Welcome to Tesla Motors Club
Discuss Tesla's Model S, Model 3, Model X, Model Y, Cybertruck, Roadster and More.
Register

SA: Institutional Investor Shift?

This site may earn commission on affiliate links.
I never realized just how poor the quality of financial reporting is in general until I followed TSLA super closely.
I had the same experience - following these forums has really changed my attitude towards investing in general, not just towards TSLA. I'm very grateful to all those who frequently post their insights here.
 
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.

Only companies that advertise themselves as a "diversified investment company" in their prospectus, need to adhere to restrictive investment portfolios. The general rule is the 75-5-10 rule. At least 75% invested in other companies, nor more than 5% in any one company and nor more than 10% of a companies outstanding voting stock. It's a way to force RIC's (regulated investment companies) to invest and not sit on a pile of cash.

If a manager becomes overweighted they do NOT have to sell anything. Fund accounting just informs them that they are on a hold with company xyz and can't by more. If you are non-diversified you could invest everything in a single company. This is the Investment Company Act of 1940's definition and not the lay person's view of simply investing in multiple companies, industries. This is just the tip of the iceberg, it certainly has a lot more detail then I know.

- - - Updated - - -

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

Actually they can. Big investment houses e.g. Janus, OppenheimerFunds, TRP use the 4th market to sell large blocks to each other just to prevent such disruption. Kind of the same way they use Brokers brokers to sell muni bonds. Lets them keep their anonymity and still get a good price. They do this through Instinet, not even visible for normal humans (individual investors).
 
I never realized just how poor the quality of financial reporting is in general...

Here's something else. That Bank Of America "graph" has been floating around for several months. Has anyone else become annoyed by the decisions of the "statistics professionals" at Bank Of America with regard to the scales?

On one side of their graph is a scale that goes from 0 to 100% of the stock price range (which in this case is $200). However on the other side is a scale that goes from 60% to 90% of the potential range, ignoring the other areas of the range and making the small movements look more dramatic. It is certainly easy for manipulative pundits to take that graph and imply that institutional investment levels are tracking with inverse proportion to the stock price. People who don't look that carefully at the graph will infer that... and will be tricked.

So I took out my Photoshop and corrected the Bank Of America graphic to be statistically fair. This new graph tells the exact same information as the Bank Of America version, but you can see that the drop in institutional investors isn't actually as dramatic as it was when they put out their version.

bofa_scaled_properly.png
 
Here's something else. That Bank Of America "graph" has been floating around for several months. Has anyone else become annoyed by the decisions of the "statistics professionals" at Bank Of America with regard to the scales?

On one side of their graph is a scale that goes from 0 to 100% of the stock price range (which in this case is $200). However on the other side is a scale that goes from 60% to 90% of the potential range, ignoring the other areas of the range and making the small movements look more dramatic. It is certainly easy for manipulative pundits to take that graph and imply that institutional investment levels are tracking with inverse proportion to the stock price. People who don't look that carefully at the graph will infer that... and will be tricked.

So I took out my Photoshop and corrected the Bank Of America graphic to be statistically fair. This new graph tells the exact same information as the Bank Of America version, but you can see that the drop in institutional investors isn't actually as dramatic as it was when they put out their version.

I've seen a few articles this month on seeking alpha that continue to reference this graph. I must admit, when I first saw it, I thought institutional holding went down to near ZERO. The human brain is very receptive to visual stimuli and it happens to also want to naturally take short-cuts to reach a decision whenever it can to be efficient (also known as "being lazy"). This combination can easily lead someone to quickly judge that graph to mean "MASSIVE institutional holding sell off", before even looking at the scaling factors. If a person is intelligent enough to think past face value and put in a small amount of effort to dig deeper, they will easily find out that 66% institutional holdings is still very healthy and that the drop is not as dramatic as it appears.

Besides, these holdings were probably just institutions booking in some profits after the rallying (notice the sharpest drops appear around the Earnings Report times, around the start of May and August).
 
If a person is intelligent enough to think past face value and put in a small amount of effort to dig deeper...

When I first saw the graph, my thought was: Where did BoA get 84% for May institutional ownership, when Google and Yahoo were saying 70%?

DaveT thought deeper and asked: Where did BoA get weekly figures for something that is reported to the SEC only quarterly?

Until those questions are answered, I don't believe anything about the graph.
 
In comparison from my Scottrade account Facebook has only 40%ish institutional investors and is a $100 + billion market cap company. Institutional investors do cash out after significant price gains to book profits. As Tesla grows more institutional investors will come and old ones will come back.
 
The sheer volume of SA diatribes is numbing. They are bordering on overexposure even by Internet standards. I understand that they have taken a short position and lost significant monies. Losses aside, their credibility is in the balance.

A taming of the shrew is in order.