Teton Capital Un-Booked Short Profits Caught In Asian Regulatory FreezeMark Melin
Technically Teton Capital Partners is down -5% year to date as of June, according to investor letters reviewed by ValueWalk. This is a relative oddity for the billion dollar long / short fund. Since 2001 the hedge fund with an 18.8% compounded annual return, run by Kleinheinz Capital “cub” Quincy Lee, has only experienced one negative year. But don’t let looks deceive. Short exposure in the fund where trading was halted could impact performance in a positive way when shares trade again on an open market.
Teton Capital not hooked by China Ocean's fish that got away story
When Teton took a look at the stock of China Ocean, little did they know it would be a “rollercoaster ride” that would “secure a place in the Teton short hall of fame.”
Like most hedge fund research hero stories, the analysis is probing for holes in the consensus thinking. What first stood out was a profit anomaly. Teton conducted a relative value analysis that is known to work for stocks as well as in evaluating hedge fund investments. Find the “beta,” used loosely in this instance, and then compare revenues both over and under the given market environment.
In the case of China Ocean, the owner of fishing boats located along the Chinese coast was exhibiting significantly higher profitability per boat than the Chinese fishing boat average. “We found that China Ocean’s vessels had 9x the sales vs. comps, and China Ocean claimed high profits while the comps were losing money or break even at best.”
This content is exclusively for paying members. Access all of our content on including years of timeless investment news and in depth analysis for only a few dollars a month by signing up here while also supporting quality content and journalism, or learn more about our premium content here
If you are subscribed and having an account error please clear cache and then cookies if that does not work email email@example.com and we will get back to you as quick as humanly possible