan.

Read more: 4 unexpected places real-estate investors should target in 2021, from a pro who's done hundreds of millions of dollars in deals




Read the original article on Business Insider

The Biden rescue plan could boost 2021 GDP growth to 11.4%, JPMorgan global chief strategist says

Joe Biden
President-elect Joe Biden gives a speech in Delaware in early January.
  • President-elect Joe Biden's  $1.9 trillion rescue plan could boost nominal GDP growth to 11.4% year-over-year by the end of 2021, says JPMorgan's David Kelly. 
  • The chief global strategist said on Tuesday that the plan could also cut the unemployment rate to below 5% by the end of this year. 
  • JPMorgan estimates that nominal GDP was on track to rise by 6.4% year-over-year by the end of 2021 before the Biden plan.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

President-elect Joe Biden's rescue plan could have "significant impacts" on the economy in 2021 and dramatically boost GDP, according to JPMorgan's chief global strategist, David Kelly. 

The rescue plan Biden laid out last Thursday would cost roughly $1.9 trillion and would include a new round of direct payments to individuals of $1,400 per person, $400 enhanced unemployment benefits, and funding to support school reopenings and swift vaccinations, among other efforts. In a speech last Thursday, Biden said he wants to push the plan through Congress as quickly as possible. 

Using a simulation of the plan where $1.2 trillion is spent in 2021, Kelly estimates that it could boost nominal GDP growth to 11.4% year-over-year by the end of 2021. Most of that would come in the form of stronger real GDP growth. Kelly also said that the plan could cut the unemployment rate to below 5% by the end of 2021. 

JPMorgan estimates that nominal GDP was on track to rise by 6.4% year-over-year by the end of 2021 before the Biden plan.

Read more: Billionaire investor Ray Dalio warned the US could be on the verge of civil war. Now a prominent market bear is saying investors should monitor this under-the-radar bubble, which could trigger unrest.

Here are some of the additional predicted economic impacts of the plan, according to Kelly:

  • "Extended, expanded and enhanced unemployment benefits through September should significantly reduce poverty until the pandemic winds down.  Importantly, however, a $400 weekly supplement, as opposed to the $600 supplement in the CARES Act, would give most laid-off workers a financial incentive to return to work when possible."
  • New stimulus checks of $1,400 per person would support consumption over the next few months and could lead to a spending boom in the fourth quarter of 2021 when families spend on services which are shut down right now. 
  • Additional spending on vaccinations could hasten the end of the pandemic and stimulate the economy. 

As for the investment implications of the Biden rescue plan, Kelly said faster economic growth could boost cyclical stocks and particularly financial stocks relative to defensive stocks. But it may lead to slumping asset performance down the road.

"With current valuations at very high levels, 2021 already looked like a difficult year for financial assets. On balance, the Biden rescue plan, if implemented, could add to those challenges," Kelly said.

Biden also called for more spending through a "recovery plan" which he will outline in more depth in his address to a joint session of Congress in February. 

Read more: The head of active equity at Wells Fargo's $607 billion asset management arm shares how she worked her way up from the call center 29 years ago - and pinpoints 3 trends transforming the investment landscape today

 

Read the original article on Business Insider

Cryptocurrencies and SPACs show signs of ‘irrational exuberance,’ but the stock market is not in a bubble, says UBS

NYSE Trader Blur
Traders working on the floor of the New York Stock Exchange are blur in this time exposure, just before the opening bell, 11 May, 2004.
  • UBS's Mark Haefele said in a Friday note that while cryptocurrencies and SPACs show signs of "irrational exuberance," investors shouldn't worry that the whole stock market is in a bubble. 
  • Within the IPO and SPAC market and cryptocurrencies, prices are discounting future rapid price appreciation, a factor that's typically present during market bubbles, said Haefele.
  • But large parts of the stock market are not expensively valued by historical comparison, the chief investment officer of global wealth management said. 
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell

While many parts of the market are showing signs of  "irrational exuberance" that should alarm some investors, UBS's Mark Haefele says there are still some risk assets outside of bubble territory.

"All of the bubble preconditions are in place," he explained in a Friday note, citing record low financing costs, new participants entering into the market, and a combination of historically low interest rates and high savings rates from government stimulus that's left investors who are searching for returns with no alternative but equities.

