A lot has occurred in the tech sector this week. In addition to the ‘Brexit’, there have also been M&A deals, damage control, executive transitions, and more.
Let’s dive in and take a closer look at some tech stocks that have been making headlines, including Tesla Motors Inc (NASDAQ:TSLA), SolarCity Corp (NASDAQ:SCTY), Alibaba Group Holding Ltd (NYSE:BABA), Facebook Inc (NASDAQ:FB), and Alphabet Inc (NASDAQ:GOOGL). In addition, we are going to assess the hedge fund sentiment towards them in order to get an idea about the long-term perspective of these companies.
At Insider Monkey, we track around 770 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).
Elon Musk Attempts to Consolidate
Tesla Motors Inc (NASDAQ:TSLA) made a bid for SolarCity Corp (NASDAQ:SCTY) this week, offering to buy the solar company in an all-stock deal, offering 0.122 to 0.131 Tesla shares for each share of SolarCity. Although SolarCity’s shares initially spiked on the news and Elon Musk said that SolarCity would help Tesla potentially be a trillion dollar company, SolarCity’s stock has since retreated to around its pre-merger news levels due to pessimism that the deal won’t go through. Notorious short-seller Jim Chanos said on Wednesday that the merger represents “a shameful example of corporate governance at its worst. SolarCity, whose bonds were yielding 20% yesterday, is a company headed toward financial distress. It is burning hundreds of millions in cash every quarter, a burden that now Tesla shareholders will have to bear, at a total cost of over $8 billion”. Given the lack of meaningful synergies between the combination, there is a possibility that Tesla shareholders might not approve the deal. Elon Musk, who owns a substantial part of both companies, has also recused himself from voting on the merger due to the conflict of interest. If the merger doesn’t go through, look for Tesla shares to potentially bounce back. Of the 766 elite funds we track, 39 funds owned shares of Tesla Motors Inc (NASDAQ:TSLA) and 23 held positions in SolarCity at the end of March.
On the next page, we examine Alibaba, Facebook, and Alphabet.