Tesla Hedge Fund Ownership Is Up as Much as Its Stock Price

Many hedge funds either established or substantially added to their positions prior to Tesla's huge rally.
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Over the last 12 months,  (TSLA) - Get Report stock price has engaged in its own insane mode, going positively parabolic to the tune of a 200% increase in price, from $300 towards end of Feb 2019 to a little over $900 as of this writing.

Its hedge fund ownership is up nearly the same amount over just the last quarter.

Credit where it’s due, this was a very prescient collective trade by the “smart money.” These funds reaped massive gains from this move, as these filings predate the mammoth 120% price increase seen within the first two months of 2020. This means funds paid at most about $430 per share for their new position, as that marked the high point of Q4 and these 13F filings only document purchases from Oct. 1 through year end. For clarity as to what SEC-mandated 13F filings are, give this a read.

TSLA 6-month chart, Q4 beginning Oct 1st

TSLA 6-month chart, Q4 beginning Oct 1st

Throughout Q4, hedge funds collectively increased their aggregate share count from 2.687 million to 7.726 million. That amounts to an 187.5% increase in total Tesla portfolio shares, mirroring the 200% increase in share price over the last 12 months, per 13F filing information aggregated by WhaleWisdom.

The new dollar-term increase that represents is substantial. Total Tesla holdings amongst hedge funds went from roughly $873 million at the end of Q3 to $3.3 billion in Q4, factoring in the roughly $100 increase in share price in addition to the share-count increase.

Bear in mind these are stats on the total amount of shares held by hedge funds that must file 13F reports ($100M or more in assets under management), not insight into how widely held the stock is. When we break it down by unique ownership, it’s equally telling just how popular this red-hot energy/car hybrid juggernaut has become.

Forty-two hedge funds, constituting 4.46% of all 13F-reporting funds, have Tesla in their top-ten holdings. And 77 hedge funds own the stock, which is over 8% of 13F-reporting funds as identified by WhaleWisdom. Given that Tesla isn't a stalwart megacap bluechip company with reliable earnings, dividends, etc., these are substantial percentages for a still-proving-itself growth stock.

The ratio of hedge funds that either created new positions or added to them, as opposed to those that closed out or reduced their stake in Tesla follows a similar theme. Fifty-six hedge funds either established a new position or added to their Tesla holdings, as opposed to 22 closing or reducing it -- an over 2.5-to-1 ratio in favor of the bulls.

Even institutions (e.g. the Vanguards, Goldmans and other asset managers that don’t fit the hedge fund description) are bullish on the management prowess of Elon Musk, albeit not as aggressively as their hedge fund counterparts. Specifically, 505 institutions either added to their Tesla positions or established a new stake, as opposed to 306 reducing or closing (only 67 of those sold out entirely), a 1.65-to-1 bullish ratio. It is worth noting, however, that institutions only increased their net share count by 1.19%.

In addition, there were two notable bullish moves by two very prominent firms: Renaissance Technologies and JP Morgan made massive buys in the quarter. Renaissance added over 3.28 million shares, bringing their entire position to 3.94 million, and JP Morgan bought 2.18 million shares, bringing their total to 2.54 million shares shares. This 486% increase by Renaissance represents a $3.54 billion position, and has made them approximately $2 billion in profit with Tesla at $900.

Retail millennial and Gen Z buyers have since piled into the stock, too. While it appears Tesla mania is in full bloom, caution is warranted on a valuation that’s incredibly rich. Tesla will need something in the way of VW-like car sales and Apple-like margins to justify its share price. It appears institutions and individual investors alike are all believers in the Musk dream.