SA: Institutional Investor Shift?

[redharel]

http://seekingalpha.com/article/1743942-is-tesla-about-to-burn-individual-investors?source=yahoo

keep yourself on guard
not so inspiring to know that
"institutional investors have been reducing their stake in Tesla"

 

[sub]

http://seekingalpha.com/article/1743942-is-tesla-about-to-burn-individual-investors?source=yahoo

keep yourself on guard
not so inspiring to know that
"institutional investors have been reducing their stake in Tesla"

Can't this be looked at the other way in that they still retain a significant stake in TSLA? If they thought the company/stock was going to tank, why would they have any stake at all? From what others have said, and i'm no expert on this, funds are only allowed to have a percentage of their assets in any one company. Therefore, any company that has a rapid rise (or slow for that matter) in share price, regardless of company, fundamentals, or these funds analysis of future performance of said company and/or stock, they would have to reduce their stake? If this is the case, the only reason these big funds are reducing their stake is to abide by their own internal rules regarding risk.

 

[fjm9898]

One thing always failed to be pointed out was that there was a secondary offering between the two data points. So that has some dilution factors on what institutions hold, if retailers, and Elon bought enough of that dilution. So they would of lost some percentage then, how much, i dont know.
Also buy and hold investors such as many on here are also not a bad thing to have in our stock and they might of taken up some of that institutional stock that was sold.

 

[redharel]

Can't this be looked at the other way in that they still retain a significant stake in TSLA? If they thought the company/stock was going to tank, why would they have any stake at all? From what others have said, and i'm no expert on this, funds are only allowed to have a percentage of their assets in any one company. Therefore, any company that has a rapid rise (or slow for that matter) in share price, regardless of company, fundamentals, or these funds analysis of future performance of said company and/or stock, they would have to reduce their stake? If this is the case, the only reason these big funds are reducing their stake is to abide by their own internal rules regarding risk.

keep in mind funds can't sale all their holding at once as it will cause the stock to tank 100$ a day, you have to find a buyers and if you have more than 10M shares you do it in few chunks

 

[Chickenlittle]

Can't this be looked at the other way in that they still retain a significant stake in TSLA? If they thought the company/stock was going to tank, why would they have any stake at all? From what others have said, and i'm no expert on this, funds are only allowed to have a percentage of their assets in any one company. Therefore, any company that has a rapid rise (or slow for that matter) in share price, regardless of company, fundamentals, or these funds analysis of future performance of said company and/or stock, they would have to reduce their stake? If this is the case, the only reason these big funds are reducing their stake is to abide by their own internal rules regarding risk.

I suspect they wanted to rebalance their holdings after the huge run up. 9% stake in a 23 billion company is a lot more money then what they had at risk with market cap 2 billion before

 

[MartinAustin]

Can't this be looked at the other way...

YES. Don't forget that in order to sell those stocks, someone has to decide to buy them. It appears that TSLA is seeing a huge number of individual ("retail") investors buy stock in the company. This is probably due in no small part to owners of the car. Tesla is a rare company whose products are so compelling that buyers also decide to buy stock in the company. How many people buy a Whirlpool refrigerator and say "dang, this refrigerator is so good I'm going to buy stock in Whirlpool" ? There are some... but not many. However there have been thousands of individuals happy to add TSLA to their portfolio. This is not a bad thing... it's not bad news that institutions lowered their ownership. If they ever want to get any of it back... they're going to have to find some to buy, and it may not be that easy.

 

[FluxCap]

keep in mind funds can't sale all their holding at once as it will cause the stock to tank 100$ a day, you have to find a buyers and if you have more than 10M shares you do it in few chunks

What does this even mean? Do you have experience with an investment bank or fund management that leads you to conclude this? If not, I would be a bit more careful making such definitive statements. Institutions and investors of all sizes buy and sell stocks every day in widely varying volumes. And no single data point is valuable alone when evaluating market dynamics. Furthermore, the SA article you linked is talking about holdings at some unknown point in September. The article does not provide useful information, it is designed with an agenda to make a point, and it is irresponsible "journalism" given that it does not provide citations at all beyond very casual discussion of one bar graph taken out of context from one report.

I'm noticing an increase here in people that may have little to no experience either with actual investment analysis, or the U.S. securities laws that govern them, making sweeping generalizations that may be misleading to amateur investors coming here for information. It is my understanding that this is a place to talk about short-term movements in the price of Tesla Motors stock.

It is also important to remember that "feelings" and "guesses" really don't matter, and when you share your "emotions" without factual data or objective analysis to back them up, this can actually hurt people who come here looking for advice.

Please be considerate, and if you are going to make a case for a particular analytical trend, please try to be more thorough.

- - - Updated - - -

Hey guys, just a reminder to vote Elon for CEO of the year at MarketWatch.

