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Hedge Funds Are Dumping Tesla Inc. (TSLA)

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31st, so let’s proceed with the discussion of the hedge fund sentiment on Tesla Inc. (NASDAQ:TSLA).

Is Tesla Inc. (NASDAQ:TSLA) worth your attention right now? Prominent investors were getting less bullish. The number of bullish hedge fund bets were cut by 6 recently. Tesla Inc. (NASDAQ:TSLA) was in 62 hedge funds' portfolios at the end of March. The all time high for this statistic is 68. Our calculations also showed that TSLA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.


Philippe Laffont of Coatue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Keeping this in mind let's check out the key hedge fund action regarding Tesla Inc. (NASDAQ:TSLA).

Do Hedge Funds Think TSLA Is A Good Stock To Buy Now?

At the end of March, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 61 hedge funds with a bullish position in TSLA a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Tesla Inc. (NASDAQ:TSLA), with a stake worth $16340.9 million reported as of the end of March. Trailing Citadel Investment Group was ARK Investment Management, which amassed a stake valued at $3864.3 million. PEAK6 Capital Management, Coatue Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Value Star Asset Management allocated the biggest weight to Tesla Inc. (NASDAQ:TSLA), around 29.58% of its 13F portfolio. Tao Capital is also relatively very bullish on the stock, designating 11.09 percent of its 13F equity portfolio to TSLA.

Judging by the fact that Tesla Inc. (NASDAQ:TSLA) has witnessed declining sentiment from the smart money, we can see that there is a sect of funds that slashed their entire stakes by the end of the first quarter. It's worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners sold off the biggest position of the "upper crust" of funds watched by Insider Monkey, comprising about $2056 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund dropped about $1654.4 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 6 funds by the end of the first quarter.

Let's now review hedge fund activity in other stocks similar to Tesla Inc. (NASDAQ:TSLA). These stocks are Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Berkshire Hathaway Inc. (NYSE:BRK-B), JPMorgan Chase & Co. (NYSE:JPM), Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), and Walmart Inc. (NYSE:WMT). This group of stocks' market valuations are closest to TSLA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BABA,135,15497689,-21 TSM,76,10870661,4 BRK-B,111,19880791,1 JPM,111,5253689,-1 V,164,26588103,-2 JNJ,81,6913373,0 WMT,58,5881223,-12 Average,105.1,12983647,-4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 105.1 hedge funds with bullish positions and the average amount invested in these stocks was $12984 million. That figure was $10013 million in TSLA's case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 58 bullish hedge fund positions. Tesla Inc. (NASDAQ:TSLA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSLA is 28.2. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately TSLA wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TSLA investors were disappointed as the stock returned -8.7% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.

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