Our call to short Amazon stock proved correct, says Indian hedge fund manager
Our call to short Amazon stock proved correct,
says Indian hedge fund manager
We correctly called the top at $844 on October 5, 2016, said hedge fund manager Kapil Khandelwal
Kapil Khandelwal November 01, 2016 Last Updated at 12:34 IST
October 7, our algorithms gave a strong signal to short sell the Amazon stock. We correctly called the top
at $844 on October 5, 2016. We were very categorical that the stock has risen and has peaked and would
correct sharply. Since then the ride on Amazon stock price had been more or less flat.
ALSO READ: Why is this Indian Hedge fund going short on Amazon?
Other analysts went long and we went short!
Prior to our call on September 28, 2016, JP Morgan, RBC Capital and Evercore went the other way and
raised their target on Amazon stock to $1,000 by December 2017. JP Morgan's previous target for
Amazon was $925 for December 2016. Other stock market analyst also concurred with JP Morgan's view.
We don't see why? Just two years ago (October 2014), the stock was trading at $315. So the stock price
had more than doubled in two years and the investors expected the run to continue. We did call that
Amazon's run was over in mid-June 2016. Our strategy has always been mean-riveting. We had clearly
identified the top at $844 and went short. Here is where we were right.
Poor quarterly results for Amazon did the trick
Amazon has always made big bets and investments every few years. It had invested heavily in Amazon
Cloud Services, third party marketplaces. These set record-high profits over the last three quarters and its
cash balances had been extremely strong. However the current quarter results were dragged down due to
the results from the overseas operations, primarily their investments into India which Bezos committed
when he visited India last. Moreover, Amazon has been investing in their own logistics facilities replacing
existing partners like Fedex and UPS.
The Day of the Reckoning: October 28, 2016
On October 28, 2016, on the back of the poor quarter results, Amazon stocks tanked over five per cent.
We made good on our call to short Amazon.
continue to gain from the signals our algorithms are providing us to gain profits for our investors.
The author is Director, EquNev-K1T Capital Hedge Fund, a US equity market-focused Indian hedge
The piece has been edited for style elements only