THE MAN WHO ABANDONED VALUE – AND FOUND TESLA

Ten years ago, Arne Alsin quit trying to be, as he puts it, “normal.” 

Alsin, the founder of investment firm Worm Capital, had an abundance of classic Asperger’s symptoms. He was sensitive to light and sound and was so anxious around people that he forswore becoming a teacher. When his dog barked, Alsin says, “my brain would feel like it would explode.”

He had tried to change. “When you’re on the spectrum, you tend to react like a volcano and just work your way down. And I thought through logic and reprogramming and desensitization, I could gradually get to be ‘normal’. It didn’t work. Total failure.”

Around the time Alsin was attempting to “reprogram” himself, he was also trying to salvage a portfolio of stocks that had earned him the moniker of “the Turnaround Artist” from the editors of TheStreet.com, where he authored a column of the same name for three years. 

It wasn’t going well. Classic value plays had won Alsin notice after the tech bubble burst in 2000, thanks in large part to his column. But by 2008 his stock picks were struggling — and even when markets bounced back after the financial crisis, his value stocks weren’t turning around.

Eventually, he says, “I just totally gave up and said, ‘I’m going to do the exact opposite.’”  

Alsin, now 63, threw away almost every investment principle he had once held. A forensic accountant by training who had formerly worked for Peat Marwick (just before it became part of KPMG), Alsin switched from being a classic Warren Buffett–style value investor who scoured balance sheets to being one who obsessively embraced the disruptive promises of Silicon Valley and the new economy.

He took big, and early, stakes in both Amazon and Tesla — in 2012 and 2016, respectively. At the same time, Alsin shorted auto companies like General Motors and railed against buybacks that had crippled companies like Sears and American Airlines, which he also shorted.

At last, in 2020, Alsin’s insights bore exceptional fruit: The small hedge fund with the quirky name, which launched in 2017, and the long-only fund, which got off the ground in 2012, turned in what appear to be the best performances in the industry for the year, according to Institutional Investor calculations. 

To be sure, a few famous hedge fund managers made a fortune in 2020. But in terms of percentage gains, Worm Capital outdid them all: Its long/short equity fund gained an astounding 274 percent, thanks in large part to a 700 percent surge in the price of Tesla’s stock, which accounted for 37 percent of Worm’s publicly traded equities portfolio at the end of the third quarter. The long-only fund was up 205 percent. And by year-end, Worm Capital had amassed some $374 million in capital.

Last year’s numbers signaled a huge shift from the days when Tesla short-sellers — much more powerful hedge fund managers like Kynikos Associates founder Jim Chanos and Greenlight Capital’s David Einhorn — had so thoroughly captured the narrative that Alsin didn’t even attempt to woo institutional investors.

But now, with his firm standing atop a 274 percent year, the question is whether these institutional investors will finally embrace Worm Capital’s founder as a savvy investor worthy of their blessing — or dismiss his astounding 2020 as nothing more than luck. 


You can read my Institutional Investor profile of Arne Alsin and Worm Capital here:

https://www.institutionalinvestor.com/article/b1qmbjmykxql3g/The-Man-Who-Abandoned-Value

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