Aquirers Fund founder Tobias Carlisle said the market was underestimating the impact of COVID-19 and made a case for value investing and his preferred shorts in a March 2020 episode, recorded on Feb. 26.
Carlisle said he could see “the market get hammered again” later in the year and that unlike other public health scares, COVID-19 had an impact on supply chains.
“I think it’s very likely that we see material weakness all year long due to coronavirus,” he said at the time.
Carlisle also favored low-stake shorts of Tesla (TSLA) stocks.
“They move completely untethered from reality,” Carlisle said. “Tesla makes it really tough to short, so you’ve got to keep it small.”
Carlisle also said he had shorted Etsy (ETSY) on a small scale because of increasing market competition and “on any metric, they’re very, very expensive.”
What Happened
The S&P 500 closed at 3,116 on Feb. 26, 2020, dropping 26% to a post-2008 record low of 2,305 on March 20, 2020, before starting a rebound that has continued – in various fits and starts – until entering a correction on Feb. 22.
Carlisle said his firm shifted to “active management and removed the shorts in December” for three reasons.
“First, the removal of the shorts removed any risk of blowing up from a short squeeze,” hesaid in an e-mail. “The risk was low, but not zero.”
Second, Carlisle said shorting was more “expensive and cumbersome” due to new regulations that increased expense ratios.
“The shorts performed well last year because it was a very rough environment for overvalued junk like those found in the ARKK portfolio and tech generally,” he said. “We were short many of those positions, and it worked out well.”
Carlisle views this year as “similar to the market in 2000. The broad market is extremely overvalued, but value stocks have been left behind and are reasonably valued.”
Tobias Carlisle returns to the podcast on Feb. 25.