However, Haefele said that while parts of the market seem speculative, investors shouldn't worry that the whole market is in a bubble.

"The cryptocurrency markets are exhibiting signs of excessive speculation and the IPO/SPAC markets are the hottest in two decades. But these markets do not yet pose a broader systemic risk," the chief investment officer of global wealth management said.

Within the IPO and SPAC market, as well as crypto, prices are discounting future rapid price appreciation, a factor that's typically present during market bubbles, said Haefele.

Speculation is pushing up prices for bitcoin, especially as major investors raise their long-term price targets for the coin, like Guggenheim's Scott Minerd who sees bitcoin hitting $400,000 in the future.

Read more: GOLDMAN SACHS: Buy these 25 stocks best-positioned to juice profits in 2021 as stimulus and vaccine progress spur economic growth

First-day IPO performance is also the strongest in around two decades. Airbnb leaped 115% on its first day of trading, while DoorDash opened 78% higher than its offer price. SPACs raised more than $70 billion in 2020, more than the entire prior decade combined, he said.

But equities as a whole are not in a bubble, said Haefele. For one, he explained that large parts of the market are not expensively valued by historical comparison. Removing Facebook, Amazon, Apple, Microsoft, Netflix, and Google, the S&P 500 only rose 6% in 2020. 

He also said that valuations of indices look reasonable against the backdrop of low interest rates, and used an equity risk premium approach to explain why stocks still look cheap relative to bonds. 

Against that backdrop, he recommends investors "think beyond the bubbles."

"One reason that bubbles can be so deceptive is that there is often a grain of truth behind their narratives. The dotcom bubble, for example, correctly anticipated the impact of the internet," said Haefele. "Many of the narratives linked to today's bubbles may also prove to be correct. Investors may be able to capture some upside but reduce the risk associated with bubbles by identifying the narrative, yet investing in a more diversified way." 

He reiterated his suggestion to investors to buy emerging technology investment themes like 5G, fintech, greentech, and healthtech, while staying diversified. He also said UBS is bullish on emerging market stocks.

Read more: 'Extremes are becoming ever more extreme': A Wall Street strategist who sounded the alarm before last year's 35% crash showcases the evidence that a similar meltdown is looming

Read the original article on Business Insider

Beyond Meat stock leaps 16% after Taco Bell announces partnership with the faux-meat producer

Taco Bell Veggie Items 2
  • Beyond Meat rose as much as 16%, to $144.78 a share, after Taco Bell announced it's partnering with the faux-meat producer to explore plant based protein menu items on Thursday.
  • Beyond Meat's stock surge comes after a stellar 2020 which recorded a 65.3% yearly gain. The plant-based meat company has also gained over 100% since its IPO in May 2019.
  • "Taco Bell chose to team up with Beyond Meat as a category leader with a proven track record of attracting younger customers with its irresistibly delicious plant-based offerings," Taco Bell said in a press release.
  • Watch Beyond Meat trade live here.

Beyond Meat rose as much as 16%, to $144.78 a share, after Taco Bell announced it's partnering with the faux-meat producer to explore plant based protein menu options on Thursday.

Taco Bell said that it's partnering with Beyond Meat to create an "innovative new plant-based protein that will be tested in the next year." 

Taco Bell's parent Yum! Brands gained as much as 2.3% on Thursday.  

"Taco Bell chose to team up with Beyond Meat as a category leader with a proven track record of attracting younger customers with its irresistibly delicious plant-based offerings," the Mexican food chain said in a press release. 

Beyond Meat's stock surge comes after a stellar 2020 for the faux-meat company. It soared 65.3% last year, and has also gained over 100% since its IPO in May 2019. 

Read more: Cathie Wood's ARK Invest runs 5 active ETFs that more than doubled in 2020. She and her analysts share their 2021 outlooks on the economy, bitcoin, and Tesla.

The company's stock often experiences wild swings when investors hear plant-based meat news.

In November, it sold off as much as 10% when McDonald's announced it was creating its own plant-based burger, the McPlant. Later in the day, Beyond Meat reversed all its losses and jumped 9% after the company claimed it "co-created" the McPlant.

Taco Bell is just one of the many fast-food chains Beyond Meat has teamed up with.