MarketWatch CEO of the Year 2013

Just a casual observation: If you use incognito mode on your browser the site seems to forget that you have already voted and allows you to vote a second (or third, or fourth...) time. Not sure why anyone would every do such a thing, but I thought it curious and wanted to share.

Done and done!

 

[sub]

my point is that this decrease in institutional ownership of the stock is being portrayed as a negative on the company and the stock and I can easily turn it around the other way. I agree that people are buying or test driving the car then going home and buying stock, that is exactly what I did. I have not bought a model S but I have been close to placing my order a couple of times. We need a new car but I refuse to buy a new ICE vehicle so I will continue to drive our old cars until I buy a Tesla.

 

[CyberDutchie]

I suspect they wanted to rebalance their holdings after the huge run up. 9% stake in a 23 billion company is a lot more money then what they had at risk with market cap 2 billion before

Definitely something like that is going on, even at individual account levels. Case in point, my SO asked her IRA fund manager to buy TSLA when it was a lot cheaper. He advised against it but she insisted and TSLA became a relatively small part of her portfolio.

Fast forward to last week and she got a call from her fund manager that TSLA is now 40% of her portfolio (the only one that made significant gains), and now he's telling her to sell, otherwise he can no longer manage her portfolio (against company rules if an individual stock in an IRA portfolio is more than 40%).

What a scam, the investments he picked have made nothing so far this year and now he's complaining that the one investment that he advised against has more than doubled in one year? These "advisers" are the worst, they have no interest other than filling their own pockets (did you know they take 1% of your portfolio for the privilege to have them manage it for you?).

She's thinking of taking her IRA elsewhere, and she should!

But I wonder if this is more common, where the huge profits from TSLA make portfolios unbalanced and some portion gets sold...

 

[Mario Kadastik]

I learned through personal experience and a bit of study, that most funds for small people to invest in will be deaths through a thousand papercuts. Their small fees on various things on every transaction as well as monthly fees etc will eat the portfolio even if you look at a profit in the underlying stock. They mandate such spreading between industries that you're effectively smeared out of any decent profit and at best keep ahead of inflation with general market performance (and mostly below because of all the fees).

So teo years back I took out my funds from all funds etc and started investing on my own against all recommendations from my brokers. The first half a year to a year I had some ups and some serious downs getting me to -30% that I took as schooling money. Since then I've gotten to a decent platform (IB basically) with true market access and better strategies that I've learned over the years. I also decided that I'm still young and the funds I invest are utterly unrelated to my day-to-day living expenses so I tolerate quite some risk. My portfolio is nicely in the green now with most of 2013 being only green months. Tesla has helped of course, but ignoring all brokers has more

 

[SciGuy13]

For what it's worth: One of the guys who won the Nobel Prize in economics today did research showing that the average individual investor cannot/does-not (can't remember which) succeed in the end. Ha!
I think this thread is full of above-average individual investors.

 

[MartinAustin]

my point is that this decrease in institutional ownership of the stock is being portrayed as a negative on the company and the stock and I can easily turn it around the other way. I agree that people are buying or test driving the car then going home and buying stock, that is exactly what I did. I have not bought a model S but I have been close to placing my order a couple of times. We need a new car but I refuse to buy a new ICE vehicle so I will continue to drive our old cars until I buy a Tesla.

That is pretty much exactly the same position I'm in. I have a 2002 Civic which I've owned since new. It's pretty worn out and I've been looking at all sorts of cars. I had settled on a 328i when I realised that I need to help push us all forwards out of the gas-guzzling era and over to electric. I now have the money for a Model S, and even though I can afford almost every other car out there, they all look bad, because they guzzle gasoline and preserve the status quo.

I was happy to see TSLA end on a slightly positive note today. After the bombardment the last couple of weeks, we have to be thankful for small gains

 

[Cameron]

That is pretty much exactly the same position I'm in. I have a 2002 Civic which I've owned since new. It's pretty worn out and I've been looking at all sorts of cars. I had settled on a 328i when I realised that I need to help push us all forwards out of the gas-guzzling era and over to electric. I now have the money for a Model S, and even though I can afford almost every other car out there, they all look bad, because they guzzle gasoline and preserve the status quo.

I was happy to see TSLA end on a slightly positive note today. After the bombardment the last couple of weeks, we have to be thankful for small gains

I'm starting to think I prefer these small gains, I'm still making money but it almost feels safer, like we are flying under the naysayers radar :tongue:

I personally have an older BMW that I still enjoy, but won't hesitate to get a Model S once I can more comfortably buy one out right. I can honestly say a lot of cars that I used to love (BMWs, Mercs, etc) suddenly don't seem that appealing compared to a Tesla. They just seem so primitive.

