Hedge fund manager Kenneth Tropin of the $2.55 billion Graham Capital Management Fund has made some surprising moves in two key stocks in Q1 according to 13F forms filed by the fund with SEC. Tropin boosted controversial auto stock Tesla Inc (NASDAQ:TSLA) while dumping semiconductor Advanced Micro Devices, Inc. (NASDAQ:AMD). Before we examine these moves further, let’s delve deeper into the fund and Tropin himself.
Graham Capital, a basic-materials focused fund, has been struggling recently. TipRanks shows that the average return for the fund on a three-year annualized basis is close to -7%. Indeed since June 2013, the fund has made a portfolio loss of -36%. The fund, which uses both discretionary and quantitative trading strategies, says that it has a macro-orientated approach and “trades a broad range of markets spanning global interest rates, currencies, commodities and equities.” Interestingly, the firm does not have a “house view” and so its portfolio managers can make their own decisions within the overall framework of the fund’s “trading mandate”.
As to Tropin, he grew up near New York to parents who both worked in the not-for-profit section. He says their priority was not making money, but helping other people out. He began his working life far away from the stock market in a small construction firm. Tropin became bored with painting and light construction, and following the advice of a friend looked for a job in Wall Street at a small firm called Rosenthal Group. But here too he felt dissatisfied, eventually realizing he needed to start his own business. He learnt how to write programs and algorithms for his own trading ideas in just nine months. The rest is history.
Will the fund’s latest moves turn Tropin’s fortunes around? Let’s have a closer look on the market outlook for these 2 stocks.
Tropin upped the fund’s position in electrical carmaker Tesla by 6% to 61.2 million shares valued at $61 million. The stock now makes up 2.4% of the total portfolio. Tesla is now a top Fortune 500 stock due to the $7 billion Tesla made last year- boosted by the $1 billion revenue from China. Musk believes Tesla will one day be as valuable as Apple. Shares in the stock are now trading at new highs of $360 following Tesla’s 2017 shareholder meeting which revealed a glimpse of the Model Y due for 2019/20.
A new International Energy Agency (IEA) report has revealed some encouraging news for Tesla. It shows that electric vehicles on the road worldwide reached 2 million in 2016- double the previous year. This is a market that was not even around about a decade ago, the report pointed out. Similarly, electric car registrations rose by an impressive 750,000 in 2016 with China specifically responsible for 40% of electric car sales (about 336,000 cars in 2016).
The stock has a hold analyst consensus rating, with 5 buy, 7 hold and 6 sell ratings in the last three months. However due to recent gains the average analyst price target for the next 12 months now stands at a drastic -25% below the current share price of $363.
Advanced Micro Devices, Inc.
Tropin slashed the fund’s position in AMD by -12% to 35.7 million shares worth $70.6 million. The stock is now close to 3% of the fund’s total portfolio.
AMD is now experiencing a surprise spark in demand from rapidly exploding cryptocurrencies. Shares in AMD were up 8% on Tuesday after AMD said cryptocurrencies are causing demand to soar for its “perfectly suited” graphic cards leading to rumors of products selling out. Bitcoin is up 200% this year, Ethereum an incredible 2900% year-to-date. The serious investment in these cryptocurrencies suggest the demand will be maintained for a while yet according to RBC Capital analyst Mitch Steves.
AMD also says that gaming is nonetheless the company’s main focus and that it continues to see a “tremendous amount of demand” for its Polaris-based graphics cards. The stock has also benefited from having Apple as a customer.
The stock has a hold consensus rating on TipRanks (6 buy, 9 hold and 3 sell ratings in the last three months). The average analyst price target of $11.70 is a -7% downside from the current share price.