The faux-meat producer announced last week that its Beyond Breakfast Sausage Sandwich is available in Starbucks chains in the UK. It also introduced Beyond Meat sandwiches in Starbucks chains in the UAE and Kuwait. 

Read more: Morgan Stanley says to buy these 26 economically sensitive stocks poised to outperform as oil prices spike 10% by year-end

Read the original article on Business Insider

The electric vehicle SPAC boom is likely to continue as over $2.5 trillion is needed to make a full transition to EVs, BofA says

Nikola garbage Truck
  • The number of electric vehicle SPACs may rise in the years to come as the world pivots to full EV adoption and looks for ways to raise money to fund the transition that could cost up to $2.5 trillion, according to Bank of America. 
  • 2020 saw a boom in electric vehicle SPACs, with companies including Nikola, Fisker, and XL Fleet  all going public via a reverse merger with a special-purpose acquisition company. 
  • BofA said the recent SPAC boom indicates that there is a lot of capital waiting to be deployed for companies participating in the "electrification revolution." 
  • "With this in mind, we would expect the EV SPAC boom and capital raises for newer EV companies to continue in 2021+" BofA added. 
  • Sign up here our daily newsletter, 10 Things Before the Opening Bell.

The number of electric vehicle SPACs may rise in the years to come as the world pivots to full EV adoption and looks for ways to raise money to fund the transition, according to Bank of America. 

"The Auto industry is reaching an inflection point for electric vehicles, but funding this revolution is a tremendous hurdle," a team of BofA strategists led by John Murphy said in a note on Wednesday.

BofA estimates that the transition towards 100% electrification could require over $2.5 trillion of investment around the globe over the next decade. One way to raise that capital could be through a SPAC. 

2020 was a banner year for electric vehicle SPACs. Nikola, Fisker, Lordstown Motors, Canoo, and XL Fleet Corp were just some of the companies that went public via a reverse merger with a special-purpose acquisition company in 2020. According to BofA, over $6 billion so far has been raised so far via EV SPACs.

Although that amount is nowhere near the $2.5 trillion capital goal, the recent SPAC boom indicates that there is a lot of external capital waiting to be deployed for companies participating in the "electrification revolution," said BofA.

"With this in mind, we would expect the EV SPAC boom and capital raises for newer EV companies to continue in 2021+" BofA added. 

Read more: Wall Street has launched an electric car SPAC craze trying to find the next Tesla. Experts warn they're creating the next dot-com bubble.

The shift toward electrification raises the question as to whether incumbent auto equipment manufacturers or new entrants will be see the biggest investments in the race to electrify. Bank of America says newer EV entrants, and those who could use a SPAC money to raise capital, may have an advantage.

"A key competitive advantage currently being afforded to the newer EV entrants versus the incumbent OEMs/suppliers is unfettered access to low-cost capital to fund product development, capacity installation/expansion, and other business efforts, as illustrated by the SPAC boom and TSLA's constant capital raises," said the strategists.

Other sources of this capital to meet the $2.5 trillion goal will include internal funding within existing auto suppliers, other forms external capital raising outside of SPACs, and government funding, said BofA.  

For example, the proposed Green New Deal in the US could be a harbinger of possible support to come, though the $2.5 trillion estimate is an approximation for capital required around the globe, not just in the US, the strategists said.

In the United Kingdom, the sale of new gas and diesel-powered vehicles will be outlawed in 2030, as part of the country's "green industrial revolution" plan. The plan also involves a roughly $1.7 billion investment in new private and public charging stations, and $774 million in grants to incentivize buyers of zero-emission and low-emission vehicles, in another example of government funding that could help drive the transition to a world with 100% electric vehicles.

Read more:Inside a failed attempt to reinvent the IPO process with Airbnb and DoorDash

Read the original article on Business Insider

The electric vehicle SPAC boom is likely to continue as over $2.5 trillion is needed to make a full transition to EVs, BofA says

Nikola garbage Truck
  • The number of electric vehicle SPACs may rise in the years to come as the world pivots to full EV adoption and looks for ways to raise money to fund the transition that could cost up to $2.5 trillion, according to Bank of America. 
  • 2020 saw a boom in electric vehicle SPACs, with companies including Nikola, Fisker, and XL Fleet  all going public via a reverse merger with a special-purpose acquisition company. 
  • BofA said the recent SPAC boom indicates that there is a lot of capital waiting to be deployed for companies participating in the "electrification revolution." 
  • "With this in mind, we would expect the EV SPAC boom and capital raises for newer EV companies to continue in 2021+" BofA added. 
  • Sign up here our daily newsletter, 10 Things Before the Opening Bell.

