1. Tesla, Inc. (NASDAQ:TSLA)
Value of ARK Investment Management’s 13F Position: $1.082 billion
Number of Hedge Fund Holders: 88
Tesla, Inc. (NASDAQ:TSLA) is an American automotive company that manufactures and sells electric vehicles and battery energy storage systems. The company takes the top spot in our list of best ARK stocks. ARK Investment Management owned over 4 million of the company shares, worth $1.082 billion, after increasing its holdings in the company by 183% in the third quarter. Moreover, ARK Investment Management bought an additional 74,862 shares of Tesla, Inc. (NASDAQ:TSLA), valued at $11.7 million on December 14.
On December 15, RBC Capital analyst Joseph Spak reiterated an Outperform rating on Tesla, Inc. (NASDAQ:TSLA)’s shares and lowered the price target to $225 from $325. Spak believes that once the gross margins recalibrate, the company should experience better earnings and free cash flow growth. However, until that happens, the shares are likely to remain under pressure.
Between December 12 and 14, Tesla, Inc. (NASDAQ:TSLA)’s CEO Elon Musk sold 22 million shares of the company, worth about $3.58 billion. Musk still owns around 13.4% of the company with around 423.6 million shares.
Here is what Baron Funds had to say about Tesla, Inc. (NASDAQ:TSLA) in its Q2 2022 investor letter:
“In 2014, before we began to invest in Tesla (NASDAQ:TSLA), I called Roger to ask whether he thought Elon Musk’s electric car business would succeed. I did not believe that Roger, an owner of dealerships that sell cars powered by internal combustion engines (ICE) would likely have a favorable opinion of Tesla’s prospects. That was principally for two reasons:
First, automobile manufacturing and distribution is unusually complicated, capital intensive, and highly regulated, which makes profitability problematic;
second, cars with ICE motors require extensive annual maintenance, and dealer services revenues, not profits from automobile sales, are the most important contributor to profits of perpetual licensed ICE car dealerships.
Penske Automotive Group is principally an ICE car dealer. Since electric cars are powered by batteries and need little service, franchised dealerships are incented to sell ICE not EV automobiles. Further, Roger had been a long-term director of General Motors. General Motors’ ICE automobile business would be disrupted if Tesla were successful.
Regardless, I was right to have spoken with Roger. That was since he outlined numerous issues we needed to consider, study, and question before we determined whether we believed Tesla could be a successful business…before we ultimately chose whether to invest in that company.
When we completed our initial due diligence on Tesla, which diligence has been ongoing since 2014, we decided to invest $360 million in Tesla over the next two years. I then called Roger and outlined why I thought we could earn 20 times our capital over the next 10 years. Roger was so certain I was wrong that he offered to bet me $1 million that Tesla would fail. “Roger, I can’t bet you a million dollars. First, if you are right, I couldn’t afford to pay you. Second, if I’m right, you’re my friend, and I couldn’t take your money.” We settled on a dinner bet…” (Click here to see the full text)
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