3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Shareholders: 82
Year-to-Date Return (through June 5): 104%
Following years of relatively muted hedge fund support, Tesla, Inc. (NASDAQ:TSLA) is now far and away the most popular automaker among the smart money. Billionaire money manager David Tepper added Tesla to Appaloosa Management’s 13F portfolio in Q1, while Cathie Wood’s ARK Investment Management raised its TSLA stake by 18% to 5.44 million shares.
Tesla, Inc. (NASDAQ:TSLA) shares have more than doubled this year as the company’s outlook is much improved compared to last year, when the stock crashed by 65%. CEO Elon Musk is back in the driver’s seat after finding a new CEO to take over Twitter, while the EV market has enjoyed explosive growth in the U.S., with sales rising by 65% last year. That’s significantly lowered concerns about how Tesla will fare in a rapidly intensifying competitive landscape. Tesla also topped deliveries estimates in Q1, with the Model Y being the world’s best-selling vehicle during the quarter.
The Aristotle Atlantic Focus Growth Strategy praised Tesla, Inc. (NASDAQ:TSLA)’s leading automotive profit margins in its Q1 2023 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) was a negative contributor to performance due to our underweight position relative to Russell 1000 Growth Index, as the company had strong performance in Q1. The strength occurred after the company partially reversed a previously announced price cut for its electric vehicles following a period of strong demand. Tesla also reported better-than-expected results for Q4 2022 during the first quarter.
Tesla Motors designs, develops, manufactures, and markets high-performance, technologically advanced electric cars and solar energy generation and energy storage products. Tesla sells more than five fully electric cars, among others, the Model X and Y SUVs, as well as the Model S sedan and Model 3 sedan. The company has a growing global network of Tesla Superchargers, which are industrial grade, high-speed vehicle chargers, typically placed along well-traveled routes and in and around dense city centers to allow Tesla owners quick and reliable charging. Tesla offers certain advanced driver assist systems under its Autopilot and Full Self-Driving options. US customers generate nearly half of Tesla’s sales.
We see Tesla as the leading manufacturer of battery powered electric vehicles (EVs). The company has achieved scaled production of EVs before the other large automobile manufacturers. The company’s technology in battery production and self-driving technology is more mature than competitors’ offerings. EVs are one of the fastest growing categories within automobile manufacturing. The profit margin in the automotive segment is significantly above automotive competitors which provides the company flexibility to price its vehicles more strategically as the competition eventually scales up their EV production. The direct-to-consumer sales model gives the company more control over its relationship with its customers as well as a source of higher profit margin since there is no dealership share of the profits.”
