One of the hottest hedge funds in recent years may finally have hit a speed bump.
Sosin Partners was up 17 percent in January after gaining more than 94 percent in 2024. However, it is bracing for a big setback on Thursday as shares of online used-car company Carvana dropped more than 12 percent in after-hours trading on Wednesday. This is especially perplexing given that Carvana reported seemingly strong quarterly results, beating consensus analyst forecasts on both the top and bottom lines. It had even proclaimed in a press release: “Looking forward, Carvana expects significant growth in both retail units sold and adjusted EBITDA.”
Is Carvana’s recent success already built into the price of the stock, or is this just a temporary pause? The answer has big ramifications for Sosin. As Institutional Investor has chronicled for some time, Carvana dominates Sosin’s highly concentrated portfolio.
At year-end, Carvana accounted for 75 percent of the portfolio, which contained only five stocks, according to the most recent 13F filing. It made up only 45 percent of assets a year ago. Why the big difference? Carvana’s stock nearly quadrupled in 2024. As a result, Sosin finished the year up 94.5 percent.
Sosin had been up as much as 122 percent through October. But it wound up shedding nearly 30 percentage points, or one-quarter of its performance, in the final two months of the year partly because Carvana dropped about 18 percent, ruining the hedge fund’s chances of posting a triple-digit return for 2024.
Since then, however, Sosin has been getting some help from the rest of its portfolio. Time share giant Hilton Grand Vacations, which accounted for more than 14 percent of year-end assets, rose about 5.6 percent in the final two months of the year. Furthermore, it was up nearly 6 percent in January and has climbed about 12 percent year-to-date.
Financial services company Capital One Financial, Sosin’s third-largest long, jumped about 13 percent in January and more than 17 percent year-to-date. Since the end of October, it seen a 29 percent rise.
On the other hand, Cardlytics, Sosin’s smallest position, representing just over 1 percent of assets, has plummeted by 85 percent since last March. The company partners with financial institutions to help marketers identify potential customers.
In the fourth quarter, Sosin liquidated its tiny position in consumer finance company World Acceptance Corp., reducing the portfolio to just four stocks.