The number of electric vehicle SPACs may rise in the years to come as the world pivots to full EV adoption and looks for ways to raise money to fund the transition, according to Bank of America. 

"The Auto industry is reaching an inflection point for electric vehicles, but funding this revolution is a tremendous hurdle," a team of BofA strategists led by John Murphy said in a note on Wednesday.

BofA estimates that the transition towards 100% electrification could require over $2.5 trillion of investment around the globe over the next decade. One way to raise that capital could be through a SPAC. 

2020 was a banner year for electric vehicle SPACs. Nikola, Fisker, Lordstown Motors, Canoo, and XL Fleet Corp were just some of the companies that went public via a reverse merger with a special-purpose acquisition company in 2020. According to BofA, over $6 billion so far has been raised so far via EV SPACs.

Although that amount is nowhere near the $2.5 trillion capital goal, the recent SPAC boom indicates that there is a lot of external capital waiting to be deployed for companies participating in the "electrification revolution," said BofA.

"With this in mind, we would expect the EV SPAC boom and capital raises for newer EV companies to continue in 2021+" BofA added. 

Read more: Wall Street has launched an electric car SPAC craze trying to find the next Tesla. Experts warn they're creating the next dot-com bubble.

The shift toward electrification raises the question as to whether incumbent auto equipment manufacturers or new entrants will be see the biggest investments in the race to electrify. Bank of America says newer EV entrants, and those who could use a SPAC money to raise capital, may have an advantage.

"A key competitive advantage currently being afforded to the newer EV entrants versus the incumbent OEMs/suppliers is unfettered access to low-cost capital to fund product development, capacity installation/expansion, and other business efforts, as illustrated by the SPAC boom and TSLA's constant capital raises," said the strategists.

Other sources of this capital to meet the $2.5 trillion goal will include internal funding within existing auto suppliers, other forms external capital raising outside of SPACs, and government funding, said BofA.  

For example, the proposed Green New Deal in the US could be a harbinger of possible support to come, though the $2.5 trillion estimate is an approximation for capital required around the globe, not just in the US, the strategists said.

In the United Kingdom, the sale of new gas and diesel-powered vehicles will be outlawed in 2030, as part of the country's "green industrial revolution" plan. The plan also involves a roughly $1.7 billion investment in new private and public charging stations, and $774 million in grants to incentivize buyers of zero-emission and low-emission vehicles, in another example of government funding that could help drive the transition to a world with 100% electric vehicles.

Read more:Inside a failed attempt to reinvent the IPO process with Airbnb and DoorDash

Read the original article on Business Insider

Lemonade shares fall 9% after online insurance provider announces secondary stock offering

Daniel Schreiber - cofounder and CEO of Lemonade - speaks onstage during Day 1 of TechCrunch Disrupt SF 2018 at Moscone Center on September 5, 2018 in San Francisco, California.
Lemonade CEO and cofounder Daniel Schreiber
  • Shares of Lemonade fell as much as 9% on Tuesday as the online insurance company announced a secondary stock offering just six months after its IPO.
  • Lemonade intends to offer 3 million shares of its common stock for sale and the sale of over 1.5 million shares by insiders they call "selling stockholders" in a secondary offering.
  • Shares dipped to as low as $166 on Tuesday. 
  • Watch Lemonade trade live here

Shares of online insurance provider Lemonade fell as much as 9% on Tuesday after the company announced a secondary stock offering just six months after it went public.

Lemonade, which is backed by SoftBank, focuses on digitizing the process of obtaining homeowners and renters insurance.

The stock closed up 14% on Monday at $183.26 a share. After Monday's close, the company announced it intends to offer 3 million shares of its common stock for sale and the sale of over 1.5 million shares by insiders they call "selling stockholders" in a secondary offering. Shares dropped in premarket trading and remained low after the market open. Shares dipped to as low as $166. 

