Worm Capital LLC, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A portfolio quarterly return of -0.41% was recorded by the fund for the third quarter of 2021, while its benchmark, the S&P 500 TR Index, by comparison, returned -4.65% over the same period. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q3 2021 investor letter of Worm Capital, the management firm mentioned Tesla, Inc. (NASDAQ: TSLA) and discussed its stance on the firm. Tesla, Inc. is a Palo Alto, California-based vehicle manufacturer with a $795 billion market capitalization. TSLA delivered a 12.46% return since the beginning of the year, while its 12-month returns are up by 86.33%. The stock closed at $793.61 per share on October 7, 2021.
Here is what Worm Capital has to say about Tesla, Inc. in its Q3 2021 investor letter:
“Our core portfolio as of this writing—TSLA, SPOT, SHOP, ABNB, and AMZN—are all premier examples of companies that use the concept of aggregation of marginal gains to continuously improve their value proposition for customers. After all, what is innovation if not just a continuous search for fractional advantages in business?
The way we see it, Tesla is perhaps the generational example of the marginal gain aggregation theory. It’s also been our largest position for several years now. There are many ways to characterize and value this business (see previous letters for longform write-ups), but perhaps the best way to think about the company is that it is a highly vertically-integrated software and hardware firm that’s devoted entirely to aggregating marginal gains across its organization. The goal? Lower costs, improve thruputs, and dramatically enhance the value proposition—at scale—for consumers…” (Click here to see the full text)
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Based on our calculations, Tesla, Inc. (NASDAQ: TSLA) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. TSLA was in 60 hedge fund portfolios at the end of the first half of 2021, compared to 62 funds in the previous quarter. Tesla, Inc. (NASDAQ: TSLA) delivered a 21.57% return in the past 3 months.
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. We go through lists like the 10 best hydrogen fuel cell 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.
Disclosure: None. This article is originally published at Insider Monkey.
