Gabe Plotkin, owner of Melvin Capital, testified before the U.S. Congress in February about GameStop’s problems.
- Gabe Plotkin rebounded from Melvin Capital’s big January loss to post a 22% gain in February.
- The hedge fund owner was at the center of the GameStop case that rocked the market in January.
- He said he “discovered” it during the one-day stock market frenzy and is now refining his approach.
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Research shows Gabe Plotkin’s Melvin Capital hedge fund is up 22% in February, but it’s still in the doldrums after suffering the GameStop fiasco.
The 22% gain is well above the S&P 500’s 2.6% monthly gain, according to some media reports.
In January, however, Melvin Capital lost 53% of its money speculating on video game retailer GameStop, whose shares soared after amateur traders organized on the social media site Reddit bought the stock.
According to Bloomberg, the $8 billion fund wants to offer 75 percent of the features before early buyers break even. That’s a high level of activity, even for a fund that averaged about 30 percent annual returns between 2014 and 2020.
But Bloomberg reports that tens of millions of dollars are coming in from buyers convinced of Plotkin’s prowess, and Insider reached out to a Melvin Capital Media spokesperson for comment.
February for Melvin was also characterized by an adjustment to Plotkin’s trading technology. In congressional testimony in February about the GameStop saga, Plotkin said he was “aware” of the incident. “We are taking steps to protect our customers and make sure something like this doesn’t happen again anytime soon,” he said.
For example, Bloomberg reports that Plotkin has stopped using swap trades – contracts that allow buyers to profit from a drop in stocks – and is allowing day traders to choose their own bets, regulatory filings show.
Crowded short positions are vulnerable to a form of “short squeeze,” which struck Melvin in January. A squeeze occurs when a short seller is forced to buy back a stock to fill his or her position, causing the stock to rise.