We recently published a list of Renaissance Technologies Portfolio: 10 Best Stocks To Buy. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against the other best stocks to buy which are part of the Renaissance Technologies portfolio.
Renaissance Technologies is an American hedge fund that specializes in systematic trading and employs statistical and mathematical tools to drive its investment programs. As of March 2024, the fund managed discretionary assets over $89 billion, according to their Form ADV. It was founded in 1982 by Jim Simons, a mathematician who worked as a code breaker for the US National Security Agency during the Cold War.
Simons is considered among the pioneers of quantitative investing. At the time of his death in May 2024, he had an estimated net worth of $31.4 billion, making him the 51st richest person in the world. His use of mathematical models and algorithms to drive long-term investment returns earned him a legacy that rivaled the likes of Warren Buffet and George Soros.
His signature Medallion generated average annual returns of 66% for three decades between 1988 and 2018, earning more than $100 billion in profits during the period. The fund started with charging a 5% fixed fee and also had performance charges of 20%, which were later increased to 44% in 2002. Despite those cuts, Medallion earned annual returns of around 39% on average.
The fund was closed to outside investors in 1993 and has since then only been available to past and current employees, and their families. Renaissance Technologies does have other funds that are open to outsiders, such as Renaissance Institutional Equities Fund (RIEF) and Renaissance Institutional Diversified Alpha (RIDA).
Simons stepped down from active management of Renaissance Technologies in 2010 and resigned as its executive chairman in 2021. Peter Brown is the current CEO of the capital market company. He graduated with a B.A. in Mathematics from Harvard University and also holds a Ph.D. in Computer Science from Carnegie Mellon University. Brown’s father, Henry B.R. Brown, invented the Reserve Primary Fund in 1970, which was the first money market fund to be set up.
Brown is committed to the use of mathematical models to discover and unlock the value of stocks in the market. However, Renaissance hedge funds that are open to outside investors have been shrinking for some while. According to a recent report in the Financial Times, RIEF currently manages around $19.6 billion, significantly down from $35.8 billion in 2020. The collapse of RIDA and Renaissance Institutional Diversified Global Equities (RIDGE) has been even worse. The two funds were merged this year. In 2019, RIDA managed about $15 billion, while RIDGE had a portfolio of $14.3 billion. Today, the combined fund manages only $3.6 billion.
As a result, Renaissance’s external assets under management have declined from $65.1 billion in 2019 to $23.2 billion today. Much of the exodus happened following the coronavirus pandemic and was driven by a shock performance by the hedge fund as the stock market rattled. In contrast, the Medallion Fund, which is limited to past and current employees, gained 76% in 2020 despite Covid-19. This is because the fund indulges in high-frequency trading with a lower capacity, a strategy that is strikingly different from those applied for external funds.
However, the performance of external funds is beginning to stabilize after the lows over the last few years. RIEF is up 19.8% this year, while RIDA has also gained 17.4%. Though financial experts believe the improvement is owed more to the fund’s performance, rather than flows.
Methodology
We scanned Renaissance Technologies’ 13F portfolio, as of June 30, 2024 and picked the top 10 stocks according to their stake value. The figures were sourced from Insider Monkey Database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
25 Most In Demand Cars Heading into 2024
Tesla, Inc. (NASDAQ:TSLA)
Stake Value as of Q2 2024: $405,935,979
Tesla, Inc. (NASDAQ:TSLA) is an American automotive and clean energy corporation, headquartered in Austin, Texas. The company is a pioneer in the EV industry and has significantly contributed to the global shift toward sustainable transportation through its electric cars.
During Q2 2024, the company generated a revenue of $25.5 billion, up 2.3% year-over-year. However, its profit margin of 5.8% slumped to a five-year low. Net income for the quarter was also down 45% from the same period in 2023 to a total of $1.48 billion with adjusted earnings of $0.52 per share, missing analysts’ forecasts of $0.62.
It was a tumultuous quarter for Tesla, Inc. (NASDAQ:TSLA) financially, where it saw its margins get hammered due to hefty investments ($2.27 billion) in artificial intelligence and steep discounts offered by the company to drive auto sales. Elon Musk also admitted during the Q2 earnings call in July that the entry of new, cheaper competing electric vehicles in the market, has made it ‘a bit difficult’ for Tesla. Moreover, the delay in expansion work at Giga Mexico amid political uncertainty around the outcome of the upcoming presidential elections, and a two-month postponement of Robotaxi’s launch, has led to some investor pessimism around the stock.
On the other hand, there were also numerous positives to take out from the quarter. The company has reported progress in Full Self-Driving technology and expects the 12.5 version to have five times the parameters of 12.4 and merge the highway and city stacks. A more affordable model of Tesla, to compete with other reasonably priced EV alternatives, is also likely to be launched during the first half of 2025. Musk has also announced increase in the capacity of Tesla’s existing factories in the US and expects the Robotaxi to be produced at the headquarters in Giga Texas.
Tesla, Inc. (NASDAQ:TSLA)’s Energy business also proved to be a bright spot, with sales doubling year-over-year to reach around $3 billion. Gross profit margins were also up 6% from last year to reach 24.5% for the quarter. The demand for Tesla’s energy storage solutions is likely to remain strong, say experts, as it is closely tied to the broader infrastructure and technological trends.
Tesla, Inc. (NASDAQ:TSLA) is one of the best stocks to buy from the Renaissance Technologies portfolio. The hedge fund had invested nearly $406 million in the company, as of Q2 2024, representing 0.68% of the portfolio.
Overall, TSLA ranks 10th among the Renaissance Technologies Portfolio: 10 Best Stocks To Buy. While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.