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

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Tesla Inc. (NASDAQ:TSLA).

Tesla Inc. (NASDAQ:TSLA) investors should pay attention to a decrease in support from the world’s most elite money managers recently. Tesla Inc. (NASDAQ:TSLA) was in 62 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 68. There were 68 hedge funds in our database with TSLA positions at the end of the fourth quarter. Our calculations also showed that TSLA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To the average investor there are a lot of metrics stock traders employ to appraise publicly traded companies. A pair of the less utilized metrics are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outperform the market by a healthy amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the key hedge fund action surrounding Tesla Inc. (NASDAQ:TSLA).

Do Hedge Funds Think TSLA Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in TSLA over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Tesla Inc. (NASDAQ:TSLA). Citadel Investment Group has a $16.3409 billion call position in the stock, comprising 4.3% of its 13F portfolio. Sitting at the No. 2 spot is ARK Investment Management, managed by Catherine D. Wood, which holds a $3.8643 billion position; the fund has 7.7% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish include Matthew Hulsizer’s PEAK6 Capital Management, Philippe Laffont’s Coatue Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Value Star Asset Management allocated the biggest weight to Tesla Inc. (NASDAQ:TSLA), around 29.58% of its 13F portfolio. Tao Capital is also relatively very bullish on the stock, setting aside 11.09 percent of its 13F equity portfolio to TSLA.

Seeing as Tesla Inc. (NASDAQ:TSLA) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies that slashed their full holdings heading into Q2. Intriguingly, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners dropped the largest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $2056 million in stock. D. E. Shaw’s fund, D E Shaw, also cut its stock, about $1654.4 million worth. These transactions are interesting, as total hedge fund interest dropped by 6 funds heading into Q2.

Let’s check out hedge fund activity in other stocks similar to Tesla Inc. (NASDAQ:TSLA). These stocks are Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), and Walmart Inc. (NYSE:WMT). This group of stocks’ market caps are similar to TSLA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BABA 135 15497689 -21
TSM 76 10870661 4
BRK-B 111 19880791 1
JPM 111 5253689 -1
V 164 26588103 -2
JNJ 81 6913373 0
WMT 58 5881223 -12
Average 105.1 12983647 -4.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 105.1 hedge funds with bullish positions and the average amount invested in these stocks was $12984 million. That figure was $10013 million in TSLA’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 58 bullish hedge fund positions. Tesla Inc. (NASDAQ:TSLA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSLA is 28.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and surpassed the market again by 6.7 percentage points. Unfortunately TSLA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TSLA investors were disappointed as the stock returned 4.7% since the end of March (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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