Spruce Point, Kerrisdale Talk Bearish Bets: 'You Have To Work Harder To Understand The Short'

Seymour Asset Management founder and CIO Tim Seymour led a conversation at the Benzinga Trading Summit on short selling, market opportunities and more with Sahm Adrangi, CIO of Kerrisdale Capital, and Ben Axler, CIO of Spruce Point Management.

'Think About It Mathematically'

Seymor opened the discussion Thursday by discussing short selling and today's market environment.

"It's critical that, as you guys size up opportunities, you are doing this in the context of a time when markets could be moving," he said.

Adrangi delved into Kerrisdale's approach.

"We need to think about it mathematically. If you have free money and interest rates are at zero and go 1%, I think you can make an argument that the S&P should be trading at double the PE multiple that the market is currently trading at."

Kerrisdale is "idiosyncratic" about its stocks, Adrangi said.

"We're really never making bets on downturn in China or U.S. trade policy, et cetera."

Information Is Key

In an environment of easy money, the bar is higher, said Spruce Point's Axler.

"We're in this age of information where there’s tons of big data. You've got computers scraping websites for what hotels are charging, trade data ... you really have to work harder to understand the short better than the next person."

That means taking a holistic view that includes a deep dive into corporate governance — and filing Freedom of Information Act requests, Axler said.

"We've had some good shorts by obtaining hard to access information that nobody else has."

Seymour asked if information that nobody has truly exists in a world where information is more efficiently obtained.

Adrangi replied that Kerrisdale's latest short came courtesy of publicly information that wasn't being discussed by anyone.

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Tim Seymour, left, founder and CIO of Seymour Asset Management, moderates a panel discussion Thursday at the Benzinga Trading Summit with Kerrisdale Capital CIO Sahm Adrangi, center, and Spruce Point Management CIO Ben Axler. Photo by Mandar Parab.