Hedge Funds Are Buying Tesla Motors Inc (TSLA)

Tesla Motors Inc (NASDAQ:TSLA) was in 18 hedge funds’ portfolio at the end of March. TSLA investors should pay attention to an increase in hedge fund interest recently. There were 17 hedge funds in our database with TSLA holdings at the end of the previous quarter.

To most investors, hedge funds are assumed to be slow, outdated investment vehicles of the past. While there are more than 8000 funds in operation today, we at Insider Monkey hone in on the elite of this group, around 450 funds. It is widely believed that this group has its hands on the majority of the hedge fund industry’s total asset base, and by watching their top investments, we have determined a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as key, positive insider trading sentiment is a second way to break down the financial markets. Obviously, there are a variety of reasons for an executive to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this strategy if piggybackers know what to do (learn more here).

With these “truths” under our belt, let’s take a glance at the recent action encompassing Tesla Motors Inc (NASDAQ:TSLA).

What does the smart money think about Tesla Motors Inc (NASDAQ:TSLA)?

In preparation for this quarter, a total of 18 of the hedge funds we track held long positions in this stock, a change of 6% from the first quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully.

Of the funds we track, Drew Cupps’s Cupps Capital Management had the most valuable position in Tesla Motors Inc (NASDAQ:TSLA), worth close to $21.5 million, comprising 2.2% of its total 13F portfolio. Sitting at the No. 2 spot is Route One Investment Company, managed by William Duhamel, which held a $18.9 million call position; the fund has 2.9% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include Phill Gross and Robert Atchinson’s Adage Capital Management, John Griffin’s Blue Ridge Capital and Alexander Mitchell’s Scopus Asset Management.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Route One Investment Company, managed by William Duhamel, created the most outsized call position in Tesla Motors Inc (NASDAQ:TSLA). Route One Investment Company had 18.9 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $9.2 million investment in the stock during the quarter. The other funds with brand new TSLA positions are Alexander Mitchell’s Scopus Asset Management, Ryan Frick and Oliver Evans’s Dorsal Capital Management, and Philip Hempleman’s Ardsley Partners.

How are insiders trading Tesla Motors Inc (NASDAQ:TSLA)?

Insider buying is particularly usable when the company in question has experienced transactions within the past 180 days. Over the latest 180-day time period, Tesla Motors Inc (NASDAQ:TSLA) has seen zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Tesla Motors Inc (NASDAQ:TSLA). These stocks are Honda Motor Co Ltd (ADR) (NYSE:HMC), Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), and Tata Motors Limited (ADR) (NYSE:TTM). This group of stocks are in the auto manufacturers – major industry and their market caps resemble TSLA’s market cap.

With the returns shown by the aforementioned strategies, everyday investors should always watch hedge fund and insider trading sentiment, and Tesla Motors Inc (NASDAQ:TSLA) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds