2018 Hedge Fund contest

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AlphaLess
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Re: 2018 Hedge Fund contest

Post by AlphaLess » Sun Jun 10, 2018 8:44 pm

Tanelorn wrote:
Sun Jun 10, 2018 5:29 pm
AlphaLess wrote:
Sun Jun 10, 2018 3:28 pm
Tanelorn wrote:
Sun Feb 11, 2018 7:39 pm
you would think that the average fund in our group would be -2.5% since it is net long 0.5 (i.e. half) of a stock pick. Instead, our group is up +2%, showing we are outperforming our beta-adjusted benchmark by nearly 5%.
Nice!
You can see the current status of this comparison on the "data" tab of the contest spreadsheet - look in the bottom right corner. Our group is long about half a stock pick on average, so benchmarked against the broad market (VTI, +2.3%) you would expect our collective portfolio to be up about 1.2%. Currently, the average fund in the contest is up 5.4% and the average pick is up 4.2%, reflecting an outperformance of about 4% and 3% respectively.
What would be an interesting exercise is this:
- get data for any of the current Barra Factor Models,
- compute the Barra Exposures of the '2018 Bogleheads Hedge Fund' portfolio,
- see where the outperformance is coming from:
- - factors, OR
- - idiosyncratic.

Tanelorn
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Joined: Thu May 01, 2014 9:35 pm

Re: 2018 Hedge Fund contest

Post by Tanelorn » Sun Jun 10, 2018 10:24 pm

AlphaLess wrote:
Sun Jun 10, 2018 8:44 pm
Tanelorn wrote: You can see the current status of this comparison on the "data" tab of the contest spreadsheet - look in the bottom right corner. Our group is long about half a stock pick on average, so benchmarked against the broad market (VTI, +2.3%) you would expect our collective portfolio to be up about 1.2%. Currently, the average fund in the contest is up 5.4% and the average pick is up 4.2%, reflecting an outperformance of about 4% and 3% respectively.
What would be an interesting exercise is this:
- get data for any of the current Barra Factor Models,
- compute the Barra Exposures of the '2018 Bogleheads Hedge Fund' portfolio,
- see where the outperformance is coming from:
- - factors, OR
- - idiosyncratic.
Yes, I agree it would be nice to decompose the aggregate BH contest portfolio into factor exposures and see how much of the (current excess) performance was explained by those effects vs idiosyncratic / skill / luck effects. If someone has access to that type of data, I'd be interested to see it (feel free to PM me).

Still, I think factor analysis is probably more appropriate for judging large collections of stocks' performance, rather than in our case the handful of picks of any given fund. I don't have a great intuitive feel for factor analysis, but I would expect a lot of the highly volatile and very successful (or unsuccessful) stock picks like SHLD, TSLA, JCP, NFLX, etc, are going to be outliers and their performance isn't going to be explained primarily by generic properties (size, book value, etc) of those individual businesses. The average sector or style fund isn't up or down 30%+ like these names, so my guess is that most of the variance is not going to be well explained by those types of models.
Last edited by Tanelorn on Sun Jun 10, 2018 11:00 pm, edited 1 time in total.

Tanelorn
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Re: 2018 Hedge Fund contest

Post by Tanelorn » Sun Jun 10, 2018 10:44 pm

AlphaLess wrote:
Sun Jun 10, 2018 8:10 pm
Chanos is a structural short seller. He teaches some investing classes, and in his finals, he asks the class to go through quarterly statements, including balance sheet, income statement, and cash flow statements, and find fraud or very obvious obfuscations.

And then he takes short positions based on that.

Andrew Left of Citron Research also does something similar. In the past, I have agreed with Citron Researches positions many times.
Thanks for the background. I have read and heard a bit from some of the high profile short sellers, although not Chanos specifically. I guess my approach to my short pick this year was along those fundamental lines, although there are many ways to pick promising short candidates. This year my favorite happened to be in this vein.
Where did you even find that company, Ominto?
I checked their web site, and their CEO looks like a very suspicious character. In the past, I - as well as family members - have worked for companies where the upper management in hindsight were sleek salespeople and very incompetent.
I forget where I first ran across them but I've been following them for a while, having a passing interest in some of their business fields as well as the people involved. Yes, there's a lot of very suspicious stuff going on with the company, the management, and their acquisitions. If I didn't know better, I'd say the company deliberately arranged some of their major transactions to facilitate an exchange listing, which then let them sell their stock after appearing more legitimate than an OTC company. Stock exchanges are paid to accept new companies who meet basic SEC filing requirements afterall, not to do careful due diligence, and it shows. I have seen some similarly low quality companies move up the ranks into the indexes despite a number of fundamental issues. Maybe some of those will show up in my picks for next year if they don't crash and burn first :).

Tanelorn
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Re: 2018 Hedge Fund contest

Post by Tanelorn » Sat Jun 16, 2018 7:33 am

goblue100's patience looks like it's beginning to be rewarded with his short pick of Wins Financial Holdings (WINS). Highlighted last year for their sudden and surprising price rise (up 25x at one point), as well as limited revenues and possible China-based irregularities, WINS stock has fallen over 30% this past week and is now down 59% for the year. Investors in the Two Minute Portfolio, which this year is solely betting against WINS, are up 59%.

