Tesla Inc (NASDAQ:TSLA) is a great company to invest in. Period. Yes, it misses its targets and reports weaker-than-expected EPS and revenue on a regular basis. Yes, its stock is overvalued. But it’s still a great company to invest in not because of where it is, but where it is headed. In short, it’s a company in which you should invest because of its vision.
In fact, Tesla Inc (NASDAQ:TSLA) is the only stock I regret not having bought at the right time. I first encountered Tesla when it was trading at around $18 per share and before reading anything about its financials, solely based on the company’s description and a brief read on Elon Musk, I knew that it was headed for greatness. Unfortunately, at the time I was a poor student struggling to cover my bills, so investing in anything was out of the question. Instead, I watched the stock climb to over $240 per share.
In this article we are going to take a closer look at the latest developments surrounding Tesla Inc (NASDAQ:TSLA) and assess the latest smart money action surrounding the stock as well as some of the opinions about the company voiced by both bullish and bearish investors. We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 39.7%, topping the 24.1% gain registered by S&P 500 ETFs. Insider Monkey’s enhanced small-cap strategy registered gains of more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points in the last 4.5 years (see details here).
Overall, it looks like smart money is not so excited about Tesla Inc (NASDAQ:TSLA) and it’s understandable. Even though it is one of the most interesting companies in the world, Tesla is competing with huge automakers while not being one itself, as it has yet to transition to a car company from a high-tech company. It has had issues along the road with its previous cars: the Roadster, the Model S and the Model X. Now it is trying to become a car company by releasing a mass-production Model 3 vehicle, which is expected to be competitively priced. However, the competition in the electric vehicles industry that Tesla has disrupted is becoming more aggressive, as larger carmakers with bigger R&D budgets are also trying to show that they’ve embraced the concept of “green driving”. GM is releasing its Chevy Bolt later this year, which will be the closest competitor to the Model 3. Ford announced earlier this year that it plans to release 13 fully-electric or hybrid cars, including a hybrid Mustang and an F-150 truck. Mercedes, Volkswagen, and BMW are two other players in the field of electric vehicles.
Sidenote: in my opinion a hybrid Mustang or F-150 makes sense only as long as the electric powertrain is used to boost power and torque in ways similar to a McLaren P1 or a Porsche 918, otherwise it’s just stupid, because people buy Mustangs and F-150’s because they don’t care about polar bears. Therefore, a “green” Mustang or pick-up truck is as pointless as speed limits or those little signs on the street near my house telling people that they will be fined if they don’t pick up their dogs’ s**t.
Let’s get back to Tesla Inc (NASDAQ:TSLA) though. The company’s stock gained over 18% over the last year and the company recently acquired SolarCity, which allowed it to diversify into the solar industry. It also recently announced the solar roof, a roof tile with an included solar cell. The product is expected to change the way people power their homes and in combination with Tesla’s existing Powerwall battery, households will be able to power their houses at night. The merger with SolarCity was unpopular among analysts, many calling the move a bailout of SolarCity, which had taken a lot of debt to fund rooftop solar panels that were leased to customers.
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However, Elon Musk denied the idea of the deal being a bailout of SolarCity, a company that he co-founded and had led as its Chairman. In fact, the deal is one more step towards Elon Musk’s vision of helping households generate clean energy. The rooftop solar installations business is yet to become profitable, but the outlook appears good and with the acquisition of SolarCity, Tesla Inc (NASDAQ:TSLA) will be able to implement the project faster and reach the level of economies of scale required to drive the costs and prices lower. Both Tesla and SolarCity are cash-flow negative, but we are likely to see changes in that area too. SolarCity has already launched a loan program for customers who want to buy solar panels instead of leasing them, which should allow the company to rely less on debt.
On the next page, we will see what smart money investors think about Tesla and what the general hedge fund sentiment towards the stock is.