According to a copy of Raging Capital Management‘s 2014 Q4 investor letter seen by Insider Monkey the long/short equity hedge fund returned 2.8% in its Series A Master Fund. The return was better in its Series B Master Fund: 3.4% gain. Don’t be fooled by these small numbers though. William Martin’s Raging Capital has an impressive track record of delivering an annualized return of 25% since its inception in April 2006. S&P 500 Index returned only 7.7% during the same period. What is impressive about Raging Capital’s performance in 2014 is that they made money by shorting stocks. “Our short book earned 10.6% gross after borrow costs, compared to gains of 13.7% in the S&P 500 Total Return and 3.5% in the Russell 2000. This represents 2,430 bps of alpha versus the S&P 500 and 1,410 bps of alpha versus the Russell 2000,” the fund said in its 2014 Q4 investor letter.
William Martin has an interesting background. In 1997 he co-founded of one of the first financial websites, ragingbull.com, at the age of 19. Ragingbull was sold in 1999 for more than $160 million. Later on he went into financial newsletter business. He launched Raging Capital Management in 2006. Raging Capital has more than $600 million in regulatory AUM according to latest disclosures. In this article we will bring 10 of the most successful shorts in Raging Capital’s short book
We think the most interesting short position in Martin’s portfolio is Conn’s (CONN). David Einhorn was extremely bullish about CONN’s last year. He highlighted and discussed this long idea a couple of times. The stock climbed above $50 per share last summer following Einhorn’s bullish call. It was cut in half since then.
Martin also discussed his short positions in gun related stocks as follows:
“We also continue to maintain most of our shorts in the gun industry. Although this thesis has already played out in spades, consumer purchasing levels for guns still face significant challenges in the coming year. While recent data-points suggest a stabilization of demand, we believe this is the result of aggressive discounting by retailers that are “pulling forward” future sales. This could create further sales disappointments in 2015, even as overall industry inventory levels remain high and the political anxiety of consumers to stockpile guns and ammo has dissipated.”
Insider Monkey tracks the moves of hedge funds like Raging Capital because our research has shown that the top small-cap stock picks of hedge funds historically outperformed the market by an average of 18 percentage points per year. We have also been sharing these stock picks in our newsletter in real-time for the past 29 months and managed to deliver an annualized return of 37% vs. 18% annual gain for the S&P 500 index during the same period. You can download a sample issue and read the details here.