Tesla Shorts Suffer As Stock Soars Over 10%, But This Fund Manager Doesn't Regret Missing Out On Rally After Paring Stake: Here's Why

Tesla, Inc. TSLA shares have been higher for six straight sessions now, with the upward momentum accelerating after the release of second-quarter deliveries on Tuesday. The flagship fund of Gary Black-run Future Fund substantially reduced its Tesla holdings earlier this year, and the fund manager weighed in on the potential lost opportunity stemming from the liquidation.

What Happened: “With the benefit of hindsight we could have owned more $TSLA than 3.3% of our portfolio,” said Black in a post on X, formerly Twitter.

In early March, Future Fund Active ETF’s FFND Tesla holding fell from 5.07% to a little under 3%, with Black reasoning then that March quarter consensus expectations were too high and he expected estimate rerating.

The fund’s most recent disclosure showed it held 289,075 Tesla shares as of July 2, accounting for 3.59% of the market value of the portfolio. Tesla is now the ninth biggest holding of FFND.

When a social-media user commented that Black’s firm sold Tesla stock at its bottom, the fund manager clarified that he began trimming position in Sept. 2022 at $260 per share when it was the fund’s largest position at 12.2%.

Black suggested that he wasn’t worried. The stock that replaced Tesla as Future Fund’s second most-owned stock – Nvidia Corp. NVDA has gained 146% year-to-date, he said. This compares favorably to Tesla’s 8% drop during the same period.

Nvidia has been the biggest beneficiary of the AI revolution that is getting entrenched and is expected to last at least three to five years.

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Fine With Tesla Position: Black explained why he was fine with Future Fund’s 3.3% Tesla position. At $229, Tesla traded at 94 times the 2024 estimated earnings per share of $2.42, he said. This multiple marks a two-year high, he added. On the 2024 earnings per share estimate of $3.42, Tesla traded at a 70 times P/E, the fund manager said.

As the 2024 and 2025 earnings per share estimates continue to fall, Tesla stock looks less attractive on valuation, he said.

Delving into the positives, Black said finished goods inventories fell by 33,000 or 22% in the second quarter, with the days of sales outstanding dropping from 28 days at the end of the first quarter to 20 days at the end of the second quarter. The pressure on Tesla to reduce prices has abated, going into the third quarter, he added.

Data provided by S3 Partners‘ Ihor Dusaniwsky showed that since June 13 short interest in Tesla shares declined by 1.5% as the stock began to rally. Tuesday’s gains left shorts with mark-to-market losses of $1.65 billion, reducing their profit for the year-to-date to $1.37 billion, he added.

In premarket trading on Wednesday, the stock edged down 0.06% at $231.11, according to Benzinga Pro data.

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