Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Tesla Inc. (NASDAQ:TSLA) changed recently.
Is Tesla Inc. (NASDAQ:TSLA) a good stock to buy now? TSLA was in 67 hedge funds’ portfolios at the end of September. The all time high for this statistics is 63. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TSLA investors should be aware of an increase in hedge fund interest lately. There were 63 hedge funds in our database with TSLA holdings at the end of June. Our calculations also showed that TSLA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we’re going to go over the key hedge fund action regarding Tesla Inc. (NASDAQ:TSLA).
What have hedge funds been doing with Tesla Inc. (NASDAQ:TSLA)?
At third quarter’s end, a total of 67 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in TSLA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Tesla Inc. (NASDAQ:TSLA) was held by Citadel Investment Group, which reported holding $13269.8 million worth of stock at the end of September. It was followed by Coatue Management with a $1333 million position. Other investors bullish on the company included LMR Partners, PEAK6 Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Ariose Capital allocated the biggest weight to Tesla Inc. (NASDAQ:TSLA), around 33.26% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, dishing out 26.05 percent of its 13F equity portfolio to TSLA.
As one would reasonably expect, some big names were leading the bulls’ herd. Light Street Capital, managed by Glen Kacher, created the biggest position in Tesla Inc. (NASDAQ:TSLA). Light Street Capital had $65.8 million invested in the company at the end of the quarter. Kenneth Tropin’s Graham Capital Management also initiated a $14.4 million position during the quarter. The other funds with brand new TSLA positions are Michael Gelband’s ExodusPoint Capital, Greg Eisner’s Engineers Gate Manager, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks similar to Tesla Inc. (NASDAQ:TSLA). We will take a look at Walmart Inc. (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), The Procter & Gamble Company (NYSE:PG), Mastercard Incorporated (NYSE:MA), NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks’ market values match TSLA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMT | 69 | 5492521 | 9 |
| JNJ | 82 | 4882436 | -12 |
| PG | 75 | 10091350 | 2 |
| MA | 133 | 15645517 | -14 |
| NVDA | 82 | 7672045 | -10 |
| HD | 73 | 4957355 | -12 |
| UNH | 89 | 8963458 | -7 |
| Average | 86.1 | 8243526 | -6.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 86.1 hedge funds with bullish positions and the average amount invested in these stocks was $8244 million. That figure was $8177 million in TSLA’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 69 bullish hedge fund positions. Compared to these stocks Tesla Inc. (NASDAQ:TSLA) is even less popular than WMT. Our overall hedge fund sentiment score for TSLA is 39. 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. Hedge funds clearly dropped the ball on TSLA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on TSLA as the stock returned 36.5% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
