Nio Inc (NIO)

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Second-Largest U.S. Pension Bought Up EV Stocks NIO...
By: Barron's | February 20, 2022

The second-largest U.S. pension by assets bought up shares of four electric-vehicle makers as 2021 was coming to a close. Unfortunately, they all have slumped so far in 2022.

The California State Teachers’ Retirement System more than tripled holdings in three Chinese EV makers— NIO (ticker: NIO ), XPeng ( XPEV ), and Li Auto ( LI )—and bought shares of U.S. electric-truck maker Rivian Automotive ( RIVN ), which had an initial public offering in November. Calstrs, as the pension is known, disclosed the trades, among others, in a form it filed with the Securities and Exchange Commission.

Calstrs didn’t offer a comment on the investment changes. It managed assets of $327.6 billion as of Dec. 31.

The pension bought 210,763 more American depositary shares of NIO to end the fourth quarter with 305,036 ADRs. Calstrs also bought 90,011 more ADRs of XPeng and 124,171 additional ADRs of Li Auto to lift its respective holdings to 123,957 ADRs and 172,163 ADRs.

NIO ADRs tumbled 35% in 2021, compared with a 27% rise in the S&P 500 index. Interestingly, NIO’s peers ended 2021 with gains, although short of what the index marked: ADRs for XPeng and Li Auto rose 18% and 11%, respectively. But so far this year, the ADRs of all three are down: NIO with a 27% drop, XPeng is down 25%, and Li Auto with a relatively moderate drop of 11%, while the index has slipped 9%.

Early this year, bullish calls were made for the Chinese EV makers, but the wheels came off the story when EV deliveries by the three all fell in January. Also, NIO, XPeng, and Li Auto ADRs currently have two major overhangs: an uncertain Chinese regulatory environment, and an investor bias favoring value stocks over growth as higher interest rates loom.

Rivian stock came public just in time to get caught up in the latter. Shares ended 2021 with a gain of 33% from the $78 IPO price, but shares have dropped 36% so far in 2022. Rivian is now a so-called broken IPO, as shares, which closed at $66.37 on Friday, are under the IPO price.

Calstrs bought 282,772 Rivian shares in the fourth quarter.

The surge in Rivian stock late last year provided a boost to Amazon.com (AMZN) earnings, as the retail and cloud giant was an early investor. With the drop in Rivian shares, however, we pointed out that Amazon is now sitting on a substantial paper loss. This month, George Soros’ family office disclosed it bought 20 million Rivian shares in the fourth quarter.

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