Hedge fund guru Michael Messner, of Seminole Capital Management, has made moves in three key stocks in Q1, namely Tesla Inc (NASDAQ:TSLA), Micron Technology Inc (NASDAQ:MU) and Apple Inc (NASDAQ:AAPL).
New York-based Seminole, which has a portfolio value of $545 million has a focus on tech and finance stocks. So far, this quarter the fund is up by 1.06%. Messner, who has a background in civil engineering, co-founded the fund back in 1995. The fund, which returned $400 million to investors at the end of 2015 because it “couldn’t maintain historical-like returns”, says its approach “is to identify voids in the marketplace and then work to develop a niche program that can be expanded nationally.”
So how did this approach play out in the last quarter? Let’s take a closer look:
Messner turned bearish on controversial automaker Tesla in Q1. He slashed the fund’s holding of the stock by 38% to 61,550 shares valued at just over $17 million. The holding is now worth about 3.13% of the fund’s total portfolio holding.
Was this a good idea? CEO Elon Musk is a non-stop whirlwind of new ideas. Tesla has just announced that it is in discussions to build a factory in Shanghai. This would boost the company’s profile in the world’s largest electrical vehicle market. Just as the market was digesting this news, another headline has appeared when Tesla announced that it is developing its own music streaming service.
The news has been very well received, with commentators noting that subscription services are a lucrative source of revenue and data. The service could easily be integrated into Tesla vehicles via the touchscreen dashboards and complements Musk’s vertical integration ambitions- which involve him controlling all aspects of the vehicle manufacturing, delivery and use.
Top Morgan Stanley analyst Adam Jonas has a hold rating on the stock with a $305 price target. He is worried that tech giants will move into mobility and become competitors to Tesla. He sees the music streaming service as a clever move that will enable it to offer original branded content rather than “just being a dumb pipe”
The Street is, overall, sidelined on Tesla with a fairly even split in the last three months between buy, hold and sell ratings. As the share price has continued to grow it has overtaken the average analyst price target of $285 which is now a -21% downside from the current share price of $367.
Micron Technology Inc
Messner showed a much more bullish attitude towards semiconductor giant Micron- ramping up the holding by a whopping 2479% to 245,000 shares worth close to $8 million.
The company is due to report fiscal third quarter earnings results today after the close of trading. The market is confident in its expectations given that the stock is up by 44% on a year to date basis. Consensus for the quarter comes in strong at EPS of $1.51 on revenue of $5.41 billion, boosted by a very lucky situation of tight supply and demand for DRAM random-access memory and NAND flash memory, increasing prices, and cost reductions.
The outlook for the stock is very strong say analysts. For example, JP Morgan analyst Harlan Sur told investors not to be fear a supply glut from China as the technology there is so far behind that it will take at least a decade to catch up with Micron. Loop Capital Markets analyst Betsy Van Hees goes even further and says she sees “no near-term negative catalysts” for the stock.
MU is a top pick from the Street in general. In the last three months, the stock has received 16 buy, 1 hold and 1 sell rating giving it a very strong buy analyst consensus rating. The average analyst price target of $38 also translates into significant upside potential of 19.7% from the current share price of $32.
Better late than never for Michael Messner- the hedge fund manager has now initiated a new position in tech giant Apple with the addition of 171,687 shares valued at $24.7 million (about 4.5% of the total portfolio).
The iPhone is now celebrating its 10th year anniversary- and to celebrate Apple will launch its much-hyped iPhone 8 later this year. While most of the market is very excited about the upcoming release, KeyBanc’s Andy Hargreaves has just reiterated his bearish hold rating with a $145 price target- which is basically where the stock is trading now. He says that the Apple’s services business has almost peaked, and is predicting that the rate of growth for the App Store will slow significantly. For Apple to double its service revenue by 2020, Hargreaves says the company will have to make “incredibly successful new service launches or acquisitions.”
Like Messner, the Street has a very confident outlook for Apple with a Strong Buy analyst consensus rating. In the last three months, the stock has received 25 buy, 6 hold and no sell ratings. Meanwhile, with an average analyst price target of $164, analysts are predicting 14% upside from the current share price over the next 12 months.