First thing this morning, an overzealous WSJ Heard of the Street editor Spencer Jakab decided to mock Jeffrey Gundlach’s predictions made three months ago at the Ira Sohn conference, recalling how Gundlach had the temerity to go against the grain of virtually every single hedge fund when revealing his trade recommendations:
Gundlach’s suggestion to short the shares of Facebook and to go long on an exchange-traded fund of oil and gas explorers, for example, would have lagged behind an S&P 500 Index fund by 24 percentage points through Monday’s close.
And surely at 6am this morning, Mr. Jakab would have preferred the following sellside “recommendations”:
Of course, we now know that just 10 hours later, following a historic 20% drop and $130 billion less in market cap, making fun of Gundlach for advising the Sohn conference to short Facebook was not exactly… prudent.
Jakab, however, at least correctly quoted Gundlach’s words, that “Nothing new ever occurs in the business of speculating. What’s happened in the past will happen again and again and again”, and was also right to mock the stupidity of the professional investor crowd, which as today’s fiasco showed are about a clueless as everyone else, and all they really do is chase momentum while collecting 2 and 20.
And here’s why: as Jakab reports, “at the time of the conference, Heard on the Street columnists took on the stock pickers by throwing darts to create a portfolio of 10 stocks to go up against the 12 stocks picked by the Sohn speakers.”
Readers an probably guess where this is going:
Three months later, the darts have prevailed. The Heard team’s 10 picks, eight long and two short, have returned 7.23% on average. The combined performance of 12 picks by Sohn attendees has been slightly negative, lagging behind the S&P 500 by more than 6 percentage points.
What were some of the names the best and brightest in the business could come up with? The top “expert” pick belonged, ironically, to former Facebook exec (and current critic) Chamath Palihapitiya who said to buy Box. Since than it is up 16% which is great… until one compares the top 5 dart returns.
The top pick from the darts was railcar leasing company GATX , up 27% in the past three months.
The other dart “picks” were PagSeguro, Paychex, Park Hotels and Four Corners, all of which have outperformed their respective “2 and 20” recos.
In parting, Jakab tells us that he will update this competition ever three months until the next Sohn conference.
Maybe the Heard on the Street team will be invited to throw its darts on stage next year.
And maybe he can charge a 20% dart performance fee: they deserve it, which is far more than we can say about all those hedge funds who decided to follow the flocks and all invested in the biggest stock disaster (so far) of 2018.
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