Read more: An ETF provider whose specialty funds have smashed the market breaks down how to capitalize on the red-hot SPAC craze - and shares 4 to watch in 2021

The company has not yet disclosed the price of the shares that will be offered for sale. Lemonade also said it will not receive proceeds from the sale of shares by the "selling stockholders" in the secondary offering. 

Lemonade soared 132% in its first day of trading in July 2020 after it went public at $29 per share. The company is now up an additional 144% from the closing price of its IPO day.



Read the original article on Business Insider

Lemonade shares fall 9% after online insurance provider announces secondary stock offering

Daniel Schreiber - cofounder and CEO of Lemonade - speaks onstage during Day 1 of TechCrunch Disrupt SF 2018 at Moscone Center on September 5, 2018 in San Francisco, California.
Lemonade CEO and cofounder Daniel Schreiber
  • Shares of Lemonade fell as much as 9% on Tuesday as the online insurance company announced a secondary stock offering just six months after its IPO.
  • Lemonade intends to offer 3 million shares of its common stock for sale and the sale of over 1.5 million shares by insiders they call "selling stockholders" in a secondary offering.
  • Shares dipped to as low as $166 on Tuesday. 
  • Watch Lemonade trade live here

Shares of online insurance provider Lemonade fell as much as 9% on Tuesday after the company announced a secondary stock offering just six months after it went public.

Lemonade, which is backed by SoftBank, focuses on digitizing the process of obtaining homeowners and renters insurance.

The stock closed up 14% on Monday at $183.26 a share. After Monday's close, the company announced it intends to offer 3 million shares of its common stock for sale and the sale of over 1.5 million shares by insiders they call "selling stockholders" in a secondary offering. Shares dropped in premarket trading and remained low after the market open. Shares dipped to as low as $166. 

Read more: An ETF provider whose specialty funds have smashed the market breaks down how to capitalize on the red-hot SPAC craze - and shares 4 to watch in 2021

The company has not yet disclosed the price of the shares that will be offered for sale. Lemonade also said it will not receive proceeds from the sale of shares by the "selling stockholders" in the secondary offering. 

Lemonade soared 132% in its first day of trading in July 2020 after it went public at $29 per share. The company is now up an additional 144% from the closing price of its IPO day.



Read the original article on Business Insider

Bitcoin gets ‘less risky the higher it goes’: Legendary investor Bill Miller breaks down why the cryptocurrency could surge 100% in 2021

Bill Miller
  • Legendary investor Bill Miller told CNBC on Friday he sees bitcoin surging 100% in 2021 as more investors add the coin to their portfolios as a hedge against inflation.
  • "One of the things that's interesting about Bitcoin is that it gets less risky the higher it goes, and that's the opposite of what happens with most stocks," the Miller Value Partners founder said. 
  • He added that he's not sure when the price of the cryptocurrency will correct, and if investors aren't ready to stomach another 80% correction, they probably shouldn't own bitcoin.
  • Watch bitcoin trade live here

Legendary investor Bill Miller told CNBC on Friday he sees bitcoin surging 100% in 2021 as more investors add the coin to their portfolios as a hedge against inflation.

Miller explained that investors should consider holding 1-2% of their portfolios in bitcoin as opposed to cash, because cash will be a "guaranteed loser" and lose at least 2% in value each year with the current inflation rate. 

"It's more a risk management strategy than anything else to have a little bit of money in bitcoin,"  the founder and chief investment officer of Miller Value Partners said. 

He added: "One of the things that's interesting about Bitcoin is that it gets less risky the higher it goes, and that's the opposite of what happens with most stocks."

Miller doesn't have a price target for bitcoin but said he has "price expectations."

"I think that bitcoin... should probably be up 50% to 100% from here in the next 12 to 18 months. And if you were to ask me the over or under, I would definitely say it would be much more likely to be higher than lower," he said.

Read more: BANK OF AMERICA: Buy these 10 Dow stocks to take advantage of rich dividends and a long-term strategy primed for a comeback in 2021

Bitcoin has more than doubled in value over the last month, and risen over 30% in 2021 so far. While some bitcoin investors want to take profits off the table now as the price balloons, many investors who haven't bought in yet are waiting for a correction so they can buy it at a cheaper price.

But Miller told investors who are waiting for the pullback that it already occurred in the first quarter of last year, when the price hovered around $4,000.

