In this article, we discuss is Jim Chanos shorting these stocks? You can skip our detailed analysis of Chanos’ hedge fund and its performance over the years and go directly to read Is Jim Chanos Shorting These 5 Stocks?.
Wall Street’s best-known short seller, Jim Chanos, known for his bearish bet against Enron and Tesla, is shuttering his hedge fund after almost four decades. Founded in 1985, Kynikos is a hedge fund that has been at the center of some of the biggest short bets on Wall Street. Some bets have put the legendary investor at crossheads with high-profile personalities, including Elon Musk.
Chanos rose to prominence in 2000 as he labored through Enron’s financial reports, underlining complicated passages. While the company’s books were hard to figure out, Chanos spotted enough to bet that the then high-flying gas pipeline company would tumble. True to his in-depth analysis, Enron imploded by more than 90%, resulting in a $500 million profit for the legendary investor. The company would eventually collapse into bankruptcy after being hit with corporate fraud and misconduct charges.
Chanos would yet again shoot to the limelight ahead of the 2008 and 2009 financial crises as he issued warnings about a potential credit and banking crisis. His funds would generate significant returns as the markets tumbled thanks to going short various counters. Once the 2009 financial crisis dust settled, the legendary investor turned his attention to Chinese companies that he felt were in a precarious position of any slowdown in the Chinese economy.
While the prediction did take some time to materialize when it did in 2015, the legendary investor generated significant returns as Chinese positions accounted for a fifth of his hedge fund holdings. Chinese stocks tumbled, erasing gains for the year in August of 2014 as the slowdown of the Chinese economy rattled investors worldwide.
As the overall stock market came under pressure in 2022, Chanos was one of the few hedge fund managers who finished the year on positive territory. His funds were up 7% for the year, benefiting from short positions that accrue returns on stock prices tumbling. The gains came as the S&P 500 dropped by about 19%, driven by tech stock sell-off amid a spike in interest rates.
The 7% gain in 2022 at the height of the market turmoil followed a 21% gain in 2021.
Chanos & Co, manages less than $200 million, compared to the $6 billion it managed at the height of the financial crisis 2008. His performance has also been wavering, with his funds down by about 4% at the height of one of the biggest rallies, which has seen the S&P 500 rally by about 19%.
Nevertheless, Chanos has been vocal against some companies that he believes are highly overvalued. Tesla is one of the companies that Chanos has been vocal against entering a short position. In addition to shorting the electric vehicle giant, the legendary investor remains skeptical about high-priced data storage companies and real estate investment trusts that he believes could struggle amid the high-interest rate environment.
Our Methodology
After analyzing Kynikos’s 13F filings for the third quarter of 2023, we have selected some of the top stocks Chanos remains skeptical about amid the high-interest rate environment. The legendary investor has already triggered Put positions in the options market, affirming he expects their share price to drop.
Is Jim Chanos Shorting These Stocks?
11. Coinbase Global Inc (NASDAQ:COIN)
Value of Put Option: $375,400
Number of Hedge Fund Holders: 27
Coinbase Global Inc (NASDAQ:COIN) is a financial services company that offers financial infrastructure and technology for the cryptocurrency sector. Coinbase Global Inc (NASDAQ:COIN) provides a platform that allows people to buy, sell, and trade cryptocurrencies. It also provides services that allow developers to build crypto-based applications and accept crypto payments.
Famed short seller Chanos has always questioned whether the trading commissions that Coinbase Global Inc (NASDAQ:COIN) earns are sustainable as they are too high compared to traditional brokerages. The legendary investor insists that the 1.5% trading commission the company earns on trading commissions will likely fall to 0.5% on increasing competition. Consequently, he has leveraged Put options to bet against Coinbase Global Inc (NASDAQ:COIN). The hedge fund manager held about 5,000 shares valued at $375,400 on Put options as of the end of the third quarter.
10. Carvana Co. (NYSE:CVNA)
Value of Put Option: $419,800
Number of Hedge Fund Holders: 38
Tempe-based Carvana Co. (NYSE:CVNA) operates an e-commerce platform for buying and selling used cars in the US. Its platform allows people to research and identify a vehicle, inspect it using 360-degree imaging technology, and secure financing.
Carvana Co. (NYSE:CVNA) was popular during the pandemic as investors flocked to online businesses competing against brick-and-mortar stores. Its fortunes have dwindled, depicted by consistently negative cash flows. Chanos is one of the biggest names on Wall Street that has been betting against the stock. The famed short seller held shares worth $419,800 on Carvana Co. (NYSE:CVNA) using Put options as he speculated prices would fall.
9. NVIDIA Corporation (NASDAQ:NVDA)
Value of Put Option: $652,485
Number of Hedge Fund Holders: 180
NVIDIA Corporation (NASDAQ:NVDA) is a technology company that provides graphics, compute, and networking solutions. NVIDIA Corporation (NASDAQ:NVDA) is best-known for producing graphics processing units in high demand for data centers to enable and power artificial intelligence.
NVIDIA Corporation (NASDAQ:NVDA) has rallied by more than 230%. The rally has come even as Chanos remains bearish on the stock, insisting that Wall Street is good at creating supply even when there is no demand.
8. Tesla, Inc. (NASDAQ:TSLA)
Value of Put Option: $1 Million
Number of Hedge Fund Holders: 81
Chanos has been betting against Tesla, insisting the company faces an uncertain future amid growing competition from legacy automakers. The famed short seller has also questioned what he terms as a small size of the luxury car market.
Amid the skepticism, Tesla, Inc. (NASDAQ:TSLA) stock is up by about 95% for the year. Chanos trimmed his short exposure in the stock in the third quarter by 89% to 4,000 shares valued at approximately $1 million.
7. Lemonade, Inc. (NYSE:LMND)
Value of Put Option: $1.1 Million
Number of Hedge Fund Holders: 13
Lemonade, Inc. (NYSE:LMND) is a financial services company that offers insurance products in the US and Europe. Its insurance products include stolen or damaged property and personal liability solutions that help protect customers in the event of an accident or damage to another person or property. Lemonade, Inc. (NYSE:LMND) also offers renters, homeowners, car, pet, and life insurance products.
The famed short seller downplayed comments by Lemonade, Inc. (NYSE:LMND) CEO Daniel Schreiber that the company has unlimited total addressable markets as “utter nonsense”. While Lemonade, Inc. (NYSE:LMND) is up 14% for the year, Chanos trimmed his short exposure in Q3 2023 to 94,000 shares valued at $1.1 million and accounting for 0.34% of the portfolio.
6. Sunrun Inc. (NASDAQ:RUN)
Value of Put Option: $1.35 Million
Number of Hedge Fund Holders: 26
Headquartered in San Francisco, California, Sunrun Inc. (NASDAQ:RUN) is a technology company that designs, develops, installs, and maintains residential solar energy systems. The company sells solar energy systems and products such as panels and racking. Sunrun Inc. (NASDAQ:RUN) also offers battery storage along with solar energy systems.
Sunrun Inc. (NASDAQ:RUN) is one of the companies that short seller Chanos has targeted, insisting that solar leasing companies are hysterical science projects that cost millions of dollars. Chanos remains short of Sunrun Inc. (NASDAQ:RUN) as it has a huge negative free cash flow.
The hedge fund manager held 107,300 shares valued at $1.35 million in short position through Put options as of the end of the third quarter.
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Disclosure: None. Is Jim Chanos Shorting These Stocks? is originally published on Insider Monkey.