Billionaire hedge fund manager Michael Platt was caught bragging to a New York taxi driver Manny Anzalota who is a savvy social media person and interviews his famous passengers on video and posts them online. “The thing that’s different about me is … I’m the highest-earning person in the world of finance,” Platt is heard saying.
“I’ve transformed my fund into a personal investment vehicle because we made such high returns, and now, it’s on the internet, on Forbes,” Platt says according to NY Post. Post article also said the following about Platt:
“Platt did nab the top spot on Forbes’ “Highest earning hedge fund managers” list in 2017 by pocketing an estimated $2 billion. Last year, he earned $1.2 billion, finishing second behind Simons, who earned $1.6 billion. But some speculate Platt could be back on top for 2019.
…The former JPMorgan trader, who dodged the 2008 financial crisis after launching BlueCrest in 2000, has become unstoppable since he returned money to investors in 2015, citing falling fees.
Multiple sources close to BlueCrest say Platt has since more than doubled the value of his firm. While most hedge funds were losing money and investors, BlueCrest earned close to 50 percent in both 2016 and 2017 before returning close to 25 percent last year, the sources said.”
We don’t know how exactly Platt generates these strong returns but we know that his 13F stock picks don’t generate anywhere near these levels. For examples, Michael Platt’s 13F portfolio contained more than 1000 stocks at the end of 2018 and the weighted average return of his positions in companies with at least $1 billion in market cap was -8.9% for 2018. Clearly his stock picks didn’t beat the market by more than 30 percentage points in 2018, actually they underperformed the market.
Insider Monkey tracks hedge funds and billionaires in order to identify the smartest of the smart money to tag along. That’s why we track the performance of every hedge fund that files 13Fs with the SEC and discloses its positions in US stocks. We also leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent.
The performance of billionaire Platt’s 13F stock picks also underperformed the market during the first 9 months of 2019 by one percentage points. When we look at Platt’s latest 13F portfolio we see that the total value of positions were only $1.5 billion. Assuming that Platt is also using a lot of leverage to amplify his returns, we conclude that US stocks isn’t where billionaire Platt generates his amazing returns. Our monthly newsletter’s stock picks generated much better returns than Michael Platt’s 13F stock picks.
At the end of September Platt’s biggest US equity position was Aqua America, Inc. (NYSE:WTR). Our calculations showed that WTR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Aqua America returned about 4% so far in Q4 and underperformed the market. Platt didn’t have any positions in Facebook, Inc. (NASDAQ:FB) and Amazon.com, Inc. (NASDAQ:AMZN), two of the top 3 hedge fund stocks in its portfolio either. Platt sold out his tiny $5.6 million Amazon.com, Inc. (AMZN) position during the third quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Platt had very very small positions in Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOGL), and Microsoft Corporation (MSFT). Platt boosted his tiny Apple Inc. (AAPL) position by 17 fold during the third quarter, yet the total value of this position was less than $12 million at the end of September. Platt’s Alphabet Inc. position was less than $11 million and he had only $2.5 million invested in Microsoft Corporation’s shares.
It seems to us like Platt is probably generating his returns through some sort of high frequency trading where you don’t need to identify the best long-term stocks. In this sense he isn’t really an investor, but a market maker and a front runner. This is pretty similar to how Jim Simons’ Medallion Fund generates his returns. Platt may be one of the highest earning hedge fund managers but I doubt that he is a good stock picker.
Disclosure: None. This article is originally published at Insider Monkey.