Was The Smart Money Right About Piling Into Tesla Inc. (TSLA)?

Tesla TSLA

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Tesla Inc. (NASDAQ:TSLA) based on those filings.

Tesla Inc. (NASDAQ:TSLA) shareholders have witnessed an increase in hedge fund sentiment of late. Tesla Inc. (NASDAQ:TSLA) was in 68 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 67. This means the bullish number of hedge fund positions in this stock reached another all time high. Our calculations also showed that TSLA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Tesla Inc. (NASDAQ:TSLA).

Do Hedge Funds Think TSLA Is A Good Stock To Buy Now?

At Q4’s end, a total of 68 of the hedge funds tracked by Insider Monkey were long this stock, a change of 1% from one quarter earlier. By comparison, 51 hedge funds held shares or bullish call options in TSLA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

More specifically, ARK Investment Management was the largest shareholder of Tesla Inc. (NASDAQ:TSLA), with a stake worth $2917.4 million reported as of the end of December. Trailing ARK Investment Management was LMR Partners, which amassed a stake valued at $2056 million. Coatue Management, Whale Rock Capital Management, and LMR Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position LMR Partners allocated the biggest weight to Tesla Inc. (NASDAQ:TSLA), around 31.95% of its 13F portfolio. Tao Capital is also relatively very bullish on the stock, setting aside 22.56 percent of its 13F equity portfolio to TSLA.

Consequently, key hedge funds have jumped into Tesla Inc. (NASDAQ:TSLA) headfirst. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the most valuable position in Tesla Inc. (NASDAQ:TSLA). Adage Capital Management had $465.4 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also made a $228.3 million investment in the stock during the quarter. The other funds with brand new TSLA positions are Daniel Gold’s QVT Financial, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), and Charles Clough’s Clough Capital Partners.

Let’s go over hedge fund activity in other stocks similar to Tesla Inc. (NASDAQ:TSLA). These stocks are Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), and JPMorgan Chase & Co. (NYSE:JPM). All of these stocks’ market caps match TSLA’s market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BABA,156,17892090,-10 TSM,72,11843403,5 BRK-B,110,20795968,1 V,166,23599162,6 JNJ,81,5820696,-1 WMT,70,6197019,1 JPM,112,6967178,-6 Average,109.6,13302217,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 109.6 hedge funds with bullish positions and the average amount invested in these stocks was $13302 million. That figure was $12308 million in TSLA’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 70 bullish hedge fund positions. Compared to these stocks Tesla Inc. (NASDAQ:TSLA) is even less popular than WMT. Our overall hedge fund sentiment score for TSLA is 36. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards TSLA. Our calculations showed that the top 30 most popular hedge fund stocks returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th but managed to beat the market again by 0.9 percentage points. Unfortunately TSLA wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was very bearish); TSLA investors were disappointed as the stock returned 1.3% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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