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Some Hedge Funds Dodged the Worst of Tesla's Latest Tantrum

Some Hedge Funds Dodged the Worst of Tesla's Latest Tantrum

(Bloomberg) -- Hedge funds like Millennium Management LLC and DE Shaw & Co. trimmed their exposure to Tesla Inc. just before the company’s latest drop during the second quarter wiped out roughly $16 billion in market value.

The pair of funds sold close to 850,000 shares in the first three months of the year, according to quarterly filings for the period ended March 31 -- ahead of the latest round of bearish criticism from Wall Street analysts. Millennium and DE Shaw held onto some of their positions, while funds like Water Street Capital Inc. and Light Street Capital Management LLC threw in the towel just in the nick of time.

Some Hedge Funds Dodged the Worst of Tesla's Latest Tantrum

As shares fell more than 16% in the first-quarter, some money managers still saw opportunity. The Capital Group Cos. Inc. and Jane Street Group LLC added to their positions, filings show. The automaker is now the worst performing stock year-to-date in the Nasdaq 100 Stock Index, falling more than 40% and underperforming the index’s 15% gain.

With shares gyrating in Thursday’s trading, down more than 3.3% at a peak and topping out up 3.5%, the stock currently is on track to end a six-day decline. The rally was spurred by an upbeat email from chief executive Elon Musk saying the company has a good chance of exceeding a record number of deliveries in the fourth quarter.

However, if the stock reverses the day’s gains to close yet again in the red, it would match the Palo Alto, California-based company’s worst losing-streak as a public company. The stock fell for seven consecutive sessions in September of last year, December of 2014, and at the start of 2013. It has yet to record 8-straight sessions of losses.

It’s worth noting that the average return for investors in the six months following such a losing streak ranged notably. The best return came in the stretch from January to July 2013 when shares nearly quadrupled, with the most muted rebound coming in at 1.7% -- recorded from September to March of this year.

While the stock is among the few publicly traded firms with more sell-equivalent ratings than buys or holds, the average 12-month price target indicates plenty of upside potential. At $281 the average sell-side target implies a potential return of roughly 44%, according to data compiled by Bloomberg. The current spread between that target and today’s level, about $86, is the largest gap in more than three years, Bloomberg data show -- and that even takes into account the fact that the average price target has fallen considerably from the $319 seen at the end of March.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk, Brad Olesen

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