Tesla Stock vs. Apple Stock: Billionaires Buy One and Sell the Other
Tesla (NASDAQ: TSLA) and Apple (NASDAQ: AAPL) were two of the three most popular stocks among retail investors last year, according to Vanda Research. But two hedge fund billionaires bought Tesla and sold Apple during the fourth quarter, as detailed below:
- Israel Englander's Millennium Management purchased 1.3 million shares of Tesla, nearly tripling its stake. Tesla is now the tenth largest position in the portfolio excluding options. Meanwhile, the hedge fund sold 114,456 shares of Apple, reducing its stake by 9%.
- David Shaw's D.E. Shaw purchased 2 million shares of Tesla, nearly tripling its stake. Tesla is now the fifth largest position in the portfolio. Meanwhile, the hedge fund sold 2.5 million shares of Apple, reducing its stake by 30%.
To reiterate, the trades listed above happened in the fourth quarter, which ended two months ago. But the billionaires mentioned run two of the three most successful hedge funds as measured by net gains since inception, according to LCH Investments. So, I think Tesla and Apple warrant further consideration.
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Tesla: The stock Englander and Shaw bought in the fourth quarter
Tesla narrowly held its lead in electric vehicle (EV) sales last year, but struggled with weak demand amid rising competition and interest rates. In fact, the company reported its first annual decline in deliveries in history, and price cuts meant to makes its vehicles more attractive to consumers cut deeply into profits.
Consequently, Tesla reported disappointing fourth-quarter financial results, with earnings falling short of the consensus estimate for the fifth time in six quarters. Revenue increase just 2% to $26 billion, operating margin declined 2 percentage points, and non-GAAP net income climbed 3% to $0.73 per diluted share.
However, CEO Elon Musk outlined a few major catalysts on the quarterly earnings call. Tesla is on track to launch a cheaper EV model in the first half of 2025. While specific details are lacking, Deutsche Bank called it the "Model Q" in a recent report and suggested it would cost less than $30,000 after tax credits.
Perhaps more important, Musk confirmed the launch of an autonomous ride-sharing service (robotaxis) in Austin in June 2025. He also told analysts, "I expect us to be operating unsupervised activity with our internal fleet in several cities by the end of the year." Finally, Musk speculated Tesla may one day earn $10 trillion in annual revenue from the autonomous humanoid robot Optimus.
Several analysts have revised their earnings estimates lower for Tesla in recent weeks, perhaps because of the possible elimination of the federal EV tax credit. Regardless, Wall Street expects earnings to grow at 24% annually through 2026, which makes the current price-to-earnings (PE) ratio of 119 looks very expensive.
That said, Tesla has outlined large (but theoretical) opportunities in robotaxis and robotics. The current PE ratio may look sensible in hindsight if the company is successful in entering those markets. To that end, I think long-term investors comfortable with risk should have a stake in Tesla, provided they know it could be a bumpy ride. And now is a reasonable time to buy a few shares given the stock has fallen more than 30% from its high.
Apple: The stock Englander and Shaw sold in the fourth quarter
Apple has brand authority and consumer loyalty on a level most companies can only imagine. Innovation and design expertise that spans hardware and software have earned the company a strong presence in multiple consumer electronics market, including a leadership position in smartphones as measured by revenue.
Apple also has a services business that lets it more deeply monetize its installed base of 2.3 billion active devices. The company has a strong presence in many of those markets, including leadership in global app store revenue. And Apple Pay is also the most popular proximity mobile payment solution in the U.S.
However, Apple is beset by headwinds that threaten to drag on already-slow earnings growth. Its service business could lose $20 billion in annual revenue if a U.S. judge later this year terminates its deal with Alphabet, which gives Google Search default placement on the Safari browser.
Beyond that, Apple is quickly losing smartphone market share in China because of intense competition. And consumers have shown little enthusiasm for artificial intelligence capabilities, called Apple Intelligence, added to certain iPhone models last year.
Apple reported lackluster first-quarter financial results that beat estimates on the top and bottom lines, but fell short in iPhone sales. Total revenue increased 4% to $124 billion as strong sales growth in services offset a decline in iPhone and wearables revenue. GAAP earnings still increased 10% to $2.40 per diluted share, but 3 percentage points of that growth came from stock buybacks.
Wall Street estimates Apple's earnings will increase at 10% annually through fiscal 2026, which ends in September 2026. That makes its current P/E ratio of 34 look expensive, especially when analysts have been revising earnings estimates downward. I think the hedge fund billionaires that sold Apple stock made a smart decision.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Tesla. The Motley Fool has positions in and recommends Alphabet, Apple, and Tesla. The Motley Fool has a disclosure policy.
