Going long is a classic way short sellers insulate themselves against a rising stock market, even though they say that most of their research energy is spent on their short positions, writes Institutional Investor (II).
Muddy Waters’ founder Carson Block, who started a long-only quantitative momentum share class for the firm’s employees called Left Curve, said, “You could think of us as having two departments. So there’s the department of caring too much, and that’s activist short selling, and then there’s the department of not caring at all, and that’s Left Curve.”
This year has been “devastating” for activist short sellers when looking at the performance of their targets, said Ivan Ćosović at Breakout Point, a data provider. Activists have published 117 reports, and the average target was up 27% since the reports as of mid-October, he said speaking to II.
One fund that has performed well despite the massive runup in the prices of its short targets is Sahm Adrangi’s Kerrisdale Capital Management, a long-short fund that gained more than 15% through September. “Our longs have been more profitable than shorts,” said Adrangi, speaking to II.
“You can’t run a short fund anymore without accepting that this is the table stakes now. That the market just goes up,” said Orso Partners founder Nate Koppikar. “This feels like 2021 where it felt just as miserable and terrible and then a few variables changed” in 2022. Koppikar’s dedicated-short fund gained more than 70% in 2022 as the tech and growth stocks he had shorted tanked.