"That's what typically happens. It's that once things correct, those who are waiting for the correction- they're waiting for the correction to keep going lower," Miller said. "And then when they missed it on the upside, they're asking if they should buy it."

"We've had 3 80% corrections, I think if you can't take that,then you probably should not own bitcoin," he added. 

The investor appeared on CNBC days after publishing his fourth quarter market letter, where he said that bitcoin is "best thought of as digital gold", but has several advantages over the precious metal. 

"Warren Buffett famously called bitcoin 'rat poison,'" Miller said. "He may well be right. Bitcoin could be rat poison, and the rat could be cash."

Read more: Bank of America says the warning signs that stocks are hurtling into bubble territory are growing - and pinpoints 6 that could signal a bear market is beginning

Read the original article on Business Insider

‘Don’t sell a share’: Billionaire investor Chamath Palihapitiya says Tesla’s stock could triple from current levels, making Elon Musk the first trillionaire

FILE PHOTO: Chamath Palihapitiya, Founder and CEO of Social Capital, presents during the 2018 Sohn Investment Conference in New York City, U.S., April 23, 2018. REUTERS/Brendan McDermid/File Photo
Chamath Palihapitiya.
  • The billionaire investor Chamath Palihapitiya told CNBC on Thursday that Tesla's stock could be worth three times its current valuation, which would make CEO Elon Musk the first trillionaire.
  • On Thursday, Tesla shares shot up 6.9%, and Musk surpassed Jeff Bezos as the richest person on the planet.
  • Palihapitiya said that Tesla was a "distributed energy business" and that he'd believed for a while that the world's first trillionaire would be a person fighting climate change.
  • "Delivering clean energy, allowing the world to be sustainable, is an incredibly important thing that will be rewarded by markets and individuals," Palihapitiya said.
  • "Don't sell a share" of Tesla, he told investors.
  • Watch Tesla trade live here.

The billionaire investor Chamath Palihapitiya said Tesla's stock could be worth three times its current valuation, which would make CEO Elon Musk the first trillionaire.

"Don't sell a share" of Tesla, Palihapitiya told investors in a CNBC interview on Thursday. He advised investors to get behind Musk and other entrepreneurs who wouldn't bend to short-term profits and who were striving to make the world a better place.

"I don't understand why people are so focused on selling things that work," the Social Capital CEO added. "When things are working, you're paid to stay with people that know what they're doing. And this is a guy who has consistently been one of the most important entrepreneurs in the world. And so why bet against him?"

Musk surpassed Jeff Bezos as the richest person on the planet on Thursday. Tesla shares shot up as much as 6.9%, to $808.69, boosting the net worth of its CEO to about $186 billion.

Musk's wealth derives from his stakes of roughly 20% in Tesla and 48% in SpaceX, as well as 57 million exercisable Tesla stock options, Bloomberg said.

Read more: A growth fund manager who's beaten 96% of his peers over the last 5 years shares 6 stocks he sees 'dominating their space' for the next 5-10 years - including 2 that he thinks could grow 100%

Palihapitiya said that Tesla was a "distributed energy business" and that Musk was figuring out a way to harness energy, store it, and use it to help people to be productive and fight climate change.

"I tweeted this a while ago that I thought the world's first trillionaire would be a person fighting climate change," Palihapitiya said. "It very well could be Elon. But if it's not him, it'll be somebody like him. It will be because of this: Delivering clean energy, allowing the world to be sustainable, is an incredibly important thing that will be rewarded by markets and individuals."

Palihapitiya added that that the power-utility business was ripe for disruption and that there were "trillions of dollars of bonds, of capex, of value sitting inside the energy-generation infrastructure." When those are harnessed, Tesla will double and triple again, he said.

Palihapitiya's CNBC appearance aired shortly after the longtime Tesla bear RBC upgraded the electric-vehicle maker to "sector perform" from "underperform" and increased its price target to $700 from $339.

"There is no graceful way to put this other than to say we got TSLA's stock completely wrong," RBC said in a note on Thursday.

Read more: GOLDMAN SACHS: Buy these 37 stocks that could earn you the strongest returns without taking on big risks in 2021 as the recovery and vaccine distribution get underway

Read the original article on Business Insider