There's a great vignette in the comedy "School of Rock," where Jack Black, in a plea for sympathy, notes that one of his students -- I believe it was Freddy, the drummer -- is lying on the sidewalk in an apparently terminal condition owing to a case of "stick-it-to-the-man...iosis." That plea worked and the pre-pubescent rockers got to play their set at the battle of the bands.
For my firm, Excelsior Capital Partners, and my asset management clients, we have had a very severe case of stick-it-to-the-man....iosis this year. And we are winning. By a country mile.
Numbers? Sure. I have those. Including reinvestment, my firm's benchmark portfolio, HOAX has risen 62.23% since inception on Dec. 23, 2021. Its benchmark, Cathie Wood's Ark fund (ARKK) , has fallen 61.69% in that time period.
That nearly perfect mirror image shows the value of my approach. But no one I know in the asset management community actually takes Cathie Wood seriously. Her appeal seems to be limited to financial television.
But I do have a lot of friends in the fund management community, all of whom manage more money than I do for ExCap. That's the basic disconnect that I don't think is obvious to individual investors. In Wall Street lingo it is the buy-side that actually manages funds -- hedge funds, pension funds, mutual funds -- and the sell-side that provides them with capital, custody services and, of course, wonderful equity research. I was a sell-side research analyst for more than a decade in New York City and London.
Of all people, I should know the sell-side. Indeed, I am quite familiar with "The Man." It is The Man who foisted all those awfully performing big tech stocks on you at this time last year. With Tesla (TSLA) trading at an incomprehensible valuation of $1.2 trillion last year at this time, Morgan Stanley was telling you TSLA was actually worth $1.4 trillion. Huh?
Tesla generated $53.823 billion in revenues for the full year in 2021. So you were telling me that 26-times revenue was an appropriate valuation for a company that generates most of its revenue from selling cars? Huh? Apparently peyote is readily available in the cafeteria at Morgan Stanley these days.
But then, this week, I read an interview with Joseph Gorman, CEO of Morgan Stanley, where he said something along the lines of, "I would never bet against Elon Musk," or some fertilizer like that. Here's the thing, my clients and I have been betting against Tesla for the past 12 months, and making fantastic profits by doing so.
On the sell-side I followed autos, so TSLA's peak valuation of $1.2 trillion in 2021 confounded me. TSLA's still not worth anything near its current valuation of $600 billion, but please don't hold your breath waiting for Morgan Stanley to publish that in a research report.
But that's the sell-side, and the buy-side drives valuations, not the cheerleaders at investment banks. So, in that same interview, Gorman hyped the asset-gathering strength of Morgan Stanley's Wealth Management division.
So, is Morgan Stanley's buy-side aggressively accumulating a stake in TSLA after this year's 50% plummet? Gorman just told us he would never bet against Elon Musk.
No, not really.
This shows that Morgan Stanley is not even among the Top 10 shareholders of TSLA. The Nasdaq data shows MS has been buying TSLA shares in 2022, but only enough to accumulate a hefty 0.6% stake in EV-maker.
Really, Joe? According to slickcharts.com, TSLA, even after this year's disastrous performance, represents 1.5% of the value for the S&P 500. So Morgan Stanley is effectively underweighting TSLA vs. other stocks, which is a way that professional fund managers ... wait for it ... bet against a stock.
For the most part, MS can't short stocks. I can. And I do. I buy puts, as well. But, The Man will never tell you to do that.
I have never met Joe Gorman and I have zero interest in doing so. I just want to help my clients win. We have a bad case of stick-it-to-the-man....iosis, and we are not searching for a cure.
