1. Tesla, Inc. (NASDAQ: TSLA)
Value: $2,917,399,000
Change in Position Size: 21%
Percent of Cathie Wood’s 13F Portfolio: 7.8%
Tesla ranks 1st in our list of Cathie Wood’s top 10 stock picks. Tesla shares have gained 341% over the last 12 months but the stock is under pressure amid a broader decline in EV stocks. But some analysts believe that the recent selloff is a buying opportunity. Wedbush analysts Daniel Ives and Strecker Backe said in a note that the latest EV selloff is caused by the risk aversive mood in the market and soft sales reports coming from China. The analysts said that the EV “party” is just getting started.
As of the end of the fourth quarter, 68 hedge funds in Insider Monkey’s database of 887 funds held stakes in Tesla Inc., compared to 67 funds in the third quarter. Cathie Wood’s ARK Investment Management is the company’s most significant stakeholder, with 4.1 million shares worth $2.9 billion.
Bireme Capital, in their Q4 2020 Investor Letter, said that they are short Tesla, Inc. (NASDAQ: TSLA). Bireme Capital stated that Tesla may have the most unrealistic expectations among the companies they treat as great contenders.
Here is what Bireme Capital has to say about Tesla, Inc. in their Q4 2020 investor letter:
“Of all the contenders, Tesla may have the most unrealistic expectations. Now Tesla inarguably deserves a ton of credit for driving forward the frontiers of electric vehicles, car design, and consumer adoption of autonomous driving. However, as we said in Part I, “There’s a difference between a great company and a great investment.”
Tesla’s worldwide market share is only about 1%, but its market cap is higher than the nine largest car companies combined. Growing into this market cap is going to be impossible. Bending metal just isn’t that good of a business: car manufacturers generally earn single-digit net margins. Hopes of recurring high-margin revenue from software sales and robotaxis are pipe dreams — in a third-party ranking, Tesla’s much-ballyhooed autonomous driving system recently came in dead last out of 18
competitors.Tesla did eke out a profit for the first time this year, but only because of $1.5b in pure-margin revenue from sales of automotive regulatory credits to other car manufacturers that did not meet emissions standards. This pure-margin revenue will disappear shortly as competing EVs enter the market. Nearly a hundred EV models are set to debut in the next few years, from large and established industry players like Ford, Toyota and GM, as well as upstarts like NIO, Fisker, Lucid, Rivian, and many, many others.
Tesla does have a market share lead in the EV market, but we find it hard to believe that the technology lead is insurmountable — Tesla’s latest annual report revealed that it spent more on bitcoin than on research and development. (We would be remiss not to mention the incongruity of a company focused on sustainability buying bitcoin, the energy-intensive mining of which produces more greenhouse gases than many medium-sized countries.)
We suspect that for many stockholders a share of Tesla is more of a collectible than an investment. Jim Cramer recently tried to explain Tesla’s astonishing stock gains (up 13x in the past two years). He said, “The analysts couldn’t understand that Tesla is more than just a vehicle. It’s a vehicle of hope in a miasma of gloom.” That may be true, but if you are looking for a solid investment rather than a manifestation of optimism, we suggest you look elsewhere.
We are short Tesla.”
You can also take a peek at Chuck Akre’s Top 10 Stock Holdings and Billionaire Mario Gabelli’s Top 10 Stock Picks.
