Time flies and the third quarter is already behind us. Despite all the noise about trade wars and tariffs, the US markets rose about 8% for Q3 after being basically flat for the first half of the year, now up a very respectable 10% on a total return basis (VTI, our equity benchmark for the contest, is up 6-7% due to a slightly later start date and excluding dividends). Bond markets have continued to decline modestly, now -3% for the year as the Fed continues to follow through on their planned rate hikes and with several more expected for 2019 as well.
As always, it was a stock pickers market and our best stock pickers have done quite well. Here are the current standings as of the end of September:
Current Standings - 2018 hedge fund contest
1. Better Lucky Than Good by Tanelorn +76.15% (single short pick - OMNT)
2. Two Minute Portfolio hedge by goblue100 +75.51% (single short pick - WINS)
3. The Bet Against Eddie Fund by whodidntante +71.64% (single short pick - Sears, SHLD)
4. Luna by Agggm +68.54% (long tech)
5. Penny Stock by b42 +55.26% (single short pick - JC Penney, JCP)
Despite strong equity markets, our contrarian short sellers have hit it out of the park with their results, taking the all of the top 3 places and 4 out of 5 of the top positions. Tanelorn
edged out goblue100
by less than 1% to hold on to his first place lead for the time being as they vie for picking the worst stock.
Trouble continued to plague the retail sector, with Sears reaching new lows and ending the quarter at just $0.97 (-72%), now officially a “penny stock
”. Their most recent 20% drop came in the wake of rising bankruptcy fears and a proposed restructuring plan
from CEO and hedge fund manager Eddie Lampert to buy time for downsizing and cost cutting efforts to attempt to return the firm to profitability. JC Penney suffered as well, dropping almost 15% this week as their CFO moved on
for greener pastures, leaving the firm without a CEO or CFO.
The top performing contest stock for the year is now AMD, the computer chip maker, up over 150% and much of that coming in the last few months. AMD has put up good earnings
and promising new products, while Intel, the market leader, has stumbled repeatedly with delays and multiple security vulnerabilities in their hardware. Three of our contestants made the right call and were long AMD, while one unnamed manager bet against them.
Now not everyone can pick the best fund managers like the top of our list currently, but our average contestant is performing very respectably so far. Currently about 3/4 are in positive terroritory with an average return of +15%. This compares favorably to VTI index of about 6%, or 3% adjusted for the fact our average contestant is only about 50% net long. As such, our fund managers have outperformed by about 10% across the whole group. Keep up the good work!