When Your Process Gets it Wrong (w/ John Hempton)

Описание: John Hempton, CEO of Bronte Capital, talks with Matt Milsom about his experience running his long-short fund with a unique angle. Hempton discusses dealing with a trade that blew up, despite all the proverbial stars aligning. This clip is excerpted from a video published on Real Vision on April 26, 2019 entitled “Tesla, Japan, and the Hunt for Red Flags.”

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When Your Process Gets it Wrong (w/ John Hempton)
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Transcript:
For the full transcript visit: https://rvtv.io/2L3owzk
JOHN HEMPTON: If you have 200 short, you get stopped out on some, right? We tend not to get
stopped out very much. And the reason we tend not to get stopped out is that our starting position
is like 20 bids.
We tend to go up very slightly when the market goes down. But the real thing is that when the
market goes down then our shorts are going to deliver us a big whack of cash. And that big
whack of cash is there to buy Christian Hansen at three times revenue rather than 10 times
revenue.
MATT MILSOM: Right. But you're still on the beater of the shorts. It's when they go under is when
you really make the killing, right?
JOHN HEMPTON: Yeah, though if I can find longs at will and shorts with some difficulty, then I'm
going-- which is not the case at the moment-- but if I could, I would run with it, right? If we come to
a world where the Christian Hansens, the really fine companies are trading at three times
revenue, and the crappy companies are blowing up, then I will take the profits that we made from
the shorts in cash and go by large whacks of longs. And I probably won't replace the shorts,
because if I can find lots of longs at willingness, the market's going to go up.
MATT MILSOM: So you got stopped out a couple of times last year?
JOHN HEMPTON: If you have 200 shorts, you get stopped out on some, right? We tend not to
get stopped out very much. And the reason we tend not to get stopped out is that our starting
position is like 20 bids. And we're actually tolerant of the short tripling, all right? And the ability to
just be tolerant of a short tripling means that you don't get stopped out very much.
MATT MILSOM: But you don't add.