Short-seller Citron Capital generated a net return of 155% and a gross return of 202% in 2020 as bets on work-from-home stocks paid off, the fund’s managing partner Andrew Left wrote in a letter to investors.
The firm started an “outsized long position” in Amazon.com Inc. in late March on the theory that the company would prove a big winner regardless of how the pandemic played out, Left wrote.
“The logic was simple,” he said in Citron’s 2020 investor letter dated Jan. 4. “If we continue to stay at home, Amazon is a huge winner. If everything goes back to normal, Amazon will still be a big winner.”
The shift to online shopping and digital sales with stuck-at-home consumers fueled a rally in Amazon’s shares, which jumped 76% last year, extending its winning streak for a sixth year.
The fund also stayed away from “all story stocks” and didn’t shortTesla Inc. or any of the companies with high short interest levels that “became detached from any underlying financial metrics,” he added.
Left shrugged off his one regret — he didn’t buy Etsy Inc., which was the second-biggest winner on the S&P 500 Index after surging fourfold. “In hindsight, we should have bought Etsy (facemasks) instead – Oh Well,” he wrote.
Citron’s bet againstInovio Pharmaceuticals Inc. was the largest contributor on the short side to the fund’s returns, whileGSX Techedu Inc. was one of the biggest losers among its short bets.
For this year, Citron is sticking to a strategy similar to the one it adopted for 2020: “If it is not broken, don’t fix it.”
“We will continue to look for situations, both long and short, that are misunderstood by the market and present an actionable investment opportunity. With the recent SPAC explosion, we do not believe there will be a shortage of ideas.”
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