Today's Video Update: Never Do What This Once Smart Hedge Fund Manager Did

Hello traders everywhere! Adam Hewison here, President of and Co-creator of MarketClub, with your mid-day market update for Tuesday, the 13th of August.

Never Do What This Once Smart Hedge Fund Manager Did - Not Once, But Twice!
Oh my, where do I start? This once smart hedge fund manager used to be good, so why did they make some unbelievable rookie mistakes?

What were these rookie mistakes?
1. No money management.
2. Picking a very public argument with someone in the business who is bigger, more powerful and swings a bigger axe.

The reason for this seemingly non-professional behavior is still a mystery to many traders that I have spoken to. One theory I have is this trader was beginning to believe his own press clippings, and believed he could do no wrong in the market. One lesson I learned many years ago is that no one is bigger than the market and that you cannot fight market trends.

So what is the name of this hedge fund manager?

His name is William Ackman. He's a smart guy, but he made two serious, and I would say, pretty irresponsible trades. These two trades in hindsight have cost his investors millions in losses and are the trades he will long be remembered for.

1. He got married to two of his positions.
2. He then picked a very public battle with an even bigger hedge fund manager.

In one of his stock picks, which is the J.C. Penney disaster, Mr. Ackman for the most part was his own worst enemy. He kept trying to re-invent a brick and mortar store in an online world and totally disregarded all the known and key retail marketing metrics.

His next big mistake was trying to talk down Herbalife (NYSE:HLF). Mr. Ackman was telling anyone who would listen that Herbalife was a huge Ponzi system. It was during this smackdown of Herbalife that Carl Icahn stepped in (great track record and worth more than Mr. Ackman) and purchased a ton of Herbalife stock. This vote of confidence pushed the stock of Herbalife to its highest levels and values in over a year! I don't care who you are Mr. Ackman, but that was a lot of your investors' money to lose in a very public battle with Mr. Icahn.

Today we will be looking at Herbalife (NYSE:HLF) and J.C. Penney (NYSE:JCP) to see how these stocks should have been traded.

This just in: The Board of J.C. Penney announced today that William Ackman had resigned from the Board. In a prepared statement, Mr. Ackman had this to say: "My stepping down from the Board is the most constructive way forward for J.C. Penney and all other parties involved." Amen, Mr. Ackmen.

A Sleeping Giant Awakes
Rumors of a new iPhone over the weekend rallied the shares of Apple (NASDAQ:AAPL) sharply on Monday on the heaviest volume in 12 days. With all of our Trade Triangles in a positive mode, I am bullish on this stock. Today, I am watching the market action in Apple closely, a close over $469.25 and $470 will begin, in my opinion, to accelerate this stock's upward move. I am targeting the $550 to $575 levels on the upside.

The Markets Are On Holiday, Are You?
Yep, I plead guilty to taking some time off in August, did you? In fact, most of France closes down in August as the entire country goes on holiday. It seems that many traders are taking time off before the real trading begins after Labor Day. It would appear that the market has moved into a more laid back, holiday mode and I would not be surprised to see it stay that way for the next couple of weeks. Out of the three major indices we track, DOW, S&P 500 and the NASDAQ, only the DOW is indicating for us to be on the sidelines at the moment. However, all three major indices remain in a long term bullish mode.

Have a great trading day,
Adam Hewison
Co-Creator, MarketClub

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2 thoughts on “Today's Video Update: Never Do What This Once Smart Hedge Fund Manager Did

  1. Hmm - picking fights with big boys - bad dog! Not too keen on Apple given the current competitive position, and the lack of progress on something that is more than a better iPhone. Apple made it big with new products, with the genius of invention coupled with production - smarts. The invention now seems sadly lacking.

  2. Dear Adam,
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