Tips from Wall St hedge fund gurus fail to reward faithful

May 7, 2013 7:27 pm

Tips from Wall St hedge fund gurus fail to reward faithful

By Dan McCrum and Arash Massoudi in New York

Advice from the gurus of Wall Street may be rather less valuable than their fans would like to believe. Investors who bought on the basis of top tips from one of New York’s most celebrated hedge fund conferences last year spectacularly failed to beat the market. The Ira Sohn Investment conference held at New York’s Lincoln Center brings together the leading lights of the hedge fund community to share market insights as a way of raising money for cancer research. But a Financial Times analysis of last year’s tips shows decidedly mixed results. An investor who followed every top idea from the 12 speakers last year would have made 19 per cent, less than the 22 per cent gain available from a passive index fund tracking the US stock market. Many of the ideas have proved woefully miscued, including some from the most high-profile managers who will return to the stage on Wednesday: David Einhorn of Greenlight Capital and Bill Ackman of Pershing Square.The two best performers were the rather less well known Larry Robbins of Glenview Capital, and Philippe Laffont of Coatue Management, neither of whom will be speaking again this year. Followers of the former would be up 60 per cent. He argued that healthcare stocks were cheap, ahead of a Supreme Court decision on the constitutionality of President Obama’s healthcare law, and that investors should sell ITC, a power transmission company.

Mr Laffont led the pack by tipping two stocks, Equinix, a datacentre business and Virgin Media, a UK broadband provider that in February agreed to be bought by Liberty Global for $23.3bn. The two are up almost 80 per cent, on average.

Mr Ackman’s presentation, entitled “think big”, focused on just one stock, department store chain JC Penney. However, a turnround backed by the investor led to plummeting sales and profits, and the stock is down 37 per cent since.

Mr Einhorn, founder of Greenlight Capital, gave a rapid fire 137-page presentation. Some ideas, such as selling the yen versus the dollar, and buying Japanese social networking companies have worked well.

However, investors following his call to sell the stock of Martin Marietta Materials, a construction company boosted by government stimulus spending, would have lost 66 per cent of their money, and a favoured stock, Apple, has dropped 16 per cent. On average his top ideas would have left an investor up just 0.7 per cent.

Tips by John Paulson, of Paulson and Co, reflected the investor’s tendency to make bold calls , producing both big gains and losses. The stock of CVR energy has doubled, but gold miner AngloGold Ashanti has dropped 40 per cent.

His third pick, Casino group Caesars, is up 17 per cent for those who had the nerves to ride out an initial decline in the share price last year of more than 50 per cent. Overall the three stocks are up an average 27 per cent.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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