| Gabriel Plotkin, Melvin Capital Management |
Gabriel Plotkin has quickly emerged as the top SAC Capital alum after posting his second gargantuan gain in three years at the same time that many of his fellow “SAC PAC” members are generating mediocre returns.
Plotkin, who launched New York-based Melvin Capital Management in late 2014, last year gained roughly 44 percent, according to an investor in the fund.
In 2016, Melvin was up around 12 percent, beating the S&P 500’s 9.5 percent gain.
In 2015—Melvin’s first full year of operation—its main fund surged 47 percent.
When asked about Melvin’s 2017 performance, David Kurd, Melvin chief operating officer, simply said: “We can’t confirm or deny.”
Plotkin is a former trader and consumer stock specialist at Sigma Capital Management, then a division of SAC, where he spent eight years.
He founded Melvin in late 2014, reportedly naming it after his grandfather, Melvin Plotkin.
Melvin charges a 2 percent management fee and between 20 percent and 30 percent of performance, according to a regulatory filing. It receives more than 20 percent if gross returns exceed 12 percent and 30 percent if returns exceed 22 percent.
Melvin managed $1.87 billion in assets under management as of December 31, 2016, according to the latest ADV filing with regulators. However, assets could easily exceed $3 billion now after Melvin generated a better-than 62 percent gross return last year. Its 2018 ADV must be filed with regulators by the end of this month.
Last year, Melvin heavily benefitted from several of the red-hot internet and tech stocks. However, the firm’s over-riding theme is consumer stocks, both online and offline.
For example, Amazon’s common stock was one of Melvin’s three largest U.S. longs all year. The stock was up 56 percent last year.
Search giant Alphabet and Chinese e-commerce giant Alibaba Group were each among Melvin’s top holdings in the second and third quarters. The firm also held a large position in call options on both of those stocks during those quarters.
Melvin then cut nearly half of its position in each of those two stocks in the fourth quarter. From April 1 through September 30, Alphabet and Alibaba were up 15 percent and 60 percent, respectively.
Distilling giant Constellation Brands was also one of Melvin’s largest positions for most of the year. The hedge fund firm also held a sizable position in call options on the stock throughout 2017. Sure enough, the common stock was up nearly 50 percent in 2017.
Melvin’s largest long common stock position at year-end was video game giant Electronic Arts, valued at $570 million. It also held a very sizable position in call options on the stock. Most of the common stock stake was taken in the fourth quarter. This disclosure was made on February 14, the deadline for filing the 13F form detailing quarterly U.S. common stock holdings as of December 31.
On January 5, Melvin disclosed in a 13G filing that it had nearly tripled its stake in EA to nearly 16 million shares, or 5 percent of the total outstanding, easily making it the firm’s largest long position. The 13G form suggests the stake is passive.
The stock is already up 18 percent for 2018, while Amazon.com, Melvin’s second largest long at year-end, is up more than 31 percent this year.