As a testament to the success of our contestants, 59% gains in less than half a year is only good enough for 3rd place at this point. Agggm has continued to make gains, holding 2nd for now with 61% returns as Luna fund picks Amazon and especially Netflix have powered higher in recent weeks. Tanelorn's short pick, briefly down as much as 95%, is down 88% currently.

Current Standings - 2018 hedge fund contest

Tanelorn
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Re: 2018 Hedge Fund contest

Post by Tanelorn » Mon Jul 02, 2018 12:34 am

Congratulations to goblue100 for taking 2nd place with his short WINS pick, now up 65%!

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whodidntante
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Joined: Thu Jan 21, 2016 11:11 pm

Re: 2018 Hedge Fund contest

Post by whodidntante » Mon Jul 02, 2018 12:41 am

Don't tell my shareholders, but I've felt some consternation over my sole pick (short Sears). I've come to realize that letting the stock languish is exactly what their hedge fund manager/CEO likely wants. Why? The short interest is huge because of the cloud of doom, and guess who you have to go see to borrow shares? That "hard to borrow" securities lending revenue is juicy. Eddie will be happy to ride the sick pony until it just can't pony up anymore. I guess the real question is why the board let the fox in the henhouse.

Tanelorn
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Re: 2018 Hedge Fund contest

Post by Tanelorn » Sun Jul 22, 2018 5:29 pm

Tanelorn wrote:
Mon Jul 02, 2018 12:34 am
Congratulations to goblue100 for taking 2nd place with his short WINS pick, now up 65%!
goblue100 took 1st place with his short pick WINS on Friday, now up 71% for the year and barely edging out Tanelorn who had taken first for some time. Tanelorn's short pick, OMNT, has tripled off their lows and is now only down 69% for the year.

Tanelorn
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Re: 2018 Hedge Fund contest

Post by Tanelorn » Wed Aug 08, 2018 6:20 pm

That which goes down, often goes back up again. Our two previous leaders, Tanelorn and goblue100 were up over 70% on their shorts. Both their short picks, OMNT and WINS respectively, however, have both tripled off their lows. This lead to a shakeup in the rankings in which Tanelorn is back in 1st and Agggm has retaken 2nd place.

Current Standings - 2018 hedge fund contest

In other shorting news, TSLA shorts were down 15-20% briefly as Elon Musk tweeted about a proposed buyout / going private deal at $420, a 20% premium to recent prices. This lead to much speculation, including where he would get the supposedly “secured” billions of funding needed to buy out the public shareholders. Since then, investment banks and major private investment funds denied any knowledge of or interest in funding a deal, while the SEC is investigating whether Musk’s tweet was a legitimate offer (if not, it would likely be a crime of some sort). After much excitement, TSLA stock is down off its highs, but still up 10% for the year. I expect this story will have many more twists and turns and tweets before the year end.

goblue100
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Re: 2018 Hedge Fund contest

Post by goblue100 » Thu Aug 09, 2018 1:52 pm

Tanelorn wrote:
Wed Aug 08, 2018 6:20 pm
That which goes down, often goes back up again. Our two previous leaders, Tanelorn and goblue100 were up over 70% on their shorts. Both their short picks, OMNT and WINS respectively, however, have both tripled off their lows. This lead to a shakeup in the rankings in which Tanelorn is back in 1st and Agggm has retaken 2nd place.

I guess I was a pig, not a bear! This holding(WINS) feels like the most manipulated stock ever, not trading shares for days on end. I keep hoping it will be de-listed!

Looks like I crawled back to second with WINS down 16% today.
Can't take it with you when you're gone | But I want enough to get there on - Rollin with the flow - Jerry Hayes

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whodidntante
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Re: 2018 Hedge Fund contest

Post by whodidntante » Mon Aug 27, 2018 8:40 pm

Tanelorn,

I'm chasing you with the second worst stock.

Tanelorn
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Re: 2018 Hedge Fund contest

Post by Tanelorn » Tue Aug 28, 2018 6:20 am

whodidntante wrote:
Mon Aug 27, 2018 8:40 pm
Tanelorn,

I'm chasing you with the second worst stock.
I saw that. Congrats to whodidntante on his bet against Sears. SHLD is now -68% for the year, putting him in second place. Sears recently announced nearly 50 additional store closures and seems to have only found the CEO’s hedge fund as a buyer for their Kenmore brands (although the pension regulators look to be blocking that).

For an up market, with the broad equity indexes up 10% currently on a total return basis, I thought it was interesting that our top three places in the contest were all short only funds.

Tanelorn
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Re: 2018 Hedge Fund contest

Post by Tanelorn » Sat Sep 29, 2018 1:30 pm

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!

Tanelorn
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Joined: Thu May 01, 2014 9:35 pm

Re: 2018 Hedge Fund contest

Post by Tanelorn » Thu Oct 04, 2018 12:26 am

Congratulations to whodidntante for pulling into 1st place. His short Sears pick has reached -77% for the year, edging out short picks by Tanelorn and goblue100, closely behind with -76% and -75% stock results respectively. Sears is facing a small but potentially significant debt maturity in the middle of this month.

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