Move over Bernard Arnault: Elon Musk is once again the richest person in the world. The CEO of Tesla (TSLA 3.11%) previously held the title for the world’s richest person. But in December, he was surpassed by Arnault.
Arnault’s time at the top proved short-lived, with Musk reclaiming his crown on May 31.
Some may be wondering what Arnault did earlier this year to jump past Musk. And some may also be wondering what Musk did now to reclaim the top spot. Well, you might be shocked to find out they both did the same thing: nothing.
The back-and-forth between Arnault and Musk
The majority of Bernard Arnault’s wealth comes from his personal stake in luxury goods conglomerate LVMH Moet Hennessy Louis Vuitton (LVMUY 2.39%), or simply LVMH. Arnault owns about half of LVMH both directly and indirectly and is also its CEO.
Likewise, Elon Musk is the CEO of Tesla. And he’s also the founder and CEO of SpaceX. Through his large ownership stakes in both companies, Musk has become a centi-billionaire.
SpaceX is a private company. Therefore, its value changes less frequently than that of a public company. By contrast, stock prices change every day that the stock market is open. And in May, shares of LVMH and Tesla headed in completely opposite directions, as the chart below shows.
This is how Musk just pulled ahead of Arnault once again.
It was a different story for LVMH and Tesla, however, in 2021 and 2022. Elon Musk watched his net worth drop as the value of Tesla stock drifted downwards. But the luxury-goods market was strong during this time, and LVMH stock gained. This had allowed Arnault to overtake Musk.
Therefore, all Arnault and Musk did was hold the shares of their companies. This is what I mean when I say they did nothing.
According to The Bloomberg Billionaire Index, Musk’s net worth is estimated at $192 billion as of May 31, up $55 billion so far year to date. For his part, Arnault’s net worth is up year to date as well and sits at $187 billion.
How many shares of Tesla does Musk have?
According to a March filing with the Securities and Exchange Commission (SEC), Elon Musk beneficially owns just over 715 million shares of Tesla stock. At its current price of about $208 per share, that’s worth nearly $150 billion, accounting for somewhere in the neighborhood of three-quarters of his net worth.
It’s worth pointing out that Musk owns about 411 million shares of Tesla in the Elon Musk Revocable Trust. The rest of his position is related to stock options.
The lesson for investors
Owning shares of companies that grow and create shareholder value is a fantastic way to create wealth — both Arnault and Musk owe a lot to the stock market. However, stock prices can be volatile. And investors can see big swings in the value of their investments. Consequently, Musk and Arnault are trading places at the top of the list of the world’s richest people. They’ll probably switch places again at some point.
The value of stocks can go down. In fact, Arnault “lost” $11 billion in a single day recently. This experience can be painful for any investor regardless of net worth or investing experience. And unfortunately, many investors sell at the worst possible time simply because they want the pain to stop.
Selling a stock just because it’s down can lead to terrible long-term results. Stocks can go down for any number of emotional reasons in the short term. But longer term, stock prices tend to follow business results. Therefore, as long as business fundamentals remain strong, it’s in investors’ best interests to just sit back and do nothing.
As we can see with Tesla and LVMH, business is good. Revenue is up for both companies over the last few years, and diluted earnings per share (EPS) are sharply higher for both as well.
In short, Musk and Arnault have made the right choice to simply hold on to their large positions in Tesla and LVMH, respectively, even though shares have pulled back at times.
It’s a great lesson for all investors. When you’ve found a top stock to invest in, buy and hold through the ups and downs. The strategy will yield far greater results than selling every time you’re down on your investment.