Yost Partners On Lessons From Superforecasters On Short SellingRupert Hargreaves
For the third quarter, Yost Capital's Yost Partners and Yost Focused Long Fund returned 3.0% and 7.9% respectively, net of fees, compared to the MSCI World Index’s return of 4.9%. Year-to-date the funds are up 4.3% and 13.7% net compared to the MSCI World’s 5.6%.
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Yost Capital On Refining The Short Process
Within the pages of Yost’s third quarter letter to investors, Carson L. Yost the firm’s managing member discusses the short selling process of the group. To begin with, Carson dissects Yost’s short performance over the past 6.5 years.
Across different classifications of shorts, the fund has achieved vastly different success statistics. For example, with shorts based on the assumption that the business is a fraud, Yost has a commendable batting average of 77.8% 18 fraud shorts have generated $3.4 million in profits, by far the most profitable short classification.
However, shorts based on valuation alone have cost the fund $10.7 million and the batting average is less than 25.9%. Overall, across 346 shorts during a 6.5 year period, Yost has a batting average of 52.6% losing a total of $13.2 million for investors. Carson draws several conclusions from the above figures.
“There are a few interesting things to note from the chart above: 1) We have cumulatively lost our investors about thirteen million dollars shorting stocks since 2010. Not impressive; 2) Our “batting average” for shorting stocks is about 53%. At first glance this appears to be a little better than average. At second glance, it is worth noting that during the same time frame only 16% of the stocks in the Russell 3000 are actually down. So we did a decent job figuring out what stocks would be losers; 3) Our batting average betting against certain kinds of shorts such as “frauds” was high, while we had a deplorable record shorting other flavors such as valuation shorts; 4) Lastly, in some areas we had a high batting average but cumulative losses; in other areas we had a low batting average but good gains.”
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