Bireme Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be seen here. Fundamental Value had its best year ever in 2021, returning 48.5% net of fees vs 28.7% for the S&P 500. The fund has now compounded at 25.9% net of fees since inception in June of 2016, beating the market by 800 bps annually over more than half a decade. While this level of absolute returns is unlikely to be sustainable, Bireme Capital is as confident as ever in its ability to significantly outperform a still richly-valued equity market. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Bireme Capital, in its Q4 2021 investor letter, mentioned Tesla, Inc. (NASDAQ: TSLA) and discussed its stance on the firm. Founded in 2003, Tesla, Inc. is a Palo Alto, California-based vehicle manufacturing company with an $822.0 billion market capitalization, and is currently spearheaded by its CEO, Elon Musk. TSLA delivered a -24.74% return since the beginning of the year, while its 12-month returns are up by 14.65%. The stock closed at $795.35 per share on March 11, 2022.
Here is what Bireme Capital has to say about Tesla, Inc. in its Q4 2021 investor letter:
“We did have a few short positions move against us in 2021, most notably Tesla. Tesla beat expectations for the year, delivering more than $50b of sales and a profit of $5b. These results sent the stock up about 50% for the year. While we think Tesla will continue to have success in the EV market, its valuation of over $1 trillion is roughly 12x the peak profit pool of the entire pre-pandemic auto industry.
Tesla will also fight a huge increase in competition over the next few years, with every major car maker now focused on delivering electric vehicles. We remain skeptical of the purportedly imminent robo-taxi business, which CEO Elon Musk has consistently over-promised and under-delivered on.
We think Tesla will materially underperform the market from here. But we are even more skeptical of the second- and third-tier EV companies, those with little-to-no revenue and multi-billion dollar valuations. The stocks of these companies have been buoyed by the strong price action of Tesla as investors try to catch “the next one.” We think few, if any, of these companies will generate the profits implied by their valuations.
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Our calculations show that Tesla, Inc. (NASDAQ: TSLA) ranks 26th on our list of the 30 Most Popular Stocks Among Hedge Funds. TSLA was in 91 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 60 funds in the previous quarter. Tesla, Inc. (NASDAQ: TSLA) delivered a -21.80% return in the past 3 months.
In January 2022, we also shared another hedge fund’s views on TSLA in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
