One of the most volatile hedge funds is off to another spectacular year — so far. And it can thank a single stock that has significantly outperformed chip juggernaut Nvidia over the past 18 months.
Sosin Partners was up about 46 percent in the first half of the year. But as its current and former investors and other observers know very well, this fortune could skid off the road faster than one of the cars sold by its largest holding, online used-car seller Carvana.
Take 2024. The fund started down more than 7 percent in January, then reversed the loss with a gain of nearly 40 percentage points over the ensuing two months, only to give back one-quarter of that performance in April. This means that over the past two months, Sosin has more than doubled its year-to-date gain.
This year’s performance comes on the heels of last year’s roughly 80 percent gain. However, the fund lost 77 percent in 2022, which means it remains solidly below its high-water mark. Sosin declined to comment.
Clifford Sosin founded Sosin Partners and CAS Investment Partners, which manages the fund, in 2012. CAS reported $951 million in regulatory assets as of year-end 2023, down from $2.2 billion at the close of 2021, according to regulatory filings. A hedge fund database reports that the fund is currently managing $475 million.
Sosin was previously a director in the fundamental investment group at UBS, analyzing equities and fixed-income securities. Before that, he worked as an analyst at hedge fund Silver Point Capital.
The fund continues to hold just five stocks, two of which account for more than 80 percent of assets. But just one has driven performance this year: Carvana, its largest long, representing approximately half of assets. The stock surged about 150 percent in the first half of the year, coincidentally matching Nvidia’s performance.
Since year-end 2022, however, Carvana’s stock has swelled 26 times, roughly three times the appreciation of Nvidia. This is not shocking if you consider that in calendar 2023, Carvana reported $175 million in pretax income. This compares with pretax losses of nearly $2.9 billion the previous year and a total of $3.7 billion from 2020 to 2022, when questions were raised about the company’s viability.
Sosin’s other major holding, Hilton Grand Vacations, accounted for more than 28 percent of assets at the end of the first quarter. But the shares of the time-share giant did not play a role in first-half performance as they were essentially flat.
The three other stocks continue to play minor roles.
Capital One Financial became the third-largest long after Sosin boosted its stake by about 21 percent. The stock was up less than 7 percent in the first half. Cardlytics, a digital advertising platform for online banking channels, accounts for a little less than 5 percent of assets. World Acceptance Corp., a small-loan consumer finance company, represents 4.6 percent.