The rabid enthusiasm of Reddit sub-group "Wall Street Bets" just kicked the living crap out of the hedge fund community's most famous short-sellers.
The controversy surrounding video game retailer GameStop (GME) is all over the news. It has quickly become a classic David vs. Goliath and Wall Street vs. Main Street story. At its most recent high of $483, shares of GameStop were up a mind-blowing 2,700% year-to-date.
Setting aside the massive short squeeze, many of the "masters of the universe" hedge fund types clearly didn't understand the fundamental GameStop bull case.
On December 17 (at $14.83 per GME share), Hedgeye Retail analysts Brian McGough and Jeremy McLean notified their subscribers via email that they were adding GameStop (GME) to their "Best Ideas" Long list. The following week, just before Christmas they hosted a "Black Book" presentation on GameStop explaining their thesis behind why "that could mean a stock of $100+."
Here's the full hour-long presentation laying out Hedgeye's bull case on GameStop.
For the record, one of Hedgeye's institutional subscribers fired Brian and Jeremy for making their long call on GameStop. Apparently we took the other side of their core short position.
Here's an excerpt from a note written by Brian:
Statistically speaking, it was inevitable that some of the GME shorts are Hedgeye clients... Then there are the haters…it just so happens that they are those with the biggest short positions in GME. Two in particular. One was not a client of Hedgeye, but one of our Senior salesmen reached out to start a constructive dialogue. The investor’s answer… “just another idiotic call from the morons at Hedgeye.” The salesperson reminded the PM that this particular moron (me) called for RH to be a 10-bagger+ when the stock was $30 and it’s now flirting with $450. Needless to say we didn’t get the chance to engage in a fruitful debate with that fund. They already have all the answers.
Another big short was a Hedgeye client. Yes, they fired us – coincidently when we took the other side of their core short position. I won’t pretend that I was happy about this…it hurt – both my ego and my wallet.
But the way I see it, anyone with such a low integrity investment ‘process’ (if you want to call it that) will likely fall victim to their own close-mindedness towards differing trains of thought, new data inputs, and thoughtful financial analysis. Also, if you feel so strongly about an idea, wouldn’t you want to engage in a debate to attempt to convince me to change my mind? I guess when you’re the smartest guy on the planet you don’t need thought-provoking research to make you better.
The irony of all this?
While institutional investors failed to understand the bull case for GameStop, Hedgeye's community of professional, individual subscribers received our analysts' GameStop long call with open arms (with access to this presentation available to "Retail Pro" subscribers.)
It's characteristic of Hedgeye to make big bold calls no one else in the institutional investing community believes. Since Day 1 of our founding in 2008, we envisioned a level playing field between everyday investors and Wall Street.
We created something that didn't exist: Hedge fund-quality research for all investors.
GameStop looks like another big win for the individual investor and #HedgeyeNation.