Although it’s still several years away, there is opportunity for investors to participate in the trend of automated driving. Like the internet did for media companies, automated driving could cause a lot of change for established players. Given the size of the potential market, automated driving could be a gold mine for some companies especially in Silicon Valley and a pitfall for others in Detroit. In this article let’s analyze how Apple Inc. (NASDAQ: AAPL), NVIDIA Corporation (NASDAQ: NVDA), General Motors Company (NYSE:GM), Alphabet Inc. (NASDAQ:GOOG), and Tesla Inc (NASDAQ:TSLA) all have exposure to the trend of automated driving. With SEC hedge fund holding data, let’s analyze how the smart money is playing the trend and how the average investor can participate.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Elon Musk is big on autonomous driving as all Tesla vehicles have hardware that could potentially allow for 'full self-driving capabilities'. So far, however, Tesla has yet to push out the necessary self-driving software. Given the many Tesla cars around the world, Tesla is on its way to making its goal a reality as Tesla constantly gathers data from those cars. That data could prove valuable in helping Tesla make its self-driving software. Israel Englander's Millennium Management increased its stake by 45829% to 784,918 shares at the end of December.
Apple has done some work in automated driving/electric cars with rumored upwards of 1,000 employees at one point working to make an electric vehicle. Later Apple is reportedly said to have pivoted to creating an autonomous driving system. CEO Cook once said, "We're focusing on autonomous systems. It's a core technology that we view as very important." Warren Buffett’s Berkshire Hathaway owned around 249.5 million shares at the end of Q4, down 3 million shares. The trimming reportedly wasn't Warren Buffett's idea however.
Alphabet’s Waymo is considered the current leader in autonomous driving as it has already launched a commercial robotaxi service named Waymo One in the Phoenix area. As of right now there are test divers behind the wheel in case something bad happens. Morgan Stanley estimates Waymo to be worth as much as $175 billion. Boykin Curry's Eagle Capital Management increased its stake by 13% to over 1.8 million shares at the end of Q4.
GM's self driving unit, cruise automation, has received an investment from Softbank and some investors hope GM spins off that division in the future in a move that might unlock value. GM has big plans for self driving and investors hope the change will help boost GM stock. Warren Buffett’s Berkshire Hathaway is also a holder of GM, with Berkshire Hathaway increasing its stake by 38% in Q4 to over 72 million shares.
NVIDIA has something called NVIDIA Drive which is a scalable AI platform for autonomous driving. It serves as 'the brain' for autonomous vehicles hardware speaking. It processes data from lidar, radar, camera, and ultrasonic sensors to ideally allow self driving software to work. Philippe Laffont's Coatue Management increased its stake by 27% in Q4 to 1.4 million shares at the end of 2018.
Of the five companies, Alphabet is the most far along and Tesla is likely the company that has the most real world data point potential.