 

[joefee]

http://seekingalpha.com/article/1743942-is-tesla-about-to-burn-individual-investors?source=yahoo

keep yourself on guard
not so inspiring to know that
"institutional investors have been reducing their stake in Tesla"

Many of us have done the same thing… hold a long term core position and trade the range with the rest….or sell enough to pay for the car and play with the house money...not such a bad idea!

 

[marvinat0rz]

Not to step on any toes, but this thread is going extremely off-topic.

 

[DaveT]

Institutional ownership thoughts on TSLA at $179.72

There's been some articles of late that TSLA institutional ownership has dropped from 84% in January 2013 to 66% in September 2013. See:
- Tesla Motors Inc (TSLA): Where Retail Investors Rush In And
- Tesla Motors Inc (TSLA): Is Tesla About To Burn Individual Investors? - Seeking Alpha

BofA Merrill Lynch seems to have written this in a Sept 23 note to their clients:
“Institutional ownership of Tesla stock has faded throughout 2013, from approximately 84% of shares held in January to about 66% today. As a result, it now appears that retail investors are playing an increasing role in driving the stock price higher and could be at risk when a correction, which we believe is long overdue, ultimately occurs.”

Naturally this has concerned some shareholders, sparking some fears that institutions are dumping TSLA stock. Fidelity was reported to have cut their stake in TSLA from 15% to 9.6% (Fidelity Cuts Tesla (TSLA) Stake - TheStreet).

Here's why all of this is of very little concern to me.

1. Fidelity reducing their stake in TSLA is only natural as the stock has nearly 6x'ed it's price since the beginning of the year. Fidelity holds TSLA shares in a variety of mutual funds, and if TSLA is overweight (which it becomes when it rises 6x in several months), then those funds need to reduce their TSLA holdings. That's only natural.

Also, Fidelity Contrafund (probably the most notable and important mutual fund from Fidelity) has only increased their holdings this year:
March 31, 2013 - 1,968,741 shares
June 30, 2013 - 3,134,282 shares
August 31, 2013 - 3,379,517 shares

2. I question BofA stat of institutional ownership dropping from 84% to 66%. Here's a chart from one of the article attributed to BofA:

How do they even know what institutional ownership is day to day? I thought that most mutual funds were required to report their current holdings to the SEC at the end every quarter (ie., March 31, June 30, August 31 of this year). I have no idea how it's possible to accurate chart a day to day (or week to week) movement of institutional ownership like the chart shows.

3. My records show that institutional ownership of TSLA has not dropped significantly from earlier in the year.

I took screenshots of the TSLA yahoo finance page of major shareholders (http://finance.yahoo.com/q/mh?s=TSLA+Major+Holders) on the following dates:
May 7, 2013 (prior to Q1 earnings)
August 21, 2013
October 14, 2013 (today)

Here's what they show. (see second line in screenshots, "% shares held by institutional and mutual fund owners")

1. 70% institutional ownership from May 7, 2013 screen capture:

2. 68% institutional ownership from August 21, 2013 screen capture:

3. 68% institutional ownership from October 14, 2013 screen capture:

Yahoo Finance seems to use figures from SEC quarterly filings from mutual funds to get their figures. From my screenshots, I'm seeing a drop of just 2% institutional ownership May to October (this might change as Q3 SEC filings get figured into this, but regardless it's not a big drop from end of Q1 to now).

So, for those scared or concerned about institutional ownership dropping I'd say there's no reason for concern. If anything TSLA institutional ownership remains strong and it appears it's only dropped a few percent (according to Yahoo Finance) in the past several months.

 

[FluxCap]

THAT IS WHAT I'M TALKING ABOUT! <3

Folks, you can literally take DaveT's analysis to the bank because it is thorough, well-cited, and carefully researched. He's also not in this to sell advertising with sensationalist headlines, unlike Seeking Alpha "journalists."

Thank you for taking the time to research and share this DaveT. This is what makes this forum special.

 

[gene]

THAT IS WHAT I'M TALKING ABOUT! <3

Thank you for taking the time to research and share this DaveT. This is what makes this forum special.

+1!!

 

[tslafan123]

Another key point to note, the overall ownership far exceeded 100% for a long while because of high short interest. So even if Institutional Ownership drops as a "percentage of shares-outstanding", it could still mean that their proportion vs retail ownership is actually going up!! (as short interest goes down, the cumulative ownership goes down as well).


I don't think anyone knows for sure what the breakdown is in terms of institutional vs insider vs retail. Let alone track it over time..

 

[Thumper]

Thanks Dave. The info we get here is so superior to the general blah blah of commercial sites like SA and Fool. I never realized just how poor the quality of financial reporting is in general until I followed TSLA super closely. Bought at $25.5 average cost ending Aug 2011, holding. Thanks to all of you.