Were Hedge Funds Right About Going After Tesla Inc. (TSLA) ?

Insider Monkey finished processing more than 700 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2018. In this article we are going to take a look at smart money sentiment towards Tesla Inc. (NASDAQ:TSLA).

Tesla Inc. (NASDAQ:TSLA) shareholders have witnessed an increase in enthusiasm from smart money of late. TSLA was in 47 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 31 hedge funds in our database with TSLA positions at the end of the previous quarter. Our calculations also showed that TSLA isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


We’re going to check out the latest hedge fund action encompassing Tesla Inc. (NASDAQ:TSLA).

How have hedgies been trading Tesla Inc. (NASDAQ:TSLA)?

At Q4’s end, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 52% from the second quarter of 2018. On the other hand, there were a total of 30 hedge funds with a bullish position in TSLA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, Citadel Investment Group held the most valuable stake in Tesla Inc. (NASDAQ:TSLA), which was worth $1618.4 million at the end of the third quarter. On the second spot was PEAK6 Capital Management which amassed $264.3 million worth of shares. Moreover, Millennium Management, Masters Capital Management, and D E Shaw were also bullish on Tesla Inc. (NASDAQ:TSLA), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, some big names have jumped into Tesla Inc. (NASDAQ:TSLA) headfirst. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Tesla Inc. (NASDAQ:TSLA). D E Shaw had $100.5 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $92.2 million position during the quarter. The other funds with new positions in the stock are Glen Kacher’s Light Street Capital, Andrew Weiss’s Weiss Asset Management, and Howard Marks’s Oaktree Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tesla Inc. (NASDAQ:TSLA) but similarly valued. These stocks are VMware, Inc. (NYSE:VMW), The Charles Schwab Corporation (NYSE:SCHW), Baidu, Inc. (NASDAQ:BIDU), and The TJX Companies, Inc. (NYSE:TJX). All of these stocks’ market caps are closest to TSLA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VMW 32 1806279 -6
SCHW 46 3230035 -7
BIDU 51 2836967 -2
TJX 58 3062239 9
Average 46.75 2733880 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.75 hedge funds with bullish positions and the average amount invested in these stocks was $2734 million. That figure was $879 million in TSLA’s case. The TJX Companies, Inc. (NYSE:TJX) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 32 bullish hedge fund positions. Tesla Inc. (NASDAQ:TSLA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately TSLA wasn’t in this group. Hedge funds that bet on TSLA were disappointed as the stock lost 17.2% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.