How much risk you take on to get somewhere is just as important as getting to where you want to go.
Heard of Archegos Capital?
Us neither.
Apparently the fund – helmed by ex-Tiger Management trader Bill Hwang – was hit by a hefty margin call last week. The fund couldn’t meet it.
The consequences: a cascade of selling pressure across media and US-listed Chinese stocks, according to reports by CNBC.
CNBC reached out for comment – Archegos ghosted them.
It’s been speculated that this is, at least in part, what drove ViacomCBS and Discovery lower on Friday, with both crashing about 27% during the session.
Yikes.
For reference, if you’re hit with a margin call you generally have three options: deposit additional funds or unmargined securities, or sell your stocks.
Two for Two
This isn’t the only big name fund to face problems in 2021.
Melvin Capital – helmed by ex-Point72 trader Gabe Plotkin – saw its fund crash 53% in January. Melvin ran into trouble because it was short popular meme stock GameStop – which ten-bagged in about 30-days. Great if you were long. Evidently disastrous if you were short.
Don’t worry, Melvin was up 21.7% in February.
At Jaaims we care about both the upside and the downside. How much risk you take on to get somewhere is just as important as getting to where you want to go. How much leverage did the likes of Archegos use to get to the top? None of our business honestly, but a question worth pondering.
At Jaaims we do what we do, and so far we’ve done it pretty well.
Just last week we closed off two mammoth winners – booking gains of 24.7% on EML.ASX and 20.49% on FOX.NYSE.
Oh, and since inception (1 July 2020), our Model Portfolio has returned 14.44%. Learn more about it here.
Plus, don’t forget to tune into our latest episode of The Market Crunch . We kick-off at 5:30pm AEDT every Monday.