Source: Jin10 Data
Despite Tesla's latest sales data driving the stock's rapid rebound, hedge fund managers are calling for investors to stay away!
According to data, hedge funds heavily shorted Tesla before the latest sales data was released, but the subsequent data from the electric car manufacturer triggered a sharp rise in the stock price.
Of the more than 500 hedge funds tracked by data provider Hazeltree, about 18% held overall short positions in Tesla at the end of June, the highest proportion in over a year. By comparison, this percentage was slightly below 15% at the end of March .
These bets against the market may now cause hedge funds that made these bets to incur losses. S3 Partners data shows that Tesla's strong rebound in stock price has caused short sellers to lose more than $3.5 billion.
Tesla's latest vehicle sales data released on July 2 showed that its second quarter delivery exceeded analysts' expectations, despite a decrease in sales. Investors quickly seized upon this news, pushing the company's stock price to a new six-month high. The weekly gain was 26%, and Tesla's stock price has soared about 40% since early June.
At the same time, due to this surge, Tesla's market capitalization has returned to the top ten in the US stock market, and Musk's personal wealth has skyrocketed by nearly $30 billion, once again surpassing Amazon founder Bezos and regaining the title of the world's richest person.
According to Seth Goldstein of Morningstar, due to the reduction in production and raw material costs, Tesla's profit margin may increase. He is one of the top three stock analysts among foreign media. Goldstein said in a report to clients that the company may return to profit growth next year. But he added that how Tesla deals with low-priced electric vehicles in the market is crucial.
This development reflects the continued uncertainty about how to deal with a broader electric vehicle market. In the United States, Trump stated that if he becomes president again after the November election, he will repeal existing laws supporting new energy vehicles, and call them "crazy." However, Tesla CEO Musk said that Trump is a "hardcore fan" of Tesla Cybertruck.
Meanwhile, there is turmoil inside Tesla. In April of this year, Musk told employees to prepare for large-scale layoffs, and sales positions were also affected. As Tesla's first new consumer model in years, the marketing progress of Cybertruck has been slow.
Therefore, some hedge fund managers have decided to completely avoid the stock. Fabio Pecce, chief investment officer of Ambienta, said that Tesla is "very difficult for us to position." He said, "Basically, it's unclear whether we are dealing with 'a top company with an excellent management team' or 'a franchised company facing challenges with poor corporate governance.'"
However, he said, "If Trump wins, it will be very positive for Tesla, although this result is clearly unfavorable to electric vehicle companies, and it is expected that Trump will impose large-scale tariffs, which will benefit Tesla."
According to a survey by foreign media, investors said that they may further withdraw from the clean energy market by the end of 2023, especially in the field of electric vehicles. Nearly two-thirds of the nearly 620 respondents said they plan to stay away from the electric vehicle industry, and nearly 60% expect iShares Global Clean Energy ETF to continue to decline in 2024. The ETF has fallen 13% so far this year and fell more than 20% in 2023.
Including BYD Company Limited (BYDDY.US), the electric vehicle price return index consisting of foreign media compilations for enterprises has fallen by about 22% so far this year. At the same time, the price fluctuations of metals and minerals required for battery production in the volatile commodity market mean that some battery manufacturers have to adjust their profit margins to adapt to market changes.$BYD Company ADR (BYDDY.US)$, $Tesla (TSLA.US)$ and $Rivian Automotive (RIVN.US)$The electric vehicle price return index consisting of enterprises compiled by foreign media has fallen by about 22% so far this year, including BYD Company Limited (BYDDY.US). Meanwhile, the price fluctuations of metals and minerals required for battery production in the volatile commodity market have meant that some battery manufacturers have had to adjust their profit margins to adapt to market changes.
In this context, more traditional automakers are facing pressure from shareholders to slow down their capital spending on electric vehicles. Soren Aandahl, founder and chief investment officer of Blue Orca Capital based in Texas, said that the valuation of the electric car industry is now so low that he is avoiding shorting the industry. He said that investors can often achieve the best returns by entering the market at slightly higher prices. However, many of these stock bubbles have now dissipated.
However, Eirik Hogner, deputy investment portfolio manager of Clean Energy Transition Fund, believes that the electric vehicle industry may still face more pain. He said that there are still too many startups that are “too small” and have low gross profit margins. Therefore, the supply and demand dynamics of the electric vehicle market are “still very negative.” He said:
"Ultimately, I think we need to see more electric vehicle companies go bankrupt before the market begins to turn around."
Editor / Feynman