Future Fund Managing Partner Gary Black has defended the decision to reduce the fund’s stake in Tesla Inc. (NASDAQ:TSLA), citing a shift in investment strategy and the electric vehicle maker’s performance.
What Happened: Black outlined the criteria for Future Fund’s sell discipline, in a post written on X on Wednesday, which includes reaching the price target, a change in the investment thesis, excessively high near-term expectations, or a change in strategy or CEO.
Black noted that the fund had trimmed its TSLA position from 12.2% in September 2022 to 3.6% currently, during which time TSLA stock fell 11% while the Nasdaq 100 rose 64%. He added that TSLA was replaced by NVIDIA Corp (NASDAQ:NVDA) as the fund’s number two position, which contributed positively to its performance.
“We stand by our decision to trim $TSLA from a 12.2% position (#1) in Sept 2022 to 3.6% today (#6). During that period, $TSLA -11% vs NDX +64%, and $NVDA has replaced $TSLA as our #2 position, which has been additive to our performance,” Black wrote.
Black also defended the fund’s conservative second-quarter TSLA delivery forecast, which was down 5% year-over-year actual versus down 10% year-over-year expected. He stated that clients expect the fund to adhere to its research and valuation disciplines.
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In a separate post, Black outlined the potential upsides and downsides of TSLA, including a potential 20-25% annual increase in electric vehicle adoption and the launch of the $25,000-$30,000 Next Gen vehicle. He also highlighted potential risks such as regulatory issues and earnings risks for fiscal years 2024 and 2025.
Why It Matters: The decision by The Future Fund to reduce its holdings in Tesla Inc. comes amid a backdrop of significant market activity and analyst opinions. Recently, former Speaker of the House Nancy Pelosi (D-Calif.) also disclosed selling Tesla shares while increasing her stake in NVIDIA Corp (NASDAQ:NVDA), reflecting a broader trend among investors.
Additionally, Tesla’s stock has been a focal point for short sellers. Elon Musk recently warned that Tesla shorts “will be obliterated” after the company exceeded second-quarter delivery estimates, causing a surge in share prices.
Analysts like Dan Ives of Wedbush have highlighted Tesla’s potential, driven by its AI capabilities and data-driven strategy. Ives even raised Tesla's price target to $300, emphasizing its undervaluation in the AI market.
Analysts have praised Tesla’s potential AI boom and market share growth, with shares up 35% over the last month. Guggenheim analyst Ronald Jewsikow raised Tesla’s price target from $126 to $134, despite maintaining a Sell rating.
Price Action: Tesla Inc. closed at $246.39 on Wednesday, up 6.54% for the day. In after-hours trading, the stock continued to rise, gaining an additional 0.86%. Year to date, Tesla's stock is down 0.